Why you should consider integrating data analytics into your business
We are all inundated with data these days, companies especially. Many of them don’t know how to use it, they’re leaving money on the table.
For the longest time, people have relied on their experience to make business decisions. In times when getting a holistic view of a business was very difficult, that was okay. You had to rely on your knowledge from being there day in, day out, for years. Now, we have that same information from years past at our fingertips. So why aren’t more people using it? Why are managers okay losing out on the benefits that data analytics can bring to them? All while seeking smaller gains in other avenues.
Why should I care?
Simply put, knowledge is power. Think about what you know now vs 5 years ago, how valuable would that knowledge been then. No one is saying that you made wrong choices. But if you knew everything you know now, you most certainly would have made different choices and would have been better off.
Just look at the stock market, while it is highly illegal, insider trading is a sure-fire way to make money. If you know something that the rest of the world doesn’t know, you have an advantage over the rest of the market (your competitors). The same concepts apply to your business. If your competitors utilize all the data available to know, they know more about both your customers. Therefore, they hold a huge advantage over you. Knowing what customers want is akin to knowing what the price of a stock is going to be in a month. You become proactive, as oppose to reactive. Being proactive allows you to give the customers what they want without them having to ask for it. If you do that before your competitors, they’re left scrambling to catch up.
What kind of data do I need?
Everything can be useful if leveraged correctly. For example, looking at sales over a period of a few years will help you find patterns in your customers’ habits. There might be a seasonality to your sales that you were not aware of before, allowing you to raise or lower prices to take advantage of that. You could find out that that one month you changed something about your product, or sales technique, sales rocketed. This information is very valuable, you could then decide to make that change permanent, exploit it and use it to your advantage.
What about qualitative data? Qualitative data is simply data about the quality and characteristics of your business. How satisfied are you customers? What kind of pain points exist in your operation? Once you have that information, you can start the actual work of removing those pain points. This can reduce churn, increase repeat business, and attract new customers.
A good company will have a mix of both qualitative and quantitative data. They are complimentary: they tell both sides of the same story. Quantitative data can tell you how the changes you’re making affect your bottom line. Qualitative data can tell you how those changes are being perceived by your customers.
What if I don’t have any data?
If your company doesn’t gather data and store it for later use, I suggest you start right away. This can be very simple things such as sales numbers, number of customers, average order price… As for qualitative data it could be as simple as sending out a questionnaire to your customers. If you’re doing that, don’t be discouraged by the participation rate. Depending on your customer base, you could still get useful insights with a rate of 5%.
There are also lots of places where you can get data from the internet. It’s all about knowing your target market. Maybe by looking at data about people in your zip code, you find that the household income is higher than you expected. That you can increase the price and still sell the same volume. Finding out more about your customers from a secondary data source will not be as useful as doing it yourself. It is still, however, better than nothing at all.
I already know my market, why do I need this?
We, as humans, are inherently biased to our own worldview. This means that we will often tell ourselves stories that match what we already think we know. If someone has been in a certain position for long enough, they become less sensitive to small changes in their customers’ behaviors. They are less likely to notice that there are pain points in their operation, just because this has been the way they do things for so long. This isn’t a criticism, we are all guilty of this. It’s the same as seeing a friend for the first time in a few years, you notice all the small changes in their appearance. Whereas for another friend that you see more regularly, the changes are less apparent, you have seen them happen gradually over the years.
Looking at data allows you to take a step back and forget about what you think you know. It removes some of that bias that we are all guilty of. This will allow you to see your business and operation with a fresh set of eyes. Through the same lens that your potential customers are looking through. Things always look different from the outside then they do from the inside. This can be very powereful.
Where do I start?
The obvious place to start would be to hire a data scientist, an analyst, or to reassign one of your existing employees to work on this full time. However, not everyone has the budget for that. Another way of doing it would be to do it yourself, or have someone in your organization dedicate some of their time to it. There is more than one place on the internet where you can learn the basics of data analytics, such as data cleaning, visualization, and statistical testing. This can be as complicated or as simple as you make it out to be, you can either go all-in or just skim the surface. The important thing to remember is a little goes a long way, especially when you’re starting out. When you have no processes in place for something like this, your marginal gains are huge. So just getting started with this analysis can yield tangible results.
Conclusion
Data analytics can be a very powerful tool in your arsenal. It can help you get a leg up over your competition and improve your business. If leveraged correctly, it can change the way you see your operation and market. And odds are, you already have everything you need around you to get started. Think of it as making a gourmet meal out of leftovers you have in the fridge. Instead of them just sitting there, you take initiative, put a little work in, and end up with a great meal. And you never know, you could surprise yourself and end up with results that are much better than what you anticipated.
