Businesses, both big and small, operate and generate large volumes of information. Data that is analyzed wisely can be the key to business success.
By leveraging data analytics, businesses can increase efficiency and productivity. Data analytics can also pave the path to a competitive advantage that increases revenue.
While it is true that data analysis calls for additional resources, the results it delivers for businesses are worth the investment.
Let’s find out more about why data analytics is so critical for small businesses and what benefits you stand to receive by implementing it.
5 Key types of data analysis techniques used by small businesses
Small businesses benefit from using different types of data analysis techniques based on business and technology. There are five key data analysis methods essential to building business resilience in 2022:
- Text analysis (Data mining)
Text analysis, or Data mining helps discover a pattern in large data sets using databases or data mining tools. With its help, data analysts can transform raw data into valuable business information. Data mining allows for extracting and examining data to identify patterns and relationships, and interpret the data to make informed business decisions. Data mining comprises the following steps: data sourcing, data exploration, modelling, and deploying models.
- Statistical analysis
Statistical analysis is the process of collecting, exploring and presenting large amounts of data to discover patterns and trends. Five steps are taken to complete statistical analysis, including:
- Data description
- Building connections between the data and the underlying population
- Creating a model to summarize these connections
- Proof of the model validity
- Predicting future trends.
- Diagnostic analysis
Diagnostic analytics is a form of advanced analytics that examines data or content to answer the question, “Why did it happen?” It is characterized by techniques such as drill-down, data discovery, data mining and correlations (Gartner). Diagnostic analytics implies using data to determine the causes of trends and correlations between variables. This method can be employed across a number of use cases, such as examining market demand, analyzing customer behavior, improving company culture, etc.
- Predictive analysis
Predictive analytics is used to make predictions about future outcomes based on historical data and statistical modeling, data mining techniques and machine learning. Businesses use predictive analytics to identify future risks and opportunities based on data analysis.
- Prescriptive analytics
Prescriptive analytics examines data or content to provide a recommendation on the steps a business should take to resolve an issue. This form of analytics employs a wide range of instruments and techniques, including graph analysis, simulation, complex event processing, neural networks, recommendation engines, etc.
How data helps small businesses
With the help of the right technology, data analytics can do its magic. Small businesses can reduce operational costs, improve their business model, increase revenue, and stand out amongst the competition. Moreover, you can replace many of the manual data analysis processes with automated business solutions.
Let’s explore 6 ways you can boost your business performance with data analytics.
1. Establish a data-centric approach to business
When companies have the ability to analyze high amounts of information associated with their business and the market in general, they can create a complete picture of the customer journey.
For instance, you’ll know how people get to know the brand, what they buy, why they do it, how they shop, at what time, from which device, why they abandon the carts, and what makes them choose a brand again and again.
With this kind of information, small businesses can change the way they interact with potential consumers, stick with the preferred communication channels, and resolve issues faster.
Data analytics provide insights that illustrate a complete business overview, eliminating the need to make decisions based only on guesswork and what others do, allowing companies to act according to their business’s and clients’ needs.
The critical point here is that such a data-centric approach relates not only to customers but to the overall performance of a business. Having data gathered and analyzed is the way to act in a data-driven way in order to streamline operations, improve HR activities, and more.
2. Add clarity to financial processes
Even small businesses can spend a fortune on advertising, but all of it may be in vain. This can happen due to limited knowledge about your target market and methods for using digital marketing tools.
Digital marketing can be a tricky thing — you have the potential to attract a lot of new customers, yet you need to know how much you are spending on advertising and what your return on investment is in the end.
With the help of data analytics and management, you can track how much money you give away to onboard new consumers and how much profit you receive from them. It is important to bear in mind that the revenue clients deliver to your small business should cover all the advertising expenses.
From a financial standpoint, data management can keep your company’s financing and reporting clean. For example, you can set up Excel integrations and get all the financial data from different tools in one place. This helps with reporting, understanding your cross-department expenses, salaries, fixing up financial processes, and more.
3. Improve inventory management
It may seem that inventory issues aren’t critical for small businesses. In fact, not having an inventory management strategy, keeping unclear inventory records, over/under ordering, and other mistakes can damage your business. You can improve all these with data analytics.
With data analytics, you can upgrade operational efficiency to avoid stockout, set proper stock levels, empower order fulfillment, set accurate product descriptions, and eliminate excessive warehouse deliveries and errors.
In this way, you collect and evaluate data to optimize your existing process and build an effective inventory management system.
You’re also encouraged to use data as a basis for predictions. For example, you can conduct stock optimization based on weather forecasts, current trends, and recent consumer queries. Instead of stocking up on too many items, you can only get the most popular things and avoid stock overload. Whenever you can track what’s happening on the market and foresee how it will change, you can massively improve inventory management and save costs.
4. How to better understand the market and competitors
If you can dive into your business data, you may be able to identify valuable insights about your competitors and their niche. There are many ways a business process analyst can understand the type of clients your competitors are targeting, what products they buy, and how much profit they earn.
Such information can be of great use for small businesses. They can adjust faster to the market’s needs, decrease costs, and gain more consumers by offering the appropriate products and services. Understanding the market’s tendencies and the moves of competitors can help small businesses beat the competition and emerge at the very top of their industry.
5. Skyrocket marketing and promotional efforts
With a better understanding of how things work on the market and how competitors win over their clients, small businesses can easily predict where the trends are heading, how much in demand certain products are, and more.
Leveraging a data-centric approach eliminates the guesswork and provides facts that you’ll be able to implement in marketing your efforts. Data analytics will give you insights into what your consumers want and allow you to track them down and promote things from their wishlist.
You’ll be able to:
- analyze website performance
- adjust your marketing strategy
- choose digital marketing tactics
- use suitable channels
- set up promo campaigns
You can measure all the data down to the minor details — how people move around the online store, how they interact with your brand, how much time they spend on certain pages, etc.
There is no need to spend money on promoting items you think people might like. Instead, you can invest in marketing products people want at this very moment and lay down a budget for the next season, already knowing what they will search for in a few months.
6. Refine customer service and the customer experience
Using data analysis, small businesses can enhance their customer experience and provide greater customer service. By knowing how people think, behave, and drive their decisions, you can change the way your company is interacting with consumers.
There are many factors that could cause people to leave — a slow website, a higher price, a lack of responsiveness from a customer support representative. Whatever it is, you can use analytics to track where people fall out of the loop and make sure you are ready to catch them next time.
People tend to stick with those brands that make them feel valued. Even a small business can have many loyal consumers when the service it provides is outstanding. Based on data analysis, personalized customer service helps to engage with every client at the right time and through a proper channel, providing clients with a great experience and driving sales.
How many businesses use data analytics?
The use of data analytics among small businesses has been steadily increasing over the past few years. According to SCORE Association, in 2020, only 45% of small businesses were actually using analytics, while 51% of respondents considered data analytics important. On top of that, 73% of small businesses prioritised finding new customers, while customer retention (67%) and customer experience improvement (65%) were named less important.
Allied Market Research predicts that the big data and business analytics market will grow by 13.5% from 2021 to 2030, reaching an estimated $684.12 billion. By 2022, business intelligence investments have increased by as much as 50% across tech firms, manufacturing, retail, as well as finance (Dresner’s Business Intelligence Market Study, 2021).
At the same time, the more data is generated every day, the more use cases we see for data management and analytics. Unlike larger enterprises, very few small businesses can source, store, and analyse big amounts of data. Hence, the growing popularity of DaaS (Data as a Service) companies offering subscription-based services for data collection, storage and analysis.
Do small businesses need Big Data?
We described different ways your business can use data analytics above, lots of them intersect and can be empowered with Big Data.
While Big Data refers to large volumes of structured and unstructured information, small businesses sometimes mistakenly believe that they are too small for it, have no particular need to analyze it, or lack the budget for its implementation.
The truth is, regardless of the size of the business and the amount of information it generates, Big Data is the holy grail for those who know how to deal with it.
You can analyze your entire volume of information and leverage it for useful insights that result in better business process management and strategic moves.
On another note, there are Big Data solutions that will fit the tight budget of a small business. They can still provide actionable insights into user behavior, monitor current market trends, and reveal existing issues.
Trying to figure out how the market will change next season or looking for ways to retain clients based on your inner beliefs tend not to net any tangible results unless your decisions are backed by data. You can keep guessing why your business spends a fortune on advertising but gets no consumers, or you can start leveraging data analytics to gain all the needed insights into your small business.
Data analysis can help small businesses change how they promote their products, engage with clients, and manage finances. It can not only provide actionable insights into user behavior but assist with reducing costs, driving revenue, and providing a one-of-a-kind customer experience that makes people stay.