Reference no: EM13943437

Please read teh case and answer 3 questions:

CASE: Applebee's, Travelocity, and Others: Data Mining for Business Decisions.

Randall Parman, database architect at restaurant chain Applebee's International and head of Teradata's user group, opened Teradata's annual user conference in Las Vegas with a warning to those who aren't making the best use of their data. "Data are like gold," Parman noted. "If you don't use the gold, you will have someone else who will come along and take the opportunity," speaking to a room
packed with almost 3,900 attendees.

Parman drew an analogy to the story about Isaac Newton's discovery of gravity after he was hit on the head with an apple. "What if Newton had just eaten the apple?" he asked. "What if we failed to use the technology available, or failed to use these insights to take action?" Applebee's, which has 1,900 casual dining restaurants worldwide and grossed $1.34 billion in revenue last year, has a four-node, 4-terabyte data warehouse system. Although the company has a staff of only three database administrators working with the system, "we have leveraged our information to gain insight into the business," he said. "Some of those insights were unexpected,
coming out of the blue while we were looking in a completely different direction."

For example, Applebee's had been using the data warehouse to analyze the "back-of-house performance" of restaurants, including how long it took employees to prepare food in the kitchens. "Someone had the unanticipated insight to use back-of-house performance to gauge front-of-house performance," he said. "From looking at the time the order was placed to when it was paid for by credit card and subtracting preparation meal time, we could figure out how long servers were spending time with customers." Parman added that the information is being used to help the company improve customer experiences.

Applebee's has also advanced beyond basic business decisions based on data-such as replenishing food supplies according to how much finished product was sold daily-to developing more sophisticated analyses. His department, for example, came up with a "menu optimization quadrant" that looks at how well items are selling so that the company can make better decisions about not only what to order, but about what products to promote.

Meanwhile, technology vendors see untapped potential for businesses to spend money on software and hardware that lets them use data to make more sophisticated business decisions. "Companies who operate with the greatest speed and intelligence will win," says Teradata CEO Michael Koehler. Like many companies, Travelocity.com has lots of unstructured data contained in e-mails from customers, call center representative notes, and other sources that contain critical nuggets of information about how customers feel about the travel site. To offset the inability of business intelligence tools to search for unstructured data, Travelocity has launched a new project to help it mine almost 600,000 unstructured comments so that it can better monitor and respond to customer service issues.

The online travel site has begun to install new text analytics software that will be used to scour some 40,000 verbatim comments from customer satisfaction surveys, 40,000 e-mails from customers, and 500,000 interactions with the call center that result in comments to surface potential customer service issues. "The truth is that it is very laborious and extremely expensive to go through all that verbatim customer feedback to try to extract the information we need to have to make business decisions," notes Don Hill. Travelocity's director of customer advocacy.

"The text mining capability . . . gives us the ability to go through all that verbatim feedback from customers and extract meaningful information. We get information on the nature of the comments and if the comments are positive or negative." Travelocity will use text analytics software from Attensity to automatically identify facts, opinions, requests, trends, and trouble spots from the unstructured data. Travelocity will then link that analysis with structured data from its Teradata data warehouse so the company can identify trends. "We get to take unstructured data and put it into structured data so we can track trends over time," adds Hill. "We can know the frequency of customer comments on issue ‘x' and if comments on that topic are going up, going down, or staying the same." Unlike other text analytics technology, which requires manual tagging, sorting, and classifying of terms before analysis of unstructured data, Attensity's technology has a natural language engine that automatically pulls out important data without a lot of predefining terms, notes Michell de Haaff, vice president of marketing at the vendor. This allows companies to have an early warning system to tackle
issues that need to be addressed, she added.

VistaPrint Ltd., an online retailer based in Lexington, Massachusetts, which provides graphic design services and custom-printed products, has boosted its customer conversion rate with Web analytics technology that drills down into the most minute details about the 22,000 transactions it processes daily at 18 Web sites. Like many companies that have invested heavily in online sales, VistaPrint found itself drowning, more than a year ago, in Web log data tracked from its online operations. Analyzing online customer behavior and how a new feature might affect that behavior is important, but the retrieval and analysis of those data were taking hours or even days using an old custom-built application, says Dan Malone, senior manager of business intelligence at VistaPrint.

"It wasn't sustainable, and it wasn't scalable," Malone says. "We realized that improving conversion rates by even a few percentage points can have a big impact on the bottom line." So VistaPrint set out to find a Web analytics package that could test new user interfaces to see whether they could increase conversion rates (the percentage of online visitors who become customers), find out why visitors left the site, and determine the exact point where users were dropping off.

The search first identified two vendor camps. One group offered tools that analyzed all available data, without any upfront aggregation. The other offered tools that aggregated everything upfront but required users to foresee all the queries they wanted to run, Malone says. "If you have a question that falls outside the set of questions you aggregated the data for, you have to reprocess the entire data set." The company finally turned to a third option, selecting the Visual Site application from Visual Sciences Inc. Visual Site uses a sampling method, which means VistaPrint can still query the detailed data. but "it is also fast because you're getting responses as soon as you ask a question. It queries through 1% of the data you have, and based on that . . . it gives you an answer back. It assumes the rest of the 99% [of the data] looks like that. Because the data has been randomized, that is a valid assumption," notes Malone.

VistaPrint, which has been using the tool for just over a year, runs it alongside the 30-40 new features it tests every three weeks. For example, the company was testing a fourpage path for a user to upload data to be printed on a business card. The test showed that the new upload path had the same conversion rate as the control version. "We were a little disappointed because we put in a lot of time to improve this flow," he adds. When the company added Visual Site to the operation, it found that although the test version was better than the control in three out of four pages, the last page had a big drop-off rate. "We were able to tell the usability team where the problem was," Malone says. VistaPrint also reduced the drop-offs from its sign-in page after the Visual Site tool showed that returning customers were using the new customer-registration process and getting an error notice.

The company fixed the problem, and "the sign-in rate improved significantly and led to higher conversions," he says. While Malone concedes that it is hard to measure an exact return on the investment, the company estimates that the tool paid for itself several months after installation.

1. What are the business benefits of taking the time and effort required to create and operate data warehouses such as those described in the case? Do you see any disadvantages? Is there any reason that all companies shouldn't use data warehousing technology?

2. Applebee's noted some of the unexpected insights obtained from analyzing data about "back-of-house" performance. Using your knowledge of how a restaurant works, what other interesting questions would you suggest to the company? Provide several specific examples.

3. Data mining and warehousing technologies use data about past events to inform better decision making in the future. Do you believe this stifles innovative thinking, causing companies to become too constrained by the data they are already collecting to think about unexplored opportunities? Compare and contrast both viewpoints in your answer.