Business analytics in India
12 August 2005
Indian businesses are increasingly adopting analytics in their processes to scale down costs, improve inventory flows and extract better profits.
Analytics is the application of statistical techniques to solve business problems. In terms of process, analytics finds patterns and relationships in data by using sophisticated techniques to build models — abstract representations of reality. A good model is a useful guide to understand your business and make decisions. Analytics is being used extensively these days owing to the presence of large customer data enabled by cheaper electronic storage and computer processing power.
Analytics can broadly be divided into :
- Customer analytics, which is covered in this article which pertains to understanding and predicting the customer behaviour. Banks, telcos and insurance firms are major users of customer analytics.
- Supply chain analytics deals with optimising stock points and stocking levels starting from raw material in a warehouse to finished goods at a retail store. Manufacturing and logistic firms are the major users of supply chain analytics.
- Retail analytics deals with understanding the in-store purchase behaviour of shoppers and tries to influence shoppers through the right store layouts, product promotions, etc.
- Pharma analytics is a specialised branch of analytics that deal with the drug discovery process.
Among businesses, banks have shown the highest adoption of analytics. Sophisticated customer analytics in the Indian banking industry is helping banks reduce their exposure, cut down on customer acquisition costs and extract better profitability from existing customers.
One sign that customer analytics is rapidly being used is the growing number of banks establishing integral customer analytics cells. And it is not just restricted to MNC banks like Citibank and Standard Chartered who are emulating the best practices of their parents abroad but also home-grown banks like ICICI Bank. The latest bank to introduce analytics is the private sector HDFC Bank, which has set up its own customer intelligence unit.
One of the oldest areas in which banks have been using analytics with substantial gains is credit scoring. Statistical credit score-cards serve up as a better alternative to the traditional judgmental methods of appraising risk when a bank makes a decision whether to sanction a customer loan or issue a credit card or not.
