"Exhaust data" -- the information we leave behind when we book a flight, put a frappuccino on a Starbucks app or even buy a slice of pizza with a credit card -- is creating an ocean of information that can be profitably harnessed by businesses big and small, say executives of technology and financial services firms.
In a speech last week at the Jefferies Global Technology, Media and Telecom conference in Manhattan, Ajay Banga, chief executive of Purchase-based MasterCard, said data analytics can help even mom-and-pop enterprises.
"A pizza parlor in Westchester near our office cannot possibly know enough about their competitors and what's going on," he said. "But if they self-identify their competitors, . . . I could tell them when they run a promotion, when the other guy runs a promotion, where their usage comes from. Very valuable information at a very reasonable price."
Banga said that by analyzing the "flow and pattern" of credit card transactions, businesses can make more rational and informed decisions.
Giant corporations already are collecting and analyzing so-called "big data" from dozens of sources, including credit cards, internal sales and inventory figures, mobile devices and comments on social media such as Facebook and Twitter, to better understand their customers and predict market moves.
For MasterCard, the sale of U.S.-based data, stripped of information that identifies individuals, is a new business to supplement its core credit card processing, but it is not the only one to test the waters. Mobile payments company Square is offering analysis of credit card transactions through a new iPad app, and American Express also is offering data analysis.
"We now have data coming from everywhere," said Ed Abrams, vice president of midmarket business at IBM Corp. "The key is taking all these new sources of data and mixing them with your existing sources."
Michael Chui, principal of the McKinsey Global Institute, the research arm of the consultancy, said the phrase "exhaust data" is used to liken the information to a car's exhaust.
"When you drive your car, you get exhaust," he said. "It's the byproduct of driving your car. Now we've instrumented our businesses. We've instrumented the Web. The byproducts of making payments, signing up for an app, driving your car is data."
Once the data is collected, Abrams said, companies need tools to "separate the insights from the noise" and put the data in a form that can be used.
Abrams, who works at IBM's Armonk headquarters, said it is not so far-fetched to think that small businesses increasingly will begin using data analytics to help with strategy.
"Within the next couple of years, we'll see them doing this," he said.
TARGETED BY DRY CLEANER
For instance, Abrams said, his local dry cleaner already uses analytics to create custom coupons.
His dry cleaning profile says he's someone who likes his shirts in a box, not on a hanger, and brings in a coat every three weeks.
"Now they've begun targeting me with individualized marketing," Abrams said, noting that he gets discount offers to clean his coats on the weeks when he typically brings in only shirts, an inducement to increase his coat-cleaning frequency.
Nevertheless, Abrams acknowledged that data analytics is beyond the traditional realm of most owners of small businesses.
"These are businesses that got into business to do business, not to manage their business," he said.
Still, he said software tools are becoming easier to use and that, in many cases, the value of data analytics can be demonstrated tangibly.
He pointed to Bishop Company, a Whittier, Calif., landscape retailer with 15 employees that increased sales by nearly 200 percent.
Analytics helped the company understand which products were selling and which weren't, what products could be priced at a premium and which couldn't, he said.
How big can big data become?
Technology researcher Gartner Inc. forecasts that big data will drive $34 billion in spending on information technology alone in 2013.
VALUE TO HEALTH CARE SECTOR
A report by McKinsey Global Institute said the use of big data could be worth $300 billion per year to the U.S. health care sector and increase operating margins by 60 percent for U.S. retailers. The trend also could fuel hiring as companies seek to fill at least 140,000 analytical positions.
But will Banga's vision of the owner of a local pizzeria owner using data analytics to get an edge come to fruition?
Feedback from several Westchester County pizza parlors was mixed.
Gilbert Dacosta, manager of Michelangelo's Pizza Pasta & Things in White Plains said that he does marketing analysis the old-fashioned way. "We just go local and find out what they're doing," he said.
Seth Carson, owner of Slices Pizza in Hastings-on-Hudson, said the use of data "would always be a possibility."
But on the afternoon of Mother's Day, he added, the crush of orders left no time for analysis.