Successful business leaders have always relied on some form of data to help them make decisions. Data collection used to involve manual data collection such as talking with customers face-to-face or taking surveys via phone, mail, or in-person. Whatever the method, most data had to be collected manually for businesses to understand their customers and market better. Because of the financial cost, time, difficulty of execution, and more associated with data collection, many companies operated with limited data.
Today, gathering data to help you better understand your customers and markets is easy. (If anything, the challenge these days is whittling your data down to what’s most helpful.) Almost every modern business platform or tool can deliver rows upon rows of data for your business to use.
In 2015, data and analytics guru Bernard Marr said, “I firmly believe that big data and its implications will affect every single business—from Fortune 500 enterprises to mom and pop companies—and change how we do business, inside and out.” So if you are thinking your business isn’t big enough to need or benefit from using data, Marr doesn’t agree with you and neither do we.
It’s important to understand that data is not a know-all-tell-all crystal ball. However, it’s about as close as you can get. Of course, creating and running a successful company still requires making good decisions, hard work, and consistency—just think of data as another tool in your arsenal.
With that in mind, here are a few major ways using data can benefit any company.
Data helps you make better decisions
Even one-person startups generate data. Any business with a website, a social media presence, that accepts electronic payments of some form, etc., has data about customers, user experience, web traffic, and more. All that data is filled with potential if you can learn to access it and use it to improve your company.
What leads to or influences the decisions you make? Do you rely on what you see happening in your company? What you see or read in the news? Do you follow your gut? All of these things can be helpful when making decisions, but how powerful would it be to make decisions backed by actual numbers and information about company performance? That’s profit-increasing power you can’t afford to miss.
What is the most effective way to restock your inventory? Ordering based off what you think is selling well, or ordering based off what you know is in short supply after an inventory check and review of the data? One lets you know exactly what you need, the other could lead to surplus inventory you take a loss on.
Global business process consulting company Merit Solutions believes any business that has been around for a year or more likely has “a ton of big data” ready to help them make better decisions. So if you’re thinking there’s not enough data to improve your decisions, that’s probably not the case. Often, we’ve seen that not understanding how data can help or not having access to the right data visualization tools holds companies back from using data in their decision process.
Even SMBs can gain the same advantages as larger organizations when using data the right way. Businesses can harness data to:
- Find new customers
- Increase customer retention
- Improve customer service
- Better manage marketing efforts
- Track social media interaction
- Predict sales trends
Data helps leaders make smarter decisions about where to take their companies.
Data helps you solve problems
After experiencing a slow sales month or finishing up a poor-performing marketingcampaign, how do you pinpoint what went wrong or was not as successful? Trying to find the reason for underperformance without data is like trying to hit the bullseye on a dartboard with your eyes closed.
Tracking and reviewing data from business processes helps you pinpoint performance breakdowns so you can better understand each part of the process and know which steps need to be optimized and which are performing well.
Sports teams are a great example of businesses that collect data to make their teams better. If coaches don’t collect data about players’ performances, how are they supposed to know what players do well and how they can effectively improve?
Data helps you see performance
“The best-run companies are data-driven, and this skill sets businesses apart from their competition.”
– Tomasz Tunguz
Have you ever wondered how your team, department, company, marketing efforts, customer service, shipping, or other parts of your company are doing? Collecting and reviewing data can show you the performance of all this and more.
If you’re not sure about the performance of employees or your marketing, how will you know if your money is being put to good use? Or if it’s bringing in more money than you spend?
Let’s say you have a sales rep that you think is a top performer and send him the most leads. However, checking the data would show he closes deals at a lower rate than one of your other sales reps who receives fewer leads but closes deals at a higher percentage. (In fact, here’s how you can easily track sales rep performance.) Without knowing this information, you would continue to send more leads to the lower performing sales rep and lose more money from unclosed deals.
Or say you heard that Facebook is one of the best places to advertise. You decide to spend a large portion of your budget on Facebook ads and a minimal amount on Instagram ads. However, if you were reviewing the data, you would see that your Facebook ads don’t convert well at all compared to the industry standard. By looking at more numbers, you’d see that your Instagram ads are performing much better than expected, but you’ve been pouring the majority of your advertising money into Facebook and underutilizing Instagram. Data gives you clarity so you can achieve better marketing results.
Data helps you improve processes
Data helps you understand and improve business processes so you can reduce wasted money and time. Every company feels the effects of waste. It uses up resources that could be better spent on other things, squanders people’s time, and ultimately impacts your bottom line.
In Business Efficiency for Dummies, business efficiency consultant Marina Martin states, “Inefficiencies cost many companies anywhere from 20-30% of their revenue each year.” Think about what your company could accomplish with 20% more funds to use on customer retention and acquisition or product development.
Business Insider lists bad advertising decisions as one of the top ways companies waste money. With data showing how different marketing channels are performing, you can see which offer the greatest ROI and focus on those. Or you could dig into why other channels are not performing as well and work to improve their performance. Then your money can generate more leads without having to increase your advertising spend.
Data helps you understand consumers and the market
Without data, how do you know who your actual customers are? Without data, how do you know if consumers like your products or if your marketing efforts are effective? Without data, how do you know how much money you are making or spending? Data is key to understanding your customers and market.
The clearer you see your consumers, the easier it is to reach them. PayPal Co-Founder Max Levchin pointed out, “The world is now awash in data and we can see consumers in a lot clearer ways.” The data you need to help you understand and reach your consumers is out there.
However, it can be easy to get lost in data if you don’t have the right tools to help you understand it. Of all the tools out there, a BI solution is the best way to access and interpret consumer data so you can leverage it for higher sales.
Data helps you know which of your products are currently hot items on the market. Knowing a product is in demand allows you to increase the inventory of that item to meet the demand. Not knowing that info could cause you to miss out on significant profits. Similarly, knowing you sell more items with Facebook than with Instagram helps you understand who your actual buyers are.
Today, running your business with the help of data is the new standard. If you’re not using data to guide your business into the future, you will become a business of the past. Fortunately, the advances in data processing and visualization make growing your business with data easier to do. To simply visualize your data and get the insights you need to propel your company into the future, you need a modern BI tool.