Maximizing ROI with BI: An Introduction

Everybody wants more for less. This is the basic tenet of business optimization and ROI maximization. In our next few blogs we want to explore how an organization, whether it be commercial, government, or non-profit can use business intelligence to get more for less.

Let’s start with two basic definitions.

Business Intelligence (BI) is applying analytics, not just reporting, to strategic business problems.

Return on Investment (ROI) is the impact of a dollar spent. In purely financial terms, ROI refers to profitability on that dollar. In equation form ROI = (incremental revenue – incremental cost)/incremental cost.

Think of ROI this way…for every dollar I spend, I will get $1.00+ in contract value/revenue. If I spend $1.00 and the customer pays me $1.50, my ROI is 50%.

There are two ways to increase profitability in an enterprise: 1) revenue growth for the dollar spent and/or 2) cost reduction while gathering a dollar.

The fundamental purpose of BI is to increase profitability (aka business optimization). BI helps organizations identify their best customers/members and prospects, improve customer service, accelerate product innovation, optimize supply chains and pricing, and identify the true drivers of financial performance. BI is strategic in nature, allowing organizations to focus on what truly matters and ignore the minutiae.

Let’s look at how BI can increase ROI by driving revenue growth. When you are able to redeploy the same sales and marketing budget and achieve greater sales, you've increased your ROI. Business intelligence tools increase sales and marketing effectiveness through quicker and better decision making, by targeting the most valuable prospects at the proper price point for revenue maximization. In other words, revenue growth is achieved with the same or reduced costs.

From a sales management standpoint, appropriately deployed tools allow you to quickly analyze your sales staff’s effectiveness in an objective, data driven manner, not based upon a gut reaction. This goes beyond just spreadsheets of sales figures, but extends to population density overlays and detailed analytics around the true scope and buying capacity of your target market.

How does this work? One example is a case where a sales territory has been divided up equally by number of prospects. Salesperson 1 has exceeded goals by 5% for the past few years. Salesperson 2 has underperformed the same goal by 15% on average for the past few years. The two combined for 10% underperformance. However, upon overlaying additional population, revenue, and budget data the sales manager realized that due to the fundamental demographics of the sales territory, Salesperson 1 had actually underperformed and that Salesperson 2 was the more effective closer. Consequently, the manager altered the assigned territories based upon the additional analytics and was rewarded when both salespeople exceeded their goals, thus allowing the department to better perform.

At Empower IT, our core mission it to help our clients with business optimization, whether this be through assisting them with improving business process management, proven data strategies, custom designed web-based data analytics, establishing key performance indicators and their management, or streamlining reporting. Please give us a call if this sounds like something that could help your team.
 

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