There’s at least a kernel of truth in the old adage, “work smarter, not harder.”
The truth is, you can put in a bunch more effort, or you can get more out of the effort you put in. In an ideal world, you do both and start generating exponential growth.
For small businesses, the “work smarter” half of the equation can be achieved through a better understanding of the data you have. By looking at your customers, their buying habits, and the results your existing work generates, you can make smarter decisions.
Data analytics can be the first step in the long road to better results and fewer misfires. Today, we’ll look at what data analytics is, how it’s put into action, and why small businesses need to get serious about it.
What is data analytics?
Data analytics is the process of looking at the information your business generates to discover patterns in customer behavior, movements in the broader market, or other non-obvious business trends. Data analytics has some similarities to big data, but it’s more focused on smaller, structured data sets.
Let’s unpack that a little more, starting with the scope of data analytics. Big data, which is all the rage right now, is about finding patterns in unstructured data. This can take almost any form. For example, we could analyze a database of facial images of people walking into the local mall or the speed and models of cars traveling across a state.
Big data says, “I bet there’s a pattern in all this noise” and then goes looking for it.
Data analytics is looking at smaller and tighter sets of data. It says, “Here are 10,000 online purchases from our online store paired with some buyer information. What information can we glean from this data set?”
In terms of outputs, data analytics is looking for recommendations that make businesses more profitable or efficient. We—which is to say, “people who talk about business”—lump data analysis under the broader term: “business intelligence,” or BI.
BI is “[an] umbrella term that includes the applications, infrastructure and tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance,” according to Gartner.
How do small businesses use data analytics?
The easiest way to get started with small business data analytics is to find a software system that automates the process. These systems can pull in data from your website and your accounting and customer relationship management (CRM) systems to give you additional insight into what your business is actually doing.
Automated business intelligence tools
Most of the time, BI tools use a dashboard to visually present the resulting information. This can give you a quick and automated look at the key drivers and results in your business.
A preview of Sisense’s dashboard
The key to any prebuilt solution is that it must help you make decisions. Any BI tool that doesn’t answer a question for your business is a waste of money. Ideally, you’ll come up with a question and be able to look at your dashboard to come up with an answer and a best action to take.
An example of a question might be: “How should we allocate next quarter’s marketing budget?”
If you’re looking at a good dashboard, you might able to see where buyers are coming from, where they’re landing on your site, and which items they’re buying.
The key to good analysis is taking those data points beyond their highest level. It’s not just about who’s visiting your site; it’s about drilling down into how those visitors break out into buying segments.
For example, most Facebook buyers are landing on page A, but buying from page B. Those that land on page B are twice as likely to add something to their cart.
That’s the kind of insight you need. Now you can actually do something—you can drop more Facebook marketing dollars into promoting page B.
Doing the work yourself
If you’re looking to get your hands a bit dirty, you can take data analytics to the next level by crunching the numbers yourself.
In most cases, this isn’t going to be a requirement. If you sell cat-sized t-shirts on your website and advertise on five channels, you’ll likely be able to track all that info in a predesigned solution.
If, however, your business is more complex, you might want to start looking into DIY options.
Tableau is the option I’m most familiar with, so I’ll use it as an example. It might be perfect for you, or it might not. Read reviews, check the other business intelligence options, and talk to people you trust before you buy anything.
As a quick overview, Tableau is like super fancy, specialized Excel. That’s not really doing it justice, but it’s a fair place to start.
Tableau in action
Imagine you have a subscription software product used around the world. You’re a small but growing business, generating new users through paid advertising, some SEO work on your awesome blog, and word of mouth.
Where do you get the most bang for your marketing buck?
Using Tableau, you could pull in products and referral channels, and then order them by lifetime profitability. You might discover that LinkedIn referrals using product C are three times as valuable over their lifetime as Facebook users of the same product.
Knowing that, you can redirect some of those Facebook ad dollars to LinkedIn, generating the same product mix while increasing your lifetime customer value.
Now you’ve got a new question. Which languages should you release help docs in? Jump back into Tableau and bring together a heat-map of users’ questions. Where are they coming from? Where do user density and help requests stop matching? That’s the spot that needs the most help.
Let’s say Portuguese users are ten times as likely to ask a question. As a bonus, Brazil—a Portuguese-speaking country—is also more likely than not to submit help requests.
Action from the back of analysis: that’s the goal of every data analytics program.
Why small businesses need to embrace data analytics
Much of today’s internet is based on the value of data. The data you generate is free. It’s a free window into your customers’ habits and the future of your business. By taking the time to learn some basic analytic techniques, you can unlock the value you’re already sitting on.
Even if you skip the fancy tools, you can dive in with Excel or Google Sheets and start making better decisions.
Think about it this way: Your business and your nearest competitor both have roughly the same amount of money to spend on marketing. You both have around the same number of customers, and you’re working slightly different sides of the same product coin. How do you get ahead?
You make smarter decisions and allocate your resources more efficiently.
That’s how you win. There is no secret to this. Given similar products and resources, the person who makes the more efficient moves will succeed.
Take the time to understand the questions your business has and then find a way to answer those questions with the data you’ve already collected. Maybe you tap into a Tableau or another business intelligence option, or maybe you just fire up Excel and learn how to use it.
Tell the world how it went in the comments below or shoot me an email and let me know what other data tricks you’d like to learn. Good luck.