Author: Imarticus Learning

As a business owner, you need to understand your customers and their needs.Tracking how well your services or products work out with your customers and modifying them as per the demands will elongate the life of your business.

Tracking sales revenue, profit margin and customer retention are just some of the metrics that help you stay on track, as your business expands. If you end up not tracking any of the essential business metrics, you might not be able to predict unexpected challenges in your business journey. 

One of the most important metrics that business owners track is customer lifetime value (CLV). This metric will give you a preview of what your relationship with an average customer will look like during your business lifecycle. 

Most successful organisations track CLV and banks on it to help expand their business. A chief business officer is responsible for analysing the business metrics and developing strategies that align with market trends. In this guide, we will talk about the importance of CLV in businesses. 

What is the customer lifetime value (CLV)?

Customer lifetime value (CLV) is a metric that indicates the total revenue a business can expect from a customer account throughout the business relationship. It considers the revenue value of the customer and compares it to the business’s predicated customer lifespan. 

The higher the CLV of a customer, the more valuable the buyer is to your business. This metric helps in gauging the current customer loyalty. If a customer continues to purchase your product or service, it’s a good sign that your marketing strategies are working. 

Customer lifetime value models 

There are two models using which businesses can choose to measure customer lifetime value. These models are: 

• Historic customer lifetime value 

As the name suggests, this model uses previous purchase data to predict the value of a customer. It does not consider if the existing customer will continue with the organisation or not. 

In the historic model, the value of your customer is determined by the average order value. This model is especially useful if most of the customers are only interacting with your company over a certain period. 

However, most customer journeys are not the same. This model has some limitations. 

Active customers, considered valuable according to the historic model, can become inactive and alter your data. On the contrary, inactive customers who start purchasing from you again might get overlooked as they are deemed ‘inactive’.

• Predictive customer lifetime value 

This CLV model forecasts the purchase behaviour of new and existing customers using machine learning or regression. 

The predictive customer lifetime value model will help you identify your most valued customers and the services or products that bring you the most sales. With this prediction, you can also strategise your business to increase customer retention in the long run. 

It is the responsibility of a chief business officer to choose the appropriate CLV model for a business. 

What are the benefits of the customer lifetime value metric? 

CLV helps business owners make informed decisions to expand their business. This metric helps in understanding whether your customer retention strategies, marketing programmes or even the quality of your product/service is up to the mark. It also gives direction, based on your customer retention, which direction the business can expand for better growth. 

By understanding the CLV of your business, you get answers to some important business questions. 

• Which products drive the highest profitability. 
• The amount an average customer is expected to spend. 
• How much is available to spend on new customer acquisition, which still keeping the business profitable. 
• Which is your most profitable client domain. 
• What kind of products high-end customers are looking for. 

Finding the answer to these questions through CLV, will give you a much better understanding of your business performance. You can work on the areas which need improvement, which will increase client retention and drive in more revenue. Another benefit of understanding CLV is the customer acquisition cost (CAC) can significantly reduce with time. 

Calculating CLV

There are two ways by which you can calculate the CLV of your business. These two ways are: 

Accumulated data 

If the historical sales data of your business is available, this way is far more accurate. All orders by individual customers are put together to get their own real CLVs. 

For instance, your business has been operating for some time, but you only now decided to start monitoring your CLV, then you can use ecommerce analytics tools to find the historical data from day one. 

The formula used is: 

CLV = Purchase 1 + Purchase 2 + …. + Purchase n (here n is the number of purchases made by a customer)

Average estimate 

If the granular data of the purchases made is not available, you can estimate an average using the formula: 

CLV = AOV x n

It considers the average order value (AOV) and the average order number you get from every client. This method is mostly used for businesses that are just launching to give a market estimate.

Churn rate

Another metric which is often calculated is customer churn. It is the rate at which a customer stops doing business with your business. 

Churn rate is calculated using the formulas: (Lost customers / total number of customers at the beginning of the period) / 100

Ways to improve customer lifetime value 

Businesses are always looking for ways to enhance their customer experience and boost customer retention. Here are some tried and tested ways to improve the CLV of your business. 

• Connect and interview with your best customers to understand why they continue to choose your business. With this information, you can develop marketing strategies to strengthen these aspects. 
• Make returning items convenient for customers. If this process is complicated or expensive, it will lower the odds of them making another purchase from your brand. 
• Ensure you provide exceptions for your loyal customers to increase customer retention. For instance, if a customer is cancelling a subscription, offer them a small discount to give them the option of remaining a user. 
• Reward your loyal customers by offering them discounts or freebies with their purchases. 
• Provide freebies along with large orders. This will encourage the new and existing customers to keep engaging with your business.
• Set the right delivery date. Providing a delivery date of 15th March and delivering it on the 13th, is much better than the other way round. 
• Keep in touch with your long-time customers. Loyal customers want to know that you haven’t forgotten about them. Also, make it easy for them to contact you. 

Conclusion 

With CLV, you can shape your business strategies to ultimately build more successful, profitable businesses. It allows you to attract and retain long-term customers who will become your brand’s advocates, as well as repeat buyers. 

Customer experience is a vital driver of the CLV of a business. By understanding the needs, preferences and gauging the experience of your customers, you can increase your business revenue. 

Every company across the globe needs experts who can calculate CLV and make necessary business strategies. If you are interested in building a career as a chief business officer check out the Chief Business Officer Programme offered by Imarticus learning. 

This twelve months course has been built in association with IIM Udaipur. It will equip you with the necessary knowledge and skills to excel in the fiercely competitive business landscape. 

Every business owner has one primary goal- growth. This growth does not only point to the revenue but also the in-house expansion of the business with respect to personnel and production. However, sometimes, this growth can come faster than anticipated. In the world of digital marketing, growth can often be fast, unpredictable and can even happen as a hybrid – remote and inhouse – model. 

To match this growth, strategic human resource management measures need to fall in place. This unplanned expansion can leave HR managers scrambling to keep up. From hiring new talent to integrating them with existing teams, the challenges are endless.

However, these problems are easily navigable with open communication and a realistic plan of action in place. To be able to reach that ground, the HR needs to assess the situation and then plot around it. 

Charting the Course for Growth

Unplanned expansion, while exciting, requires a clear-headed assessment from the HR department. The first step is to understand the scale of the expansion. Is it a handful of new hires, a completely new department, or the opening of a new branch? This will dictate the level of resources needed and the timeline for implementation.

Next, the HR should conduct a thorough skill gap analysis. Identify the specific skill sets required for the new positions. This analysis reveals any discrepancies between your current talent pool and the demands of the expansion. While conducting this analysis, don’t forget to factor in budget constraints. Unplanned expansions might have tighter budgetary allocations and it is the HR’s responsibility to be upfront with hiring managers about realistic timelines and costs associated with recruitment.

Plan of Action:

• Conduct meetings with leadership to understand the scope of expansion.
• Develop a skills inventory of your current workforce.
• Research salary benchmarks for required positions to ensure competitive compensation.

Prioritising and Strategizing

With a clear picture of the situation, you reach the strategizing phase. In this phase, prioritising organisational targets is key. Focus on key roles that are critical for immediate operational success. Prioritise recruitment efforts for these positions to minimise disruption to ongoing business.

Before resorting solely to external hires, explore the potential for internal mobility through promotions and upskilling drives. This fosters loyalty, increases employee satisfaction, reduces onboarding time and resources and leverages existing knowledge of the company culture.

Now, although everything might seem to sit in perfectly at the moment, contingency plans are an integral part of strategic human resource management. Develop backup strategies through team meetings with the management in case of unforeseen delays or hiccups. Consider solutions like temporary staffing agencies or cross-training existing employees to fill skill gaps temporarily so that the company does not bear the brunt of unexpected crises.

Although the plan might seem foolproof on your end, communication is key. Keep all stakeholders informed, including leadership, hiring managers and current employees of every move that you are making. Transparency builds trust and ensures everyone is on the same page regarding resources and timelines.

Plan of Action:

• Identify a list of critical roles needed for immediate operation.
• Evaluate training opportunities for existing employees to fill skill gaps.
• Develop a communication plan to keep stakeholders informed throughout the process.

The Recruitment Challenge

Unplanned expansion demands agility in the recruitment process and it is here that traditional methods with lengthy interview processes will not present the ideal scenario. To deal with this, explore faster avenues like targeted online platforms, employee referral initiatives, internship programs and attending relevant job fairs.

Employer branding matters more than ever during unprecedented growth. To do this, highlight the company’s growth potential and exciting opportunities to attract top talent. Streamline interview processes with clear evaluation criteria such that even if you don’t end up hiring certain candidates, they can always have the option to apply to roles better suited for them if the vacancy ever arises. Utilise technology for remote video interviews to widen your candidate pool.

Cultural fit is paramount during rapid change. Finding candidates with the right skills is important, but prioritising those who align with your company values and can adapt to a growing environment is crucial.

Plan of Action:

• Leverage online job boards and social media platforms for targeted recruitment.
• Develop a compelling employer branding strategy highlighting growth opportunities.
• Implement a structured interview process with clear criteria for candidate evaluation.

Onboarding and Integration

Even with a fast-paced expansion, a structured onboarding process is essential. Provide new hires with clear expectations, detailed company information and the resources they need to succeed.

Mentorship programs can be invaluable and must hold a place in your plans for strategic human resource management. Pair new hires with experienced colleagues who can guide them, answer questions and foster a sense of belonging. Create open communication channels for new hires to express concerns or ask questions. Encourage regular feedback to identify and address any onboarding issues.

Plan of Action:

• Develop a comprehensive onboarding program tailored for new hires.
• Implement a mentorship program to connect new hires with experienced colleagues.
• Conduct regular check-ins with new hires to ensure a smooth onboarding experience.

Managing Existing Employees

Sudden expansion can lead to feelings of uncertainty and anxiety among existing employees. Implement a change management strategy with clear communication about the expansion’s purpose and impact.

Highlight how the expansion creates career development opportunities for existing employees. Offer training programs and upskilling initiatives to help them adapt to the evolving environment.

Employee engagement is crucial during expansion. Maintain it by acknowledging contributions, recognizing efforts and rewarding your team’s adaptability.

Plan of Action:

• Conduct open forums to address employee concerns about the expansion.
• Offer training and upskilling opportunities to help existing employees develop new skills.
• Recognize and reward employees who demonstrate adaptability and positive contributions.

Conclusion

Expansions can be challenging, especially when it is not predicted. But it also presents a unique opportunity for the HR department to take centre stage and drive positive change within the organisation. With strategic human resource management, HR managers can navigate this period effectively, ensuring a smooth transition for everyone involved. 

Now someone who is interested in exploring these strategies further must look to enrol in a certified course to enhance their skills and build an employable resume fostering them. If that is you, then check out the Executive Management Program by IIM Lucknow in collaboration with Imarticus. This course is directed at People Leadership and Strategic HR Management, one of the booming career options available today.  

The marketing landscape has become a data-driven battlefield as digitisation takes over businesses rapidly. While customer data is a priceless mine of significant insights, transforming that data into implementable actions remains a challenge for many. 

This is where CART (Classification and Regression Trees) or decision trees step in.This marketing analytics model factors in several metrics to help make better marketing decisions. It’s a powerful tool and if you want to understand it from the best, you can apply to prestigious B-school programs like IIM Executive courses. An in-depth understanding of this model can help you research complex customer behaviour and empower your marketing strategy.

What is a CART Model?

Imagine a complex decision tree – its branches represent a series of questions about your customers and its leaves display the resulting outcomes. This is the core concept behind a CART model. It meticulously analyses your customer data, building this tree-like structure that reveals crucial relationships between various factors that influence customer behaviour.

By dissecting vast data sets, CART brings out the hidden patterns and trends that traditional analysis methods might miss. This helps marketers structure campaigns around these insights that guarantee streamlined resource allocation and a boost in profits.

The Power of CART for Marketers

IIM Executive courses focusing on marketing techniques teach more on how CART structures empower marketers with several invaluable insights that further productivity and business growth. CART serves as an efficient marketing tool by:–

Unearthing hidden data patterns 

CART delves deep into your customer data, uncovering previously unidentified patterns and trends that traditional analysis methods might miss. This makes the marketer aware of trends in customer behaviour, such as target demographics, purchase history and online browsing habits.

Predicting customer behaviour 

By analysing past behaviour patterns, CART models can predict how customers are likely to respond to future marketing campaigns or product launches. This enables marketers to streamline their marketing efforts and resources, delivering the right message to the right audience at the right time.

Simplifying customer segmentation 

When you know your consumer base well, you can easily segment them into distinct groups based on shared characteristics – such as geographical location, age, purchasing habits and so on. This helps tailor and run marketing campaigns to resonate with each segment, maximising campaign effectiveness and return on investment (ROI).

Building transparent structures 

Unlike some complex algorithms, CART models heavily rely on their interpretability. The clear, visual tree structure simplifies how different variables influence the outcome. This transparency empowers marketers to make informed decisions based on tangible insights derived from the data.

Use Cases and Real-World Marketing Applications

Now that you know the significance of CART models, here are a few use cases to help you understand their implementation better :–

• Combating customer churn

Customer churn happens when you fail to retain your target customer base. CART helps you analyse customer data to identify red flags in your system and marketing initiatives that cause customer churn. This allows you to proactively target at-risk customers with targeted retention campaigns, minimising churn and maximising customer lifetime value.

• Optimising ad spend allocation

An effective CART model helps you predict which customers are most likely to respond positively to a specific advertising campaign. This empowers you to allocate your advertising budget more efficiently, maximising campaign ROI and ensuring your message reaches the most receptive audience.

• Personalised product recommendations

Analyse customer purchase history, search data and demographics to predict which products a customer is most likely to buy next. This allows you to offer personalised recommendations enhancing customer experience and driving sales.

• Predicting Customer Lifetime Value (CLV)

Not all customers you attract will be equally beneficial to your business. So, identifying high-value customers who are likely to spend more over time allows you to prioritise your marketing efforts. CART models can analyse customer data like purchase history and demographics to predict a customer’s CLV. This allows you to tailor marketing campaigns to retain these valuable customers, potentially offering them exclusive loyalty programs or personalised discounts.

• Fraud detection

Fraudulent activity can inflict significant financial losses. CART models can be trained to identify patterns associated with fraudulent purchases. By analysing factors like customer location, purchase history and typical spending behaviour, CART can flag suspicious transactions in real-time. This empowers you to implement preventative measures and safeguard your business from financial losses.

• Market basket analysis

Understanding how customers shop together, CART models can analyse customer purchase history to identify products frequently clubbed in purchases. Imagine a customer buying a new stitching machine. A CART model might reveal that they often purchase thread rolls and needles alongside this one-time purchase. Leveraging this insight, you can create targeted promotions and even offers bundling these products together, potentially increasing sales and average order value.

Advanced Applications of CART

While the core applications of CART focus on customer segmentation, prediction and personalization, its capabilities extend even further. Here are five advanced applications of CART that can unlock even deeper insights to empower your marketing strategy:

• Customer journey optimization

CART enables you to analyse customer interactions across various touchpoints (website, email, social media) to identify potential roadblocks or areas for improvement. The models can reveal patterns in customer behaviour that highlight where customers drop off during their purchase journey. Now you can optimise your website user experience, refine email marketing workflows, or tailor social media engagement strategies to ensure a seamless customer journey.

• Campaign response modelling

Predict how different marketing campaigns will perform before launch. By analysing past campaign data, including budget allocation and target audience patterns CART models can predict the potential reach, engagement and ROI of future campaigns. This allows you to test different marketing strategies, optimise campaign elements and ultimately maximise your return on marketing investment.

• Price sensitivity analysis

CART models can analyse customer purchase history alongside product pricing to identify price sensitivity. This allows you to develop dynamic pricing strategies, offering targeted discounts to specific customer segments or adjusting prices based on market demand.

• Product development and innovation

Gain insights into customer preferences to inform product development and brainstorm ideas to further your business into newer dynamics. Analyse customer demographics, purchase history and online reviews to identify trends and unmet target customer needs. This allows you to develop new products or features that cater to specific customer segments, increasing customer satisfaction and loyalty.

• Competitive Analysis

CART models further help you gain a competitive edge by analysing customer behaviour towards your competitors’ offerings. By analysing customer data alongside competitor product information, CART models can reveal which customers are more susceptible to competitor offerings. This allows you to develop targeted marketing campaigns to retain these customers and highlight your brand’s unique value proposition.

Conclusion

CART stands as a formidable asset capable of transforming your marketing strategy. Its insights into customer behaviour are invaluable, offering a pathway to enhanced targeting, personalised campaigns, optimised resource allocation and ultimately, accelerated business growth. 

However, to know more about CART and its many applications, sign up for the Executive Management Programme in Sales and Marketing Leadership by IIM Lucknow. This 11-month course is brought to you by Imarticus among all its other IIM Executive courses, to transform you into a marketing guru ready to kickstart your dream career!

Product analytics involves tracking and examining user data periodically to understand how customers use a product. This includes keeping a record of actions such as clicks, page views, and interactions within the product. By analysing this data, businesses can gain valuable insights into user behaviour, preferences, and trends. These insights can guide firms in making data-driven decisions focused on enhancing the product’s performance, optimising user experiences, and driving business growth.

Choosing the right product analytics tool is crucial because it enables businesses to effectively extract information from the vast amount of user-generated data. As a product manager, it becomes challenging to identify what are the best ways to choose a product analytics tool. Getting certifications for a product manager can help you enter into the specifics of how to choose the right product analytics tool. We have listed down tips on how to choose the best product analytics tools for your business. 

How to Choose the Right Analytics Tool? 

Choosing the right product analytics tool can be essential for your company’s growth. The right tools will give you different metrics – both on your team’s performance, the consumer mindset and on how the product is performing. Hence, it’s important to choose the right features when you are selecting a product analytics tool. Make sure the analytics tool you choose has the following features discussed below: 

Tracking: Users interact with your brand through different channels. To understand their journeys, which can be long and varied, you need a tool that can track and recognize customers across different devices and touchpoints.

Event management and analysis: Your product analytics tool should have the capability to handle events or create triggered events. These events can then be used to generate automated and personalised interactions with users.

KPI Dashboards: Dashboards compile important metrics and reports in one place. It’s beneficial when your tool allows customization and sharing, simplifying communication of vital information within your organisation.

User segmentation: With comprehensive cohort data provided by your tool, you can create customised experiences and effectively connect with your audience.

Integrations: The product analytics tool you choose should facilitate seamless data exchange, preventing data silos. It should enable both upstream and downstream data integration.

Funnels: Product analytics funnel reports reveal how users move through your product. They highlight where users drop off, helping you identify areas for improvement and testing.

How Does Product Analytics Metrics Help Your Team?

Product analytics tools help you get a lot of metrics that your team can work with. However, not all of the metrics can be useful in every department. Certain metrics may be useful for the marketing department while some metrics are more inclined to maximise customer success. While these metrics can be used simultaneously for two different functions, it is best to decide on the right product analytics tool based on your specific requirements.

Let’s look at the different metrics and how they can help out different areas of a company:

For Customer Success:

Customer success is very important for any brand. It helps them gain new customers or retain older customers. Brand loyalty can also result in customers promoting the brand on their own, thereby reducing marketing costs.

Here are some metrics for customer success:

• Net Promoter Score (NPS) – NPS is a metric that shows how likely a client or customer is going to recommend or promote your brand to another party.
• Churn Rate – The churn rate refers to the number of customers who have discontinued subscription of any service.
• Recurring revenue – This is the predicted revenue that you will get per month or year.
• Monthly Average User – The MAU is the user base on a short term period – a month.
• Daily Active User – Determines whether the number of users are growing per day.
• Retention Rate -​​ This determines the number of customers that keep using the product or service for a given time period.

Among these metrics, churn rate and the retention rate is very important and helps understand the customer lifetime value (CLV).

For Marketing or the Sales Team:

The department that requires very strong numbers to rate their performance is definitely the sales and marketing team. While a lot of the work they do is qualitative, the numbers dictate whether they are on the right path. These metrics make or break the sales department of a company: 

• Acquisition rate- This helps to identify how effective the sales team might be. The metric determines at what pace the team acquires new customers.
• Customer acquisition cost – The customer acquisition cost refers to the average cost the company spends to acquire customers  – for example, cost of targeted advertising.
• Trial to paid conversion rate – Many services are provided on a free trial basis first. This metric tries to identify how many customers using the trial version get converted to the full paid services.

For Product Development Team:

Quality products are finally what defines the brand to a customer. So, it’s important to keep measuring the performance of a product and improving on it.

Here are some metrics that are essential for the product development team to keep an oversight on the product they deliver:

• Engagement Rate – Identifying which product feature or utility function gets the most engagement among users.
• Usage funnels – On which step of interaction users drop off before making the final purchase or subscription of a product.
• Error rates – Where do users enter an error and then decide to discontinue using a product or service.

Key Takeaway

In 2024, the product analytics field is evolving, with various emerging trends taking over the market. These trends reflect the increasing complexity of these tools, the varied requirements, and the shifting strategies of businesses in product development and user interaction. When using different product analytics tools, companies can benefit by getting deeper insights into user behaviour, enabling more informed decision-making, enhancing product performance, and ultimately driving business growth.

With Imarticus’s professional certification course in product management, you’ll gain invaluable insights, practical experience to propel your career forward in this dynamic field. Enrol today if you intend to get certifications for product manager and take the first step towards mastering the skills and knowledge essential for a successful career in product management. Hurry! Don’t miss out on this opportunity.  

Inventory analysis is the process of examining inventory to determine the optimal amount a business should hold.

While we’ll discuss the five main analyses — ABC, SDE, HML, FSN, and VED — we’ll also describe the advantages of using more non-classified techniques like just-in-time inventory, minimum order quantity (MOQ), reorder point, and safety stock.

At the end of this blog, you’ll be equipped with inventory control techniques that you can leverage for the best results. Correct implementation of these techniques is indispensable for efficient supply chain management. Supply chain professionals, both aspiring and experts, can enrol in supply chain management programmes to brush up on these techniques as well as learn about the critical role technology plays in logistics, procurement, inventory, and vendor management.

5 Benefits of Inventory Analysis

Understanding your inventory’ capacity is crucial to building a strong storage unit. Here are the five benefits of employing inventory analysis techniques:

1. It saves money by reducing waste and inefficiencies.
2. It improves customer service by preventing stockouts.
3. Inventory analysis frees up cash flow for other areas by optimising inventory levels.
4. It minimises waste by identifying slow-moving or obsolete products.
5. Finally, it provides data for making informed decisions on purchasing, production, and sales.

8 Common Methods for Inventory Analysis

ABC Analysis

The ABC model prioritises inventory based on annual consumption value (ACV) and helps businesses focus resources on their most critical items.

Categories

• A (20% of items, 80% of value): It is the most critical category and requires close monitoring and strict controls.
• B (30% of items, 15% of value): It is moderately important and requires moderate monitoring and controls.
• C (50% of items, 5% of value): Judged at the least critical, this needs minimal monitoring and controls.

Steps for ABC analysis

• Gather data related to unit cost, annual demand, and lead time.
• Calculate ACV (unit cost annual demand).
• Sort items by ACV from highest to lowest.
• Define category boundaries based on cumulative ACV.
• Assign categories and develop management strategies like JIT and EOQ models.

FSN (Fast, Slow, Non-Moving) analysis

This classifies inventory based on sales velocity (fast, slow, non-moving) for efficient management.

Categories

• Fast (F): Sell quickly and generate high revenue. Exercise low control here.
• Slow (S): You can see these and review them gradually.
• Non-moving (N): No sales, analyse cause, chances for discounts and write-offs.

Steps for FSN analysis

• Gather data like unit costs, annual demand, and lead time.
• Set thresholds: Define the boundaries for each category based on your specific business context and industry standards. It’s common to use percentages of average inventory stay time and average consumption rate as reference points. 
• Categorise each item based on the calculated ITR or chosen metrics.

VED (Vital, Essential, Desirable) Analysis

VED analysis categorises inventory items based on their criticality to the business depending on their usefulness. To understand the complexity that goes into this analysis, you can consider a supply chain management course.

Categories

• Vital (V): These are items critical to the core operation. 
• Essential (E): These represent items whose shortage wouldn’t be catastrophic. Delays or alternative solutions might be possible.
• Desirable (D): Their absence wouldn’t significantly impact production.

Steps for VED analysis

• Identify all inventory items. This includes raw materials, work-in-progress, finished goods, and any other items kept in stock.
• Consider factors like production stoppage, cost of delay, and safety implications.
• Categorise each item as V, E, or D based on your evaluation.
• Develop different inventory management strategies for each category.

HTML (High, Medium, Low) Analysis

HML (High, Medium, Low) analysis categorises inventory based on unit cost to prioritise control efforts.

Categories

• High: Costly items (fewer in number) require strict controls due to high financial risk.
• Medium: Moderate cost items need moderate control measures.
• Low: Least expensive items (often the most in number) require minimal controls but benefit from bulk ordering and optimised storage.

Steps for HML analysis

• Collect unit cost and annual demand for each item.
• Set thresholds (percentages or manual cutoffs) to define High, Medium, and Low categories based on the cost distribution.
• Develop different control strategies for each category (e.g., frequent checks for high-cost items and bulk ordering for low-cost items).

SDE (Scarce, Difficult, Easily Available) Analysis

SDE (Scarce, Difficult, Easily available) categorises inventory based on how easy it is to acquire.

Categories

• Scarce: These are items available in limited quantities.
• Difficult: These items pose challenges in procurement and need constant monitoring.
• These are readily available and allow for bulk ordering and less control.

Steps for SDE Analysis

• Collect information on lead times, supplier availability, and potential supply chain disruptions for each item.
• Assess the difficulty of acquiring each item based on scarcity and procurement challenges.
• Assign items to each category based on the evaluation.
• Implement different control and procurement strategies for each category.

Just-in-Time Inventory Management

Just-in-time (JIT) inventory management is like having everything you need right when you need it. Instead of stocking up on supplies, businesses only receive materials as they’re needed for production. 

This frees up storage space, minimises waste from overproduction, and helps businesses react faster to changing market demands. Plus, they only pay for what they use, which reduces holding costs. Learn more about it in a supply chain management course.

Minimum Order Quantity (MOQ)

Minimum order quantity (MOQ) refers to the smallest number of units a supplier requires a customer to purchase in a single order. 

This requirement is often set by manufacturers or wholesalers to ensure their products are sold in bulk rather than individual units. Overall, MOQ is a balancing act between supplier efficiency and buyer flexibility. 

Reorder Point

The reorder point (ROP) is a specific stock level at which a business needs to replenish its inventory to avoid stockouts. It acts as a trigger point, prompting an order to be placed with the supplier to ensure a smooth flow of goods and prevent disruptions in production or sales.

Here’s how you calculate the reorder point:

ROP = Daily Sales ✕ Lead Time + Safety Stock

Example:

Daily sales: 10 units

Lead time: 5 days

Safety stock: 20 units

ROP = 10 units/day ✕ 5 days + 20 units = 70 units

Conclusion

From figuring out what needs the most attention (ABC) to getting the right stuff at the right time (JIT), inventory control techniques are all about minimising wastage and maximising revenue. But you must note that these techniques keep evolving.

That’s where Imarticus’s Advanced Certification in Digital Supply Chain Management/Analytics comes in. It teaches you the latest strategies and opens doors to amazing career opportunities. Register today!

Ever wonder what motivates employees to go the extra mile? The answer lies, in part, within the reward systems offered by companies. These are structured programmes designed to recognise and acknowledge desired behaviours and performance.

As a result, it ultimately drives both individual and organisational success. By enrolling in an HR analytics course, you can gain in-depth knowledge of reward systems’ various classifications, objectives, and benefits, simultaneously. 

On a side note, did you know that the redemption rate for incentive programmes stood at 49.8% in 2023? Read on to gain a comprehensive understanding of reward systems.

Classifications of Rewards and Incentives

Reward systems are typically classified into two main categories: monetary and non-monetary. Let’s read in detail.

Monetary rewards

These tangible incentives directly impact employees’ financial well-being and include:

• Bonuses: Bonuses are performance-based financial awards.
• Stock options: This allows employers to grant employees an ownership stake in the company.
• Merit pay: In established companies, your salary increases based on individual performance.
• Profit-sharing: This option allows a company to distribute its profits among employees based on their contributions.

Non-monetary rewards

These rewards focus on employee well-being, recognition, and development, and generally include:

• Paid leave: A highly sought-after process, it offers additional vacation days, sick leave, or personal leave.
• Professional development training: This lets a company invest in employees’ skills and knowledge.
• Fringe benefits: As an employee, you can receive supplemental benefits like health insurance, paid time off, and retirement plans.
• Public recognition: This includes acknowledging and celebrating employee achievements through awards, nominations, or public praise.

5 Primary Objectives of a Reward System

An HR analytics course focuses on the effectiveness of these reward types. Below are the main objectives of implementing a reward system.

1. Motivation

Reward systems act as a catalyst for motivation by directly linking desired behaviours and performance with positive reinforcement. This can take various forms, from bonuses for exceeding sales targets to public recognition for exceptional customer service. 

2. Engagement

Beyond sheer motivation, reward systems contribute significantly to employee engagement. When employees feel valued and appreciated for their contributions through well-designed rewards, they become more invested in their work and dedicated to the organisation’s success. 

3. Accountability

Effective reward systems go beyond simply recognising achievements by promoting accountability among teams. This instils a sense of ownership and responsibility within individuals and teams, encouraging them to take initiative, strive for excellence, and hold themselves accountable for results. 

4. Talent management

Competitive and attractive reward systems play a crucial role in talent management. They serve as a magnet, attracting top talent seeking opportunities for recognition, growth, and financial well-being. 

Additionally, well-designed rewards contribute to employee retention by creating a sense of value and appreciation, discouraging them from seeking opportunities elsewhere. 

5. Strategic alignment

Finally, reward systems play a vital role in ensuring alignment between individual goals and organisational objectives. By linking rewards to behaviours and outcomes that contribute to achieving the organisation’s strategic goals, you will find that you’ve created a unified force, much like what is taught in HR analytic courses.

Advantages of Introducing Rewards and Incentives

While we’ve outlined the broader benefits of reward systems for individuals and organisations, let’s see why they’re useful for both forces: employees and organisations.

For Employees

1. Greater motivation, job satisfaction, and sense of accomplishment

Well-designed reward systems directly link positive outcomes with desired behaviours, acting as a powerful motivator. This can be financial rewards for exceeding sales targets, public recognition for exceptional customer service, or offering additional paid time off for exceeding work hours. 

2. Increased learning and development opportunities

Reward systems can be designed to incentivise continuous learning and development. This could involve offering additional training opportunities for exceeding performance goals or providing tuition reimbursement for completing relevant certifications. An HR analytics course equips you to analyse data on employee skills gaps and training effectiveness. 

3. Improved well-being and sense of belonging

Effective reward systems go beyond financial incentives and recognise various contributions to the organisation. These could include acknowledging teamwork, celebrating individual milestones, or offering flexible work arrangements that promote work-life balance. 

For Organisations

1. Improved employee performance and productivity

When employees feel valued and motivated by well-designed reward systems, they are more likely to put in their best effort. This can directly translate to improved performance, higher quality work, and increased efficiency. 

2. Reduced turnover and absenteeism

Offering competitive rewards can be a powerful tool for attracting and retaining top talent. Additionally, a well-designed system that recognises and values employee contributions can foster a sense of loyalty and reduce the desire to seek opportunities elsewhere. 

3. Enhanced employer brand and reputation

A well-designed reward system prioritising employee well-being, growth, and recognition contributes positively to an organisation’s employer brand. This can attract top talent seeking not just competitive salaries but also a company culture that values its employees and invests in their development. 

Factors Behind Designing a Reward System

Designing an effective reward system requires careful consideration of various factors to ensure it truly motivates employees and delivers desired results. Here are some key factors to consider.

1. Organisational goals and values

The primary purpose of the reward system should be to support and incentivise behaviours that contribute to achieving the organisation’s strategic goals. Analysing these goals and values helps determine which behaviours and outcomes should be rewarded. Consider opting for an HR analytics course to learn what factors you need to look out for.

2. Employee needs and preferences

Understanding your workforce’s needs and preferences is crucial if you’re planning to design a system that resonates with them. This includes factors like demographics, job roles, career aspirations, and preferred motivational styles. Conduct surveys and focus groups and analyse data on past responses to rewards for obtaining better insights.

3. Market competitiveness and industry standards

Staying competitive in the job market is essential. Researching industry benchmarks and analysing compensation and benefits offered by competitors helps ensure your reward system is attractive and retains top talent.

4. Budgetary constraints

Financial resources available for the reward system need to be considered realistically. Striking a balance between offering competitive rewards and maintaining financial sustainability is crucial.

5. Type of work and performance measurement

For creative or knowledge-based work, intrinsic rewards and recognition might be more effective than solely focusing on financial incentives. On the other hand, performance-based rewards like bonuses might be more suitable for jobs with clearly defined metrics and goals.

Conclusion

By investing in an HR analytics course, you will gain valuable insights into the impact of different reward systems on these critical metrics. You will also learn how to analyse data on factors like employee demographics, performance metrics, and compensation trends. 

The benefit? You can adopt the specific reward type based on your organisational goals and influence organisational outcomes.

The Professional Certificate in Human Resource Management and Analytics offered by Imarticus equips you with the analytical skills to excel in this critical area. Through interactive learning modules and case studies, you’ll gain the ability to analyse data and measure the effectiveness of different reward types. Get your certification today!