Dec 7, 2022 • 2 min read
The importance of data analysis in decision making
Let’s not beat around the bush, and get to the point. Data analytics is not only important, it is vital. In fact, a recent survey by the McKinsey Global Institute found that companies that base their decisions on data are 23 times more likely to win customers than those that don’t consider data.
But that’s not the only reason why data is crucial. In fact, here are 8 more as well as some tools for incorporating data analytics into your business.
5 reasons to rely on data analytics for internal decision making
- Reduces risk
The business world requires a high dose of intuition and know-how, but that doesn’t mean that entrepreneurs should rely on solely that blindly. Data analysis not only allows you to assess all the risks associated with making a specific decision, but also helps you find ways to avoid them.
In fact, risk assessment is a fully developed field within data analysis, which already helps companies avoid pitfalls that may not at first seem obvious, even to business analysts.
- Enables confident decision-making
Once a company starts backing up its decisions with data, decision-makers will have no doubts about the next steps to take. And when the confidence of senior management increases and decisions are no longer made in a back-and-forth fashion, so does the effectiveness of employees. Therefore, business performance improves as a result.
- Data analysis helps to save costs
Companies often do not pay attention to the profitability of their decisions. When a profit is perceived, there is a tendency to ignore the fact that it could have been achieved at a lower cost.
When data analysis is introduced into the equation, things change. Studying the data reveals whether there were more cost-effective ways to achieve a goal. As a result, data-driven decisions are not only about outcomes, but also about the most efficient way to get there.
- Data analysis decreases cognitive bias
While a person cannot avoid cognitive biases, data has no intentions to move towards personal ambitions. No matter how neutral a person is, he or she will undoubtedly be more biased towards policies or trends at one time or another. Decisions affected by potentially harmful biases for the business can be avoided by opting for a data-centric approach. Provided, of course, that the data feeding a system is not itself biased.
- It makes it easier to analyse, measure and evaluate
Their ease of evaluation is one of the best features of data-driven decisions. Unlike the conventional decision-making process, data-driven decisions can be evaluated before they are implemented.
This essentially means that you can forecast how the decision will affect the organisation as a whole. And if the forecast yields negative data, the company may not make the decision and opt for a another one.
3 reasons why data analytics also helps marketing decisions
- It allows you to know your audience better
The customer is at the heart of a marketing strategy, so understanding their needs and how you can help them becomes a priority. Data analysis helps you discover the type of campaign that works best with your audience: videos, social media clips, sponsored ads or email marketing. Knowing the data, your company will not have to limit itself to one type of campaign, but instead be able to develop a comprehensive strategy.
- Helps to optimise your SEO
Thanks to data analysis, you can learn how to use keywords that attract your ideal customers. The data will show you how your customers search for your products and services. This way you can drive traffic to your website.
- Data analysis serves as a tool for forecasting results
Data analysis gives you an informed analytical look at the results of previous campaigns, which can help you predict future results. In addition, determining what worked in the past and what didn’t, helps you optimise the techniques that will make up your future strategy.
You can even change your budget to match the methods that work best.
Data analysis tools
Data analysis will not work properly without the right tools. Some of them are:
A/B testing involves doing small variations on the same element to find out which one works best with your audience. This way you find out what your customers find most appealing and you can make the necessary changes to your products or services.
Working with banners and ads allows you to track click-throughs and actual conversions. This provides data that can be used in subsequent campaigns.
Google Analytics is the ultimate tool for analysing the events that occur on a website: clicks, scroll time, conversions, etc. Data analysis of what happens on a website allows you to redesign it to suit customer activity and multiply conversions.
By evaluating historical data, marketing teams can identify potential customers for other products that may be of interest to them. As a result, it can increase cross-selling and, by extension, overall sales.
Since we specialise in all of that, at Ideafoster we offer idea validation services (both products and services), through A/B testing campaigns on social networks, online surveys and interviews, amongst others. In other words, we help you improve your decision-making process. Get in touch with us to find out more.
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