At the heart of every good business decision lies data; companies have woken up to the realization that with the right information, they can target the right demographic for their products and services and improve their bottom line, and this has given birth to business analytics.
Business analytics can be described as solving problems using available information. It involves the collection, organization, and analysis of data so that it can be used to draw conclusions and make good business decisions. The process can be applied to all areas of any business, big or small. In sales, it can be used to analyze products to determine the fast movers, the most active demographics, or even products that don’t sell so that they can be removed from the company offering.
In logistics and supplies, business analytics can be used to forecast which raw materials a business should hold at any given time, how much of it they should buy, and even whether they should stockpile in case of future shortages. In customer service, business analytics helps determine where in the sales process customers drop off, what the customer retention rate is, how many new customers are acquired in any given period, and the most effective methods for acquiring and keeping customers. Business analytics is also helpful in human resource management. It can help monitor employee performance, find out what best motivates employees, and identify causes of low productivity.
What is business analytics?
To the layman’s ear business analytics may sound like a complicated process, but it isn’t. Business analytics is simply the process of gathering and analyzing data that can then be used to make strategic and informed decisions.
Business analytics professionals are in high demand today because the amount of data that businesses collect has grown exponentially in the last twenty or thirty years. The average business now knows the names of all its customers, where they are from, their age, their preferred products, and even their spending trends from year to year. By looking at buying trends they can even know the emotional state of a customer.
Those who learn how business analytics helps in business can have excellent careers as business analysts. Courses such as the Master’s of Science in Business Analytics offered by St. Bonaventure University have become popular in recent years. In courses such as these, students learn how they can use business analytics to improve business performance. They also get to understand how they can use data analytic and visualization tools to analyze different areas of a business. Furthermore, they learn how to measure the performance of different marketing campaigns and how to use data to create sound business strategies.
When students qualify they can apply for jobs such as data architect, statistician, chief technology officer, chief data officer, market research analyst, business analyst, or data scientist. Many also work as project managers, helping companies make sense of the data that they gather every day from customers and other sources. Prospective employees who know how to gather and organize data and use it to help a company grow are regarded as highly marketable professionals and get jobs that offer good remuneration and benefits.
However, before students join the workforce it is important to familiarize themselves with some of the basic concepts of business analytics. They will need to know, for example, how KPIs tie into business analytics. Other useful areas of knowledge are behavioral analytics and how they can be used to improve decision-making and the digital methods that can be used to monitor consumer behavior.
This article will provide insights into these questions and also talk about the ethical considerations that are necessary in business analytics.
What are KPIs and how are they used in business analytics?
KPI stands for Key Performance Indicators, and as the name suggests, it is how businesses measure how well they are performing in different areas. When tracked properly, KPIs can tell management what works and what doesn’t. They vary for different businesses; a manufacturing company, for example, doesn’t have the same KPIs as an online retail business. KPIs can also vary within departments in the same business. The indicators that are tracked for the finance department, for example, are different from those that are tracked in customer service.
The main aim of tracking KPIs is to measure how well an entity is performing. However, businesses need to look out for the KPI pitfall, which usually happens when a performance metric becomes the goal. The point of measuring KPIs is so that managers can make strategic decisions using the information at hand. This involves the use of business analytics.
There are different types of KPIs that a business can use to measure performance. For example, financial performance indicators measure revenue, profit margins, return on investment, and whatever other financial metrics may be necessary to make strategic decisions. Customer KPIs are one of the most important, and they look at customer satisfaction, acquisition and retention rates, the cost of acquiring a customer, how often customers are gained and lost, and even how they move through the sales cycle. Operational KPIs look at production, efficiency, lead times, inventory levels, and employee turnover. They can change depending on the department and what needs to be measured.
Companies can also measure qualitative KPIs which are non-numeric and have to do with how people feel and what they think. Management can decide to measure how employees feel about a new procedure in the workplace or how customers feel about their interaction with the business, for example.
Business analytics is tied directly to KPIs because it is the process that companies use to analyze data so that they can use it to extract information and come up with performance indicators. If a company wants to know how many new customers they acquire for a given period, for example, it will gather all customer data and eliminate the names of existing customers to see who is new. They can see what they bought, if they bought more than once, how much they spent, and where they are from.
All this is business analytics, and the information that is extracted from the data can be used to measure KPIs and answer other important questions. Another example is whether a business meets its customer acquisition projections for the quarter. If the numbers were lower than expected the data can be analyzed further to determine why and what course of action would be best for the future.
What is behavioral analytics?
Behavioral analytics deals with analyzing data so that one can have insights into people’s actions in the digital space. Business analysts collect different types of customer data so that they can get a better understanding of their buyers and potential customers.
Customers are tracked at different stages of the sales cycle. A company can decide to look at how many users fill out website forms, for example. They may find that while they have many visitors, a significant number opt not to fill out a simple form and create an account.
The company can use this information to come up with different ways to motivate website visitors to fill out forms. They can try different types of forms, ask for different information, provide an incentive, or even get rid of the form altogether. Another example of behavioral analytics is cart abandonment. This is one of the most important statistics for online businesses because it captures customers who leave the sales cycle at the very last minute. The business analyst collects data on abandoned carts, analyzes it, and tries to understand why a customer goes through the process of placing goods in their cart only to leave at the very last minute. Could it be that the last step is a little convoluted? Is the business asking for too much personal information? Do the shipping options make sense for different types of customers?
By using the data at hand to examine customer behavior, the analyst can get a better understanding of the cart abandonment rate and make the necessary changes to get users to complete the sales journey. Data that is gathered through business analytics can be used to improve customer acquisition and retention, improve products, improve customer service, and boost customer satisfaction. All these are important KPIs for any business.
Behavioral analytics vs. customer journey analytics
Customer journey analytics is not very different from behavioral analytics. It is the process of tracking every interaction with the customer throughout the sales cycle so that you can understand why they behave the way they do. Customer journey analytics allows businesses to analyze customer needs, their emotional highs and lows, satisfaction, how much effort they put in to acquire a product, and many other metrics. In other words, it is a process that gives an in-depth view of customer behavior and helps businesses understand why they behave the way they do, and it comes with several benefits.
The first is that the business can become more customer-centric if they are in touch with customer behavior, reactions, and feelings. Managers can start to evaluate every action or process with the customer in mind and eventually streamline the customer journey.
Customer journey analytics is also important because it helps identify problems when they occur, and where within the sales cycle they are to be found. If customers drop out at a certain point in the cycle, the business analyst can examine why, eliminate the problem, and encourage customers to complete their purchases.
Lastly, customer journey analytics is important because it provides managers with feedback that they can use to streamline processes and improve the business. They can talk to customers using surveys and ask them specific questions to get a better understanding of their behavior.
What ethical considerations are important in business analytics?
Data is sensitive, and we have seen the lengths people go to obtain customer data legally and illegally. For business analysts, it is important to understand the ethics that govern data collection and storage because not only does it safeguard businesses, but it also buys user trust.
Business analysts are guided by data ethics, which are the principles that govern the gathering, protection, and use of personally identifiable information. All business analysts, and indeed anyone who handles data should be guided by the following principles:
All data belongs to the user and it is unethical and sometimes criminal to collect it without their knowledge. Businesses use different ways to gain user consent, including asking them to agree to terms and conditions or getting them to fill out a form with their personal information.
Users have the right to know what a company plans to do with their data, and the purposes for data collection should be made clear in every instance.
If a business plans to use data to keep customers up to date about their latest products they should state so explicitly on their website.
If they plan to use the information they gather for advertising purposes or to sell to third parties they should let the user know.
This has to do with the handling of data, and every business that collects data must take steps to ensure that it is always safe and doesn’t fall into the wrong hands. All employees should be familiar with data safety protocols, and they should understand why it is so important to safeguard user data.
Why does the company need to collect user data? What does it hope to gain through business analytics? Answering these questions helps define intention and provides a guide on how data should be handled.
What are the obvious outcomes of data collection, and what are the not-so-obvious outcomes? Could it be harming users either intentionally or unintentionally?
It is difficult to know what outcomes the data collection process may have in the future, but asking these questions helps explore the issues and consider different possibilities.
Ethical use of algorithms
Algorithms are a powerful data collection tool, but it is important to remember that they are just code, and they cannot make ethical decisions. It is therefore up to the business analyst to make sure that whatever algorithms are in use are carefully designed with ethics in mind.
Whether businesses know it or not, they do analytics every day. They collect data and use it to make decisions that improve operations and make for a healthier bottom line. For a business to succeed, it is important to ensure that business analytics is utilized effectively.