For any business to succeed, it needs to continually acquire and convert new customers, then engage and retain them. The proliferation of big data, made possible by advances in technology, the internet and social media, has allowed businesses to capture large amounts of customer and operational information. With the expansion of big data came a need for big data analytics.
Analyzing this data gives business leaders visibility into every facet of their organization, from marketing to operations, and helps to inform important decisions.
Every business can benefit from becoming more data-driven — it helps them understand their customers, perform more efficiently, and guide their decision making.
Before diving into the benefits of business analytics and why they’re integral to almost every operation, it’s important to understand what they actually are.
The Four Types of Business Analytics
In modern business, analysis falls under an umbrella of four distinct pillars that all work individually yet harmoniously to provide organizations a clear window into their data. Without these branches of analytics, raw data doesn’t make much sense — we need ways to interpret and understand it.
Descriptive analytics is the most common form of analysis that businesses use, and it’s focused on historical data. Using this method, businesses analyze, interpret and describe data collated from past events to answer questions like “What happened?” This helps them understand changes that have occurred and why.
Diagnostic analytics is a process that helps identify the causation of past events and the correlation between different variables. This method of data analysis seeks to answer questions like “Why did it happen?” and often involves tactics like data mining and discovery to get to the bottom of it.
Predictive analytics is used to forecast the likelihood of future outcomes and occurrences — or prognosticate about unknown events in general — based on historical data. By employing this method of analysis, businesses are looking to answer questions like “Where did it happen and when?”
Prescriptive analytics has become one of the most useful forms of business analysis. By using this method, businesses seek to determine the most appropriate action to achieve a future goal by using predictive modeling. This happens by trying to answer questions like “What do we need to do next in order to achieve this?”
For more information and a deeper dive on what exactly business analytics are and specific use cases and examples, check out this blog post.
Key Customer Analytics Used By Business Leaders
Among the many expressions of business analysis, customer analytics are some of the most important — and most used — by business leaders. They help companies understand things about customers, such as:
- Who they are.
- What they want.
- How they behave.
This allows businesses to make an educated, informed decision about their operations and processes to drive better outcomes.
Within the whole of customer analytics, there are a few standout categories of particular importance:
Customer Satisfaction Analysis
It’s no secret that customers who are happy with your product or service are much more likely to give you repeat business. Assessing whether or not you’re meeting their expectations is a valuable exercise. Interacting with them on social media or through a combination of quantitative and qualitative surveys can help you gauge their satisfaction.
Customer Lifetime Value Analytics
By assigning the lifetime value of each customer to your business, you can look beyond individual transactions and assess the significance they bring to your business over the course of the relationship. It enables businesses to answer questions such as “How long are they likely to stay a customer?” and “How much are they likely to spend, and how often?” Answering these allows you to shape your marketing efforts accordingly. You can also examine different ways to increase the length of a relationship to maximize its value.
Customer Segmentation Analysis
Your customers are a collection of distinct individuals, not a homogenous group. Rather than trying to be all things to all people, it would benefit your business to segment your customers into subgroups and target your efforts accordingly.
Demographics, purchasing patterns and the ways in which they engage with your business are some examples of how you can segment your customers. The internet provides a vast source of customer data for you to mine and analyze — just be careful not to get too granular.
Sales Channel Analytics
Knowing where your sales are made and what channels generate the most profit will help you better target your resources more efficiently. If, for example, your product is available for sale in store, online and by phone, sales channel analytics will attribute each sale to its channel and subtract the costs it took to generate it. Do keep in mind, however, that customers may have been exposed to your product through one channel and purchased it through another — such as seeing it in store and then purchasing online.
Web analytics is the process of extracting customers’ online behavior data and analyzing it to optimize the user experience on your website and increase engagement, conversion and sales. There are a number of tools, such as Google Analytics, that can dive deeply into your website to measure and report on user behavior and engagement.
The Importance of Business Analytics as a Whole
With each category of business analysis comes a set of benefits as well as a few drawbacks or inefficiencies. However, as a whole, it’s no surprise that business analytics are a good thing and absolutely necessary in today’s corporate landscape.
Actionable insights gleaned from proper business analysis helps companies understand the past and predict and plan for the future — often giving them a competitive advantage. However, that is not the totality of the bright side when it comes to business analytics. Other significant benefits to note include:
- Increased ability to track progress, making it easier to accomplish business goals.
- A refined, data driven decision making process.
- Improved personalization of products and services.
- Sharpened risk management and mitigation.
- Boost in efficiency.
- Increased awareness of important information or shifts in behavior.
All of these things allow organizations to act more thoughtfully when making a business decision.
Business analytics also come with a set of limitations or concerns, which are equally important to note. Here are a few examples what those look like:
- Privacy concerns.
- Low-quality data.
- Lack of patience.
- Poor communication between teams.
How to Start a Career in Business Analytics
As big data continues to evolve, many companies are looking for specialists who can integrate an organization’s technical needs with its business goals.
A career as a business analyst provides both a healthy salary and the opportunity to work in a variety of different industries. Business analytics professionals help bridge the gap between IT and the business itself by gathering, analyzing, processing, and presenting important data. Ultimately, data analysts are the ones who help push companies toward their goals, helping them understand essential things about their customers and the market in a way few other professionals can.
The University of Alabama at Birmingham’s Collat School of Business arms students with the business acumen they need to become well-rounded managers and business analysts. Through the Masters of Science in Management Information Systems degree, students can prepare for a career in Business Analytics.
To learn more about our Masters of Science in Management Information Systems, visit the course page.