Business analytics is a powerful and generally inexpensive tool for developing strategy. But what, exactly, is it? How do business owners use it and what can it do?
What are analytics?
The key part of analytics is numbers. Analytics uses data to look at some level of performance, usually with eye to predicting the future. For example, if you predict the arrival time of your office’s weekly donut delivery by averaging past arrival times, you’re using business analytics. If your prediction is based off of your best friend’s conviction that donuts should arrive earlier in July, you’re not using business analytics.
So pretty much everyone can do business analytics. What’s the big deal?
The big deal comes from complex business analytics, the kind that crunches big data and provides extremely nuanced reports. As an example, let’s say that your business is making its first forays into the world of social media marketing. You want to know, based on facts, which social media sites are the most effective for reaching your goals. Analytics can provide reports of how many people are clicking on and sharing each post, how many people see each post, and what percentage of visitors from each social media site spend money on your website. And this is just a small sampling of the information you can gather. Cool, right?
Where is all this information coming from?
Graphs and charts about the past don’t necessarily tell me what the future will be. Is it wise to make decisions based on analytics alone?
There absolutely needs to be a human element involved in creating and interpreting analytics reports. There is a plethora of data available on just about everything nowadays, which is all absolutely meaningless without someone to ask a question. It still takes a human to come up with questions like, “I have a limited budget for advertising on partner websites. Which partners are referring the highest number of viable leads?” Or, “I ran three different kinds of marketing campaigns in the last quarter. Which one resulted in the most clicks on my website?” Your human brain is still needed to determine which metrics matter.
As for predicting the future, analytics will help you make much more informed decisions, but, like everything, cannot predict with 100% accuracy. Let’s say you’re looking at analytics data for three different social media websites. Website A is consistently giving you more clicks, more shares, and higher engagement. The visitors to your website from Website A are 72% more likely to make a purchase (or call for a consultation, etc.). It is reasonable to assume that putting a higher priority on content in Website A will be better for your bottom line. However, if someone influential unexpectedly links to your content in Websites B and C, you may see a sudden surge in revenue coming from those websites.
If business analytics can’t do everything, why use it for anything? If it all comes down to my analysis anyway, what’s the point in crunching big data?
Business analytics hasn’t replaced human decision-making, but it can do some amazing things to help humans make better decisions. A jointstudy by IBM Institute for Business Value and MIT Sloan Management Review shows that top performers are about 5 times as likely as low performers to apply analytics when making decisions. Think about it: how many times have you treated decisions that could be fact-based as opinion-based? How many times have you said (or read, for that matter) that, “____ marketing method gets the most new customers” without looking at data that are even remotely relevant to your business? Analytics tools can give you reports that are based entirely on data from your business. It’s also possible to get reports on incredibly recent data using modern analytics tools. You’re not stuck using 2013’s numbers; you can make adjustments in response to shifts that happened two minutes ago.
How do I get analytics reports for my business? Do I need to code something myself?
Absolutely not. There are tons of free and low-cost services available that provide great reports. Google Analytics is an example of a frequently used free service which tracks data over time as well as in real time, and gives great information on the location and demographics of your users.
The metrics that I want tracked aren’t covered by the free services. I need something that’s tailored to my business. How do I get that?
Many software consulting companies will create proprietary, user-friendly analytics tools for businesses. You can have a tool created that answers the analytics questions that you decide are important on an interface that works for your company. Feel free to contact us here if you think you might want to use custom analytics.