Businesses today function around data. It has become easy and convenient to collect and store data at all levels of business operations. It would be, therefore, unwise for businesses, to not leverage this data for their benefit. Unfortunately, data remains to be an untapped asset for small and medium businesses.
Most small and medium businesses do not realize the importance of the data that they have collected.
According to a survey by the Singapore Institute of Technology, RSM Singapore and the Institute of Singapore Chartered Accountants about 70% of Small and Medium Businesses do not make use of data analytics, and 50% have no intention to do so in the near future as well.
What is data analytics for small and medium businesses?
Data analytics is the use of scientific tools and measures to convert raw data into a form that provides context and useful information for decision-making. Data Analytics makes use of statistics, algorithms, and software to analyze the stages of the business to a solution or reduce errors, expand efficiency, and strengthen planning abilities.
Data analytics is of 4 types:
Descriptive Analytics: It entails examining data and content manually.
Diagnostic Analytics: It involves some hypothesis testing and requires many data inputs.
Predictive Analytics: It uses tools like regression analysis, predictive modelling, etc. to predict the future or other events based on historical data and patterns.
Prescriptive Analytics: Advanced form of data analytics used to solve complex problems and aid decision making.
Benefits of using data analytics
For years, business owners have had to guess and follow their gut when making crucial business decisions. It is not the case anymore. Data Analytics helps to provide the complete picture of a business process. It gives perspective to data and makes decision making efficient. Data analytics helps give insight into the working of the business, relationships between the metrics and the efficiency of business channels.
Some major benefits of using data analytics for small and medium businesses are:
Reduce costs by optimizing operations and eliminating unnecessary tasks
Enhance customer experience
Improve decision making
Gain a competitive advantage
Top 5 business areas where data analytics can play an important part:
Finance: Data Analytics is helpful in analyzing cross-departmental finances
Continual reporting and adjusting of financial reports make sense from a financial perspective. Data Analytics can help with this by adding context to the organization’s spending. With data analytics, you can have access to real-time reporting and financial information across departments in one click. By analyzing this information, you can see which expenditures are bringing in the most revenue and focus on them. It also helps in identifying leakages, reducing financial risks, avoiding frauds, and eliminating unproductive expenses.
Operations: Stock levels can be optimized using data analytics
Operations, logistics, warehousing and complete supply chain management have a huge use case for data analytics. Implementing data analytics to comply with customer demands through planning, monitoring, and application of information about products and services from the source to the destination. Operational efficiency and inventory can be optimized with the help of data analytics to reduce the chances of products running out of stock and maintenance of optimal stock levels. It can help in predicting customer habits, for e.g., seasonal increase in demand and by how much.
Marketing: Customer behaviour and demand can be predicted using data analytics
Digital Marketing is one of the first steps an organization takes on its journey to digitalization. From content engagement to the cost of customer acquisition – all metrics can be measured by advertising tools. Data analytics helps make sense of the customer’s behaviour and even predict consumer behaviour by analyzing previous patterns. It helps determine the ROI for every dollar spent on marketing and advertising. It also helps in conducting thorough market research and understanding the threats from competition.
Customer Service: User experience can be enhanced using data analytics
There could be hundreds of businesses with the same service offering, but the differentiator most crucial to a business's success is customer experience. 80% of customers say that the experience a company provides is as fundamental to them as a brand’s products or services according to salesforce. Data analytics can help improve customer experience. By tracking metrics like customer response time, customer satisfaction score, the average time of resolution etc. businesses can analyze what the customer likes. This helps in building a seamless user experience in the short run and customer loyalty in the long run.
Human Resources: Strategic decisions about the workforce can be made using data analytics
People are the most important part of any organization. As every employee has more responsibilities in a start-up and plays a crucial role in the functioning of the business. Maintaining employee engagement, understanding retention and attrition rates, tracking employee development, and training and measuring employee performance are a few advantages that the use of data analytics in human resources brings to the table.
According to McKinsey Global Institute, data-driven organizations are twenty-three times more likely to acquire customers, six times as likely to retain customers and nineteen times more likely to be profitable. Data analytics not only eliminates the risk of the guesswork from business decision making but increases revenues and decreases costs. It helps to provide a good user experience and a unified supply chain. Data analytics is vital to be included in all business aspects for a small business to succeed in the long run.