Defining business objectives and KPIs¶
This topic covers the process of defining business objectives and key performance indicators (KPIs) to guide the development of a data model that aligns with strategic goals.
Scenario¶
Imagine that the sales and marketing department has approached you to leverage data insights to improve customer engagement and sales. They’ve identified key priorities and need a data model to track performance, improve sales strategies, and ultimately increase revenue.
Business Objectives¶
They emphasize that the model should be aligned with the following strategic goals:
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Cross-Sell Strategy Development: The team wants to identify products that are commonly purchased together to inform cross-selling opportunities. By understanding these relationships, they aim to recommend additional products to customers at purchase, boosting the average transaction value and driving further sales.
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Upsell Tactics: They also need to analyze customer purchase history in detail to identify opportunities for upselling. The idea is to suggest higher-value products or complementary items based on past behavior, encouraging customers to spend more on each transaction.
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Customer Recommendation Enhancement: Lastly, the stakeholder mentions that personalized recommendations could significantly enhance the customer experience. By leveraging customer affinity patterns (indicating which products are likely to be bought together), they hope to deliver more relevant product suggestions to customers, increasing satisfaction and loyalty.
Key Performance Indicators¶
After hearing their objectives, you, as the Data Engineer, translate these goals into measurable outcomes. Clear, actionable KPIs are essential for tracking progress and ensuring the model provides value. The stakeholder emphasizes the following key metrics to track the success of their initiatives:
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Cross-Sell Opportunity Score: To evaluate the potential for recommending additional products based on past purchase behavior. It measures how likely a customer is to buy additional products when certain items are already in their cart.
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Product Purchase Frequency: To track how often customers purchase specific products within a defined period. It will help the team understand product demand, identify popular products, and inform inventory and promotional strategies.
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Customer Spending by Product Category: Total spend by customer to identify high-value product categories and target customers likely to spend more in those categories, optimizing marketing and sales efforts.
Next step¶
With these objectives and KPIs in mind, you now have a clear direction. The next step is to design the conceptual model.