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Forget Big Data — Focus on Small Data

In their rush to jump on the big data bandwagon, many organizations have lost sight of a much simpler yet effective source of customer insight: “small data.”

Big data is about synthesizing, mining and analyzing mounds of seemingly unrelated information to derive actionable insights about your customer. It’s a complex science but one that can be leveraged to understand and engage customers in new, surprising and sometimes even creepy ways. (Consider the well-documented case where retailer Target figured out that a teenage girl was pregnant before her father even knew—merely by analyzing her purchase history data. See “The Challenges Around Big Data and the Lessons to Be Learned.”)

In contrast, small data is about listening to and observing your customers intently, picking up on simple cues that allow you to better personalize and customize your interactions with them.

Small data doesn’t require supercomputers to decipher. It’s not really a new concept, either—it’s just a new moniker for a tried and true approach that the best sales and service people have employed for decades, if not centuries.

That might make small data sound quaint and old-fashioned, but don’t be fooled. Using it can actually enhance your business’ customer experience in very material ways, without the expensive overhead associated with big data solutions.

See Also: To Go Big (Data), Try Starting Small

To get a flavor of how small data can influence your customer experience, consider these examples of the strategy put into practice:

• Delta Airlines’ 800-Line Greeting

Presuming a customer calls Delta from a phone number the airline has on record, the 800-line voice response system will skip the standard pleasantries and prompt you with a question such as “Are you calling about your delayed flight?” If the answer is yes, then Delta immediately routes the caller to an automated service or a live representative who can help, obviating the need to navigate through a series of menu options.

Once the incoming phone number is identified, Delta’s systems check to see if the customer has reservations coming up, or if perhaps a flight that day has been delayed or canceled.

That’s not a terribly complex undertaking from a data perspective, as it is a relatively simple look-up exercise, rather than a full-blown analytics task.  Yet it yields a much better and more efficient customer experience, particularly at a time when passengers may be frazzled about unexpected changes in their travel plans.

• Ritz-Carlton’s Personalized Guest Experiences

The Ritz-Carlton luxury hotel chain is renowned for its ability to create highly personalized guest experiences. If the Ritz in Boston learns that a guest is allergic to feathers, then the Ritz in Dubai—half a world away—will de-feather that same guest’s room prior to arrival.

How does the company do that? Ritz staff are trained to listen carefully for guests’ likes, dislikes and general preferences. These are small pieces of data (such as a favorite newspaper or snack, or a preferred room location) that Ritz-Carlton employees dutifully record in a customer database dubbed “Mystique.”

They’re also trained to consult that database prior to a guest’s arrival and act on any relevant information they find. This helps ensure that any previously captured small data is used to create an unusually customized guest experience during subsequent visits.

These two examples are from outside of the insurance industry, but the approaches they illustrate are easily transferable. It’s simply a matter of putting your antennae up and looking for small pieces of data that can be used to deliver a more personalized, relevant and anticipatory customer experience.

Consider the small data that’s available to insurance carriers—data that, if captured and capitalized on, could generate some very positive customer impressions:

• Children’s Ages

By recording information about a customer’s children during an initial needs analysis, insurers can engage the policy owner to assist in stressful parenting periods, such as when a child approaches driving age.

While identifying households with youthful drivers isn’t a new idea for insurers, using that information to strengthen the customer relationship is. Historically, such data has been used by insurers to address situations where a new, uninsured driver may be behind the wheel (to adjust premiums).

However, the identification of a youthful household driver shouldn’t just be an exercise in rate adjustment. It’s also an opportunity for the insurer to demonstrate the value it provides—in this case, by communicating relevant information to parents that helps them navigate a difficult family transition (e.g., determining what resources are available to teach their son/daughter how to drive or how they can best ensure their child’s safety while they learn to drive).

Using small data in this way creates a customer experience that appears strikingly prescient to the policy owner, essentially addressing their concerns and questions before they even have a chance to raise them.

• Sales

For certain types of commercial lines coverages, insurers have visibility into business performance measures for their clients (such as sales), which are recorded annually via premium audits.

Here again, as with youthful drivers, the industry has traditionally used such data exclusively to adjust premium rates for coverages that are tied to these business metrics. But this small data can be far more useful.

Consider the first time a commercial lines customer crosses over the $10 million revenue threshold. That’s a milestone that would be reflected in the small data most insurers collect, yet few do anything with it, other than raise premiums.

Imagine if that customer received a handwritten note from his insurer (or agent) a month after renewal, congratulating him on reaching that milestone. Imagine how that small token of recognition would make the customer feel.

Business owners, after all, don’t really care about their business insurance—but they do care about their business. When their business grows, that affords an opportunity to celebrate alongside them, to give them a “pat on the back” that they likely weren’t expecting from their insurance provider but will remember fondly.

• Recurring Information Requests

At Ritz-Carlton hotels, if a guest requests the same newspaper, snack or room location visit after visit, the staff will notice and use that small data to shape the customer’s future stays.

There is an analog for this in the insurance industry. Consider the reports and other information materials that a policy owner requests year after year—e.g., a commercial insured requesting updated certificates of insurance for her core set of clients, or a corporate risk manager requesting loss reports sorted by site.

Every recurring information request represents a piece of behavioral small data that can be used to customize the policy owner’s future experience.

Imagine if a policyholder didn’t even have to make those information requests, just as the Ritz-Carlton guest who’s allergic to feathers need not request a feather-free room.

Imagine if an insurance provider, based on a policyholder’s prior history of information requests, offered all of those reports and certificates to the customer at precisely the right time each year.

That would be the epitome of a more personalized and effortless customer experience, all made possible simply by acting on a piece of small data.

Small data may be less glamorous than its more buzz-worthy big data counterpart, but it’s no less important.

Big data has its merits, but as the “shiny new object” that every company covets it has unfairly eclipsed the value of simpler and more straightforward sources of customer insight.

Better understanding your customers and her needs doesn’t always require intense data crunching and sophisticated analytics. Often, what’s really needed is just a watchful eye, an attentive ear and the discipline to act on whatever insights you uncover.

Because when it comes to creating a positive, memorable and personalized customer experience, small data can have a really big impact.

This article first appeared at Carrier Management.

As Obamacare's 'Compassionate' Reality Sets In, Companies 'Cruelly' Cut Health Benefits

Employees of shipping giant United Parcel Service recently got an unexpected delivery. The company announced that it would stop offering health coverage to the spouses of 15,000 workers.

UPS’s workers and their families can thank Obamacare for this special delivery. And UPS isn’t alone. American businesses are discovering each and every day that the president’s signature law will raise health costs for them and their employees in short order.

In a memo explaining the decision to employees, UPS stated that increasing medical costs “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost.”

One day before UPS’s big announcement, the University of Virginia announced that it would cut benefits for spouses who have access to health care through jobs of their own. The rationale was similar.

Delta Airlines recently revealed that Obamacare will directly increase its direct health costs by $38 million next year. After taking into account the indirect costs of the law, the company is looking at a 2014 health bill that’s $100 million higher.

Increasingly, large employers who aren’t dropping spousal health benefits are requiring their employees to pay monthly surcharges in the neighborhood of $100 per spouse.

Many small businesses are dropping family coverage altogether because they expect that Obamacare’s new tax on insurers will be passed on to them in the form of higher premiums. One Colorado-based business received notice from its insurer that the tax would increase premiums more than 20 percent.

The story is similar in Massachusetts. One new report concludes that over 45,000 small businesses in the Bay State will see premium increases in excess of 30 percent. In all, more than 60 percent of firms in the state will see their premiums go up.

Last month in California, the largest insurer for small businesses — Anthem — declared that it would not participate in the state’s small-business health insurance “marketplace,” Covered California. Only two years ago, Anthem covered one-third of small businesses in California.

Anthem’s exit represents one less choice for consumers — and a sign that competition may not be as robust in the exchanges as the Obama Administration promised.

Small businesses are responding to these higher premiums by trimming their labor costs in other ways. That’s not good news for workers.

Seventy-four percent of small employers plan to have fewer staff because of Obamacare, according to a recent U.S. Chamber of Commerce survey. Twenty-seven percent are looking to cut full-time employees’ hours, 24 percent to reduce hiring, and 23 percent to replace full time with part-time employees.

One in four small companies say that Obamacare was the single biggest reason not to hire new workers. For almost half, it’s the biggest business challenge they face.

These findings are consistent with a recent Gallup Poll showing that 41 percent of small businesses have already stopped hiring because of Obamacare. Another 19 percent intend to make job cuts because of the law.

All this tumult in the labor market is fueled by more than the increase in premiums engendered by Obamacare. The law effectively encourages companies to cut full-time jobs.

Obamacare requires employers with 50 or more workers to provide health insurance to all who are on the job for 30 or more hours per week. The law originally called for this “employer mandate” to take effect in 2014, but the Administration decided in July to delay enforcement of the mandate until 2015.

Employers are responding by doing just enough to avoid Obamacare’s dictates.

Administrators at Youngstown State University in Ohio recently told adjunct instructors, “[Y]ou cannot go beyond twenty-nine work hours a week. . . . If you exceed the maximum hours, YSU will not employ you the following year.” A week prior the Community College of Allegheny County in Pittsburgh made a similar announcement.

Hundreds of employees at Wendy’s franchises have seen their hours reduced for the same reason.

Meanwhile, companies with fewer than 50 employees are thinking twice about expanding — and thus being ensnared by Obamacare’s requirement that they provide health insurance.

The cost of each additional employee could be staggering. A firm with 51 employees that declined to provide health coverage would face $42,000 in new taxes every year — and an additional $2,000 tax for each new hire. Providing coverage, of course, would be even more expensive.

Meanwhile, as private firms large and small grapple with Obamacare-fueled cost increases, one large employer — the federal government — has been quietly exempting itself from portions of the law.

Top congressional staffers like their current benefits under the Federal Employee Health Benefits Plan (FEHBP), wherein the government pays up to 75 percent of the premiums.

But the law requires those who work in lawmakers’ personal offices to enter the exchanges. And in many cases, staffers  make too much to qualify for health insurance subsidies through the exchanges. So they’d be facing a hefty cut in their compensation.

Fearing a mass exodus of congressional staffers from Capitol Hill, the Obama Administration fudged the law to permit lawmakers’ employees to receive special taxpayer-funded subsidies of $4,900 per person and $10,000 per family.

Yet only three months ago, Senate Majority Leader Harry Reid (D-Nev.) claimed that Congress wouldn’t make exceptions for itself.

President Obama no doubt knows that these congressional favors won’t go over well with ordinary Americans. So he’s called on his most popular deputy — former President Bill Clinton — to try to sell the law to the public once again.

But unless the former president can lower employer health costs with little more than the power of his words, his sales pitch will likely fall flat.

This article was first published at Forbes.com.