How to make strategic decisions using data?
How to make strategic decisions using data?
We assume that lately you’ve been hearing a lot how data is business’s most valuable asset, how data is the key to consistent growth and that data is as important as ever.
That’s all very true since it’s the only way to accurately measure your online performance. It is also catalyst of all strategic decisions and if used right, data can be very powerful.
So today we are going to talk about data-driven decision making, why is important, how to do it and most importantly why you should do it.
UNDERSTANDING YOUR DATA SOURCES
Approximately 328.77 million terabytes of data is created every single day from a whole lot of different sources.
Source: ExplodingTopics
For small businesses it’s important to focus on the right sources while making their decisions. A safe pick will always be to look at:
- Customer feedback
- Website analytics
- Social Media metrics
- Data that you have formatted in a spreadsheet
By doing this, you are essentially using the 20/80 rule, where 20% of actions get 80% of results.
Looking at these 4 sources you get insights into what your customers are loving (or not), how they interact with your website, the buzz around your brand on social media and the numbers that tell the real story of your business.
Think of it like this:
Customer feedback — This feedback is gold as it tells you directly what’s working and what’s not from the people who matter most.
Website analytics — This source can hold many clues for improvement. It helps you answer questions like — How long do people stay on your site? Which pages do they love? Answering these can help your website retain more people and convert more as well.
Social Media metrics — These are like the heartbeat of your brand. Likes, shares, comments, impressions are showing you exactly how well your brand is received by the audience as well as what they like to see.
Data in spreadsheets — Think of this like a health report for your business. Sales figures, expenses, growth charts — all the details are here. It’s boring and gritty but it is very important. Their purpose is showing if the latest decisions are making the impact you wanted them to.
Here’s the fun part. By combining these insights, you start seeing patterns and connections you otherwise would’ve missed.
Maybe people are hyped about a product on social media, but the website sales don’t tell the same story. Perhaps there’s a page on your site where potential customers keep dropping off.
When you start connecting these dots, that’s when you can make profitable decisions.
For example, tweaking your website based on social media feedback or running a special promo for specific products.
By focusing on key sources you’re extracting insights that steer your business in the right direction.
ESSENTIAL METRICS THAT ANY BUSINESS SHOULD TRACK
Now you know the most important sources, it’s time to find out the most crucial metrics you will need to track if you wish to grow your business.
Let’s get right into it:
1. Customer Acquisition Cost (CAC) — This is basically how much you’re spending to win a new customer (marketing, ads, sales). Keeping this number low means your strategies are most likely working.
— If your CAC is high, you might need to rethink your marketing strategies or find more cost-effective channels.
2. Lifetime Value (LTV) — This is an estimate of the average revenue that a customer will generate throughout their lifespan as a customer. It is telling you if your customers are satisfied and happy.
— Knowing your LTV helps you understand how much you should invest in retaining your customers. If LTV is low, spending a bit more on customer service or reward programs can be a great move.
3. Conversion Rates (CVR) — This metric tells you the percentage of website visitors who take the desired action, like making a purchase.
— If your CVR is low, it might mean your website isn’t user-friendly or your product isn’t appealing enough. It’s a sign to tweak your website design, website performance, pricing or how you present your product.
4. Average Order Value (AOV) — This metric is super important, yet often overlooked. It’s the average amount of money each customer spends on their purchase. This gives you an insight into customer buying habits.
— If your AOV is low, maybe it’s time to introduce bundle deals as well as start upselling and cross selling visitors in their carts. If it’s high, you’re doing something right with your product selection and/or pricing.
5. Retention rate — This is a very important one, especially for growing businesses. It tells you how often your customers come back for more. Many of your favourite CEO’s say that retaining customers is way more important than the acquisition of new ones.
— A low retention rate can be a wake-up call to revisit what is turning potential customers away. Maybe it’s time to spice up your product line, send out a customer feedback survey or upgrade your customer service.
Each of these metrics — CAC, LTV, CVR, AOV and retention rate give you a unique perspective of what you are doing well and what you are not. When put together, these give you a 360-degree view of your business performance, guiding you towards smarter decisions.
TOOLS AND TECHNIQUES FOR DATA ANALYSIS
We are assuming that by now you are wondering:
“Okay, now that I know what to use, how do I actually see that data and those metrics?”
There are tons and tons of analytical softwares out right now, whether web analytics, social media analytics or upgraded spreadsheets. How should you know which one to use? Here is the list of the MOST POPULAR TOOLS and their purpose:
- Google Analytics (GA4) — Of course, the most widely recognized analytical tool, Google Analytics. It is simple to install and right off the bat gives you a lot of information about whats happening on your website. Adding custom events, can be a bit tricker, but it serves many purposes, and in regards to that it is still pretty simple. It is completely free and offers core website traffic insights. It’s far from the best platform to visualize complex metrics like the ones we mentioned earlier. It can be particularly useful for collecting data and later visualizing it in a different way & tool.
- Microsoft Power BI — This is Microsoft’s tool for business analytics. It’s a bit more complex than Google Analytics, but it’s great for digging deep into your data. Power BI lets you pull data from a bunch of different sources and turn it into easy-to-understand reports and dashboards. It’s really good at handling big sets of data and can do some advanced actions if you need it to. You can use the basic version of Power BI for free, but there’s a paid version if you want more features. It works really well with other Microsoft tools, so if you’re already using those, Power BI might fit right into what you’re doing. It’s a handy tool for businesses that want to level up their understanding of their data.
- Tableau — A tool designed for business analytics. It specializes in turning complex datasets into more accessible visual formats, similar to Power BI. Where Tableau stands out is in its interface, which many users find to be quite user-friendly. It allows for the integration of various data sources, accommodating everything from simple spreadsheets to more complex databases. Tableau offers a range of visualization tools, enabling businesses to create charts and graphs that are perfect for them. For those who need basic features, there’s Tableau Public, a free version, while more advanced needs are met by its paid version. Essentially, Tableau serves a similar purpose to Power BI but is often chosen for its interface and user experience.
- Analyzee — Analyzee is a business intelligence solution with a unique offering. Matching up with popular tools like Microsoft Power BI and Tableau when it comes to creating custom dashboards. It offers an infinite range of visualization and metric creation options as well. However, Analyzee adds more to the mix with its additional features. It includes session recordings, similar to what Hotjar offers, providing a deeper understanding of user behavior on your website. This feature captures every interaction and event, giving you insights into how users really engage with your site. Alongside this, Analyzee also integrates a live chat feature, similar to platforms like tawk.to, enabling real-time communication with your visitors. This combination of advanced analytics, session recording, and live chat in a single platform makes Analyzee a comprehensive tool for any analytical need. It is also completely free to use and in ongoing development, experiencing rapid improvement.
There are many many more, these are just our picks for covering every possible use case of an analytical tool. From just web traffic insights to the deepest possible insights.
Now that you know what platform to use to display your data, what metrics to focus on and from which source, the only thing left is…
How to analyze the said data? It is crucial to know the best techniques for analysis. Ultimately, they will lead to the insights that are fuelling profitable decision making.
Here are 2 favourite global techniques:
TREND ANALYSIS — The rythm of your business, while performing this technique you are looking for patterns and shifts to make sense of how things are changing.
- Moving Average: Imagine you run a seasonal business, like a garden supply store. Your sales will naturally fluctuate throughout the year. By using a 12-month moving average, you smooth out these ups and downs to understand your overall annual performance, helping you plan for inventory and staffing throughout the year.
- Regression Analysis: Let’s say you’ve been increasing your spend on online advertising, and you want to know if it’s paying off. Regression analysis can help you understand the relationship between your advertising spend and changes in sales or traffic. This insight can guide you on whether to increase your budget, shift your marketing strategy or explore new advertising platforms.
PREDICTIVE ANALYSIS — Allows you the use of historical data to make educated guesses about the future helping you be proactive rather than reactive in your strategy.
- Time Series Analysis: Consider a coffee shop that’s been tracking daily sales for several years. By applying time series analysis, the owner can forecast future sales based on historical trends, considering factors like day of the week, season and local events. This can help in making decisions like how much coffee to stock, how many staff to schedule and when to run promotions.
Remember, this is just a vague explanation of these concepts and to actually learn them you would have to invest a little bit of time into it.
But just by understanding them, you can make smarter decision today.
Did you know that data-driven organizations are:
- 23 times more likely to acquire customers
- 6 times as likely to retain customers
- 19 times as likely to be profitable as a result
Source: McKinsey data-drive organizations report
With all this new-learned knowledge, you can now become a data-driven organization too!
CONCLUSION
Data is definitely one of your businesses’ most valuable assets if you put it to right use. This situation is here to stay for quite some time, so adapting to it is essential.
Businesses who use data to back their decisions will almost always make smarter decisions than the ones who don’t.
Leverage your data to its full potential to maximize every opportunity it presents.
There’s a million reasons to use it effectively, especially since it’s already at your disposal and will continue to accumulate, regardless of your actions.
We hope this article was helpful and informative, and that you will put our advice to good use. Until next time!
