For many years, data analytics has been a major player in commerce. Today, most businesses rely on this tool to help grow their brand. The data analytics market has been valued at almost $241 billion in 2021, and the market is expected to grow from approximately $272 billion in 2022 to $656 billion by 2029, which is a compound annual growth rate of 13.4 percent.
What are data analytics?
In a nutshell, data analytics sometimes referred to as big data analytics, help businesses make strategic decisions using data collected from their clients. The data that is harvested generates information regarding trends, correlations, patterns, and changing market trends, among other information. These insights are used to make predictions and forecast possible outcomes of decisions that business owners might make. In the end, they help businesses better cater to the needs of their clients.
A simple example of the way data analytics works in business can be seen in the case of a jewelry merchant. This merchant sells bracelets that come in two-toned colors, one a blue-green color and the other a red-brown color. Every time the merchant sells either one of the bracelets, the information regarding the customer’s purchase, among other details, is collected and stored. Later, the merchant can look at the data to see which of the colors were purchased in a higher quantity and make inventory decisions about how much to order.
Typically, the data that is processed provides users with more information about customers, such as their prior purchases. However, this is a simplified example of how data analytics is used in business. There are four types of data analytics that can be used for different purposes. Here is a closer look at each one.
Descriptive analytics
This type of analytics involves looking at past and present patterns to help businesses determine what is happening in the market. Examples of descriptive analytics include harvesting information regarding average revenue per customer or monthly website traffic.
Diagnostic analytics
This type of analytics involves making associations between two events that are referred to as causal links. This can determine the reason behind an event. For example, diagnostic analytics might be used to find out why a website experienced a sudden spike in sales or visits.
Prescriptive analytics
This type of analytics uses information to determine the next steps of action for the business.For example, a business might start making product recommendations based on customers’ past purchases.
Predictive analytics
This type of data analytics uses past data to forecast what might happen in the future. A business that is concerned about what type of inventory they need in the future might use this type of analytics to plan its budget and determine how much of the product they should purchase.
What education do you need to work in data analytics?
A bachelor’s degree is usually required to work in any field involving data analytics. A person who is interested in this field of study might major in finance, economics, psychology, management information systems, applied math, statistics, or computer science, or they may obtain an advanced degree in marketing. With the advent of analytics in business, many academic programs have included data analytics as a course of study. Walsh University, for example, offers an online MBA in data analytics to professionals who already hold a bachelor’s degree.
How are data analytics used in business to drive growth?
Decision-making is the primary advantage of using data analytics to drive growth in a business. By getting insights into business strategies, companies learn what works and what falls short. These insights make it possible for businesses to act proactively in launching a campaign or addressing an issue. Here is a look at some of the other advantages that data analytics can offer businesses.
Expansion
Data analytics can help a business determine whether it is ready to expand. By getting accurate details about how many customers frequent their establishment or how many products are being sold, the decision to expand is supported by real data indicating that if the company is scaled up, there will be enough customers to support this effort.
Not only does data analytics provide information on how many customers frequent a business, but it also plays a role in revealing customer demographic information. This information is especially important for businesses that plan to expand into international markets. Not only will the information tell the business owner that there is enough support to expand, but it can also identify which products cater to the demographic of customers.
Build customer relationships
“The customer is always right” may be an old saying, but it is true today in this digitally driven e-commerce economy. One of the keys to retaining customers is making sure they are satisfied. Data analytics has been at the core of helping businesses learn more about their customers so they can cater to them. The information taken from customers allows businesses to personalize the shopping experience while enabling them to make broad decisions about their customers in general.
Alternatively, data analytics can help businesses address problems in their brand. The information generated during data analytics can ferret out problems reported by customers when they message customer support to resolve an issue. If the problem is a pattern experienced by a lot of customers, data analytics can help the business pinpoint the issue – whether it is a website not functioning or issues with payment processing – and resolve it. Data analytics can reduce the hassles customers experience by making the company aware of problems in the business.
Reducing expenses
Business efficiency has become a major goal for many companies. It is no secret that when operations are efficient, businesses can save a considerable amount of money. Data analytics helps businesses determine the inefficiencies in their business so they can make improvements. This tool works especially well in inventory management.
Imagine that a small boutique that sells high-end bags orders several units of a popular brand that is currently selling well. A year later, they are still selling the same bags, but the bags are no longer selling at the same rate they once did. With data analytics, the business owner would have been given insight into new shopping trends. Without that insight, the retailer will have to discount the merchandise at a loss to the business to move it off the shelf.
In this case of streamlining operations, using data analytics also reduces costs for businesses. For example, imagine that an online business finds that its supply chain management processes are inefficient and delay the delivery of products by several days. Worse yet, this delay costs the company thousands of dollars a year. The information generated from data analytics picks up inefficiencies in the logistics process, allowing businesses to implement the best technological tools to improve shipping goods from their warehouse to a customer’s address.
Managing security
For online and brick-and-mortar retailers alike, cybercrime, fraud, suspicious transactions and data breaches are all a part of business. Data analytics helps companies pick up abnormalities in routine processes. For example, business owners might find inventory counts that do not match accounting records or double payments for the same item.
Again, data analytics can alert business owners of weaknesses in the platform, and the earlier these weaknesses are addressed, the sooner the problems can be resolved. A business owner who learns about a data breach or an irregularity in a business process quickly is in a better position to eliminate losses and lost revenue than one who has no idea why the business appears to be functioning routinely but is sustaining losses.
Remain competitive
Finally, using data analytics is essential for remaining competitive. The digital landscape has caused the world to feel much smaller. A customer living in the U.S. can ideally purchase items from any retailer around the world. With the geographic boundaries in commerce removed, customers have more options when it comes to where to shop and with whom to shop. There is more competition today, and businesses that want to remain competitive should adopt data analytics to plan and gain greater insights into the market and their customers.
Once again, data analytics allows businesses to get to know their customers, making it easier to cater to them. However, getting to know one’s customers is only a small part of running a business. Data analytics provide key insights into hot trends and addressing problems. All these benefits provide businesses with a clear way forward. In the end, a business that knows its customers is much better positioned to compete in the global marketplace.
The bottom line
Data analytics works well for businesses that know how to leverage its many tools. As part of any strategy using data analytics, companies should consider their goal or mission. Business owners should also consider using the information provided by this tool to establish objectives for achieving goals and increasing the bottom line.
