To understand how businesses can benefit from analytics, it’s important to first understand what business analytics is.
The use of data has spread to almost every industry. Companies have embraced big data, in an effort to improve business processes. A survey conducted by Bloomberg Businessweek Research Services shows that nearly 97 percent of respondents reported that their companies have adopted analytics. To understand how businesses can benefit from analytics, it’s important to first understand what business analytics is.
What is Business Analytics?
Gartner defines business analytics as a field “comprised of solutions used to build analysis models and simulations to create scenarios, understand realities and predict future states. Business analytics includes data mining, predictive analytics, applied analytics and statistics, and is delivered as an application suitable for a business user.” As is evident from this definition, business analytics is primarily used to devise future courses of action. It is a very technical approach and predictive in nature.
Often, business analytics can be confused with business intelligence. While some procedural aspects of these two fields may overlap, it is worth noting that business intelligence is a separate entity. Business intelligence uses different types of software applications to analyze raw data. Using business information, experts in this field track and monitor data metrics to identify past and present issues and inefficiencies a business may be having. In essence, as opposed to business analytics, business intelligence isn’t inherently predictive in nature.
Types of Business Analytics
Business analytics is a large field, and so it stands to reason that there are different types of analytics that you can choose from. Here’s a rundown of the four main types of analytics according to Ohio University — depending on your business needs and goals, you can choose what type of analytics you want to use to leverage the information your business generates:
Descriptive Analytics: Closest to business intelligence, descriptive analytics gives a detailed explanation of “what happened,” pertaining to a particular issue/project/process etc.
Diagnostic Analytics: As the name suggests, diagnostic analytics is good for diagnosing the “why”. Its uses include uncovering patterns in business processes that are likely to affect the bottom line in the future, and it works well when analyzing social media and assessing user interaction.
Predictive Analytics: Predictive analytics is the most common form of analytics — it studies and past and current data to accurately forecast the future. It is very useful in sales processes like sentiment analysis, consumer relationship management, and lead sources.
Prescriptive Analytics: Prescriptive analytics goes one step further than predictive analytics. It offers answers to relevant business questions, provides solutions to problems and predicts the outcomes of the same. Prescriptive analytics is useful in improving product development and streamlining marketing campaigns.
Using Business Analytics to Improve Business Management
While business analytics can be very beneficial for your business, you need to have the correct processes in place to be able to take full advantage of the data. Currently, there are three main aspects of data and analytics that businesses struggle with. These include a lack of manpower in terms of business analytics experts due to rising demand, lack of infrastructure to gather and store massive amounts of data, and struggles with the movement of data — for analytics to work data needs to flow freely between people and departments, but things like customer information aren't always shared uniformly and in a timely manner.
As we’ve spoken about in previous articles, there are many simple tools and changes you can introduce to your business to avoid these hurdles and analyze data more effectively. Some of these include using a database engine, installing workflow automation, or even hiring an external data management company if your budget allows for it. If executed correctly, business analytics can be a boon to your business by greatly improving management and boosting total productivity. Let’s explore how:
Improving Marketing Campaigns
Analytics has the ability to completely revolutionize a marketing campaign. In fact, a study by McKinsey & Company showed that using data to make better marketing decisions can increase marketing productivity by 15 to 20 percent. For one, business analytics is useful when it comes to target marketing. A good example of this is Target’s “pregnancy prediction score.” Based on a customer’s purchases, target assigns them a score that indicates the possibility of pregnancy. Then, these scores are used to determine the types of coupons and discounts Target will send to the customer’s address. In this way, Target is able to better cater to a customer’s needs and create a lasting brand impression through its marketing campaign. These outcomes lead to higher conversions, all made possible through the actionable intelligence gained through business analytics.
Not only can data and analytics give you quality insight about customer needs and preferences; it can also yield information about local competitors and their customers. Using this information, you can tailor your marketing efforts to send the right message to customers, finetune branding details, and use an approach that will most appeal to your customers. With the power of analytics, you’ll be able to make marketing decisions that are backed by evidence rather than based on speculation.
Creating Better Business Plans
The predictive nature of business analytics allows you to find and forecast trends in sales, turnover, and growth. This information is extremely valuable to understanding how your business is performing. Using the conclusions from data analysis, you will be able to give yourself a thorough business performance review. In turn, you can take what you have discovered alongside future predictions and create an in-depth business plan for the next phase of your company.
Predictive insights are particularly useful for dealing with problems or facing challenges that might come your way. By looking at previous patterns, you can quickly choose an outcome to solve a problem in the most effective way, ensuring that there are no unwanted side effects of whatever solution you instill.
Improving Internal Processes
As a part of business analytics, data mining and analysis is especially useful in improving internal efficiency. Business analytics experts are capable of providing real time reports regarding the cause of the problem, diagnose based on historical data, predict what will happen in the future and suggest how to best move forwards. In this manner, business analytics can result in better managerial decisions regarding your internal processes — whether it’s streamlining supply chain management or improving product quality.
While these are just three ways in which analytics can help improve business management, there is a lot of potential for business analytics to be applied to various aspects of management and the everyday business workflow. If you haven’t already, it is worth examining how analytics might benefit your particular business. After all, whether it’s identifying new opportunities or targeting the right customer, data is now capable of improving any business process — and in turn, improving the quality of your offerings.