Why is Data Important for Your Business

5 Reasons why your company needs a good database

In order to make sound decisions, many successful business leaders rely on some form of data. In the past, when we talked about data collection, we used to refer to manually gathering data. We used to do that by talking with customers in person or conducting surveys via email, phone, or in person.

Regardless of the method, we had to manually gather data for business in order to better understand both the market and our customers. Since data collection required a lot of money, time, and it was sometimes hard to execute, numerous companies were forced to operate with limited data.

Nowadays, collecting data that will help us comprehend our customers and markets is much easier. As a matter of fact, the biggest problem today is managing the data and determining what is going to help us out the most. Most modern business tools and platforms can help us obtain huge amounts of data that could help our business grow.

In 2015, Bernard Marr, data and analytics guru said that he firmly believed that big data and its implications were going to affect all businesses and change how we do business altogether. Therefore, even if we are running a very small business, not only do we need data, but we could also largely benefit from using it.

However, we do need to emphasise the fact that data is not a crystal ball that has all the information. Still, it’s as close as we could get to the ball. Also, data isn’t a magical answer to all of our questions; we still need to make good business decisions, work hard, and be consistent. Data is just another tool that we should use.

Here is how any company could benefit from using data; below are five major reasons why you should use data for your business.

 

1. Data helps us make better decisions

Even startups run by a single person generate data, and lots of it! Actually, any business that accepts electronic payments of some kind, has a social media presence, a website, etc., gathers data about users, web traffic, user experience, and so on. All of that data has a significant amount of potential; all we need to do is learn how to access it and use it to better our company.

Is there something that influences or leads the decisions we make? Do we rely on what we see happening in our company? Or maybe on what we read or see in the news? Do we follow our instincts? All of these things can be helpful in the decision-making process, but not as helpful as making a decision based on actual information and numbers about our company’s performance. Data provides profit-increasing potential we cannot afford to miss.

If we have to restock our inventory, what’s the most effective way to do that? Should we think about what product is selling well and order based on that, or is it better to do an inventory check and review the data, and know for certain what is in short supply? The former could lead to surplus inventory (which could result in a major loss of profits or cash-flow) while the latter could tell us exactly what we need.

Merit Solutions– a global business consulting company- is of the opinion that any business that has been active for a year or so is bound to have a ton of big data. Moreover, that data can help those companies make better decisions. We might be thinking that there isn’t enough data that could help us start making better decisions, but that’s most likely not the case.

Many companies don’t understand how data could help them, or they don’t have access to the right data visualisation tools, which is why they don’t use data in their decision-making process.

If they use data in the right way, even SMBs can benefit in the same way larger organisations do.

Businesses can use data to:

  • Obtain new customers
  • Enhance customer retention
  • Improve customer service
  • Manage marketing efforts more successfully
  • Keep an eye on social media interaction
  • Predict sales trends

Leaders use data to make smarter decisions and see in which direction they should take their companies.

 

2. Data aids us in solving problems

Maybe we are experiencing a slow sales month or wrapping up a poor-performing marketing campaign. In that case, we should be able to pinpoint what exactly went wrong or caused problems along the way. How are we supposed to do that? Without data- very hard. Not using data to find the reasons for underperforming is like playing darts in the dark and wondering why we’re missing the board.

When we actively track and review data from business processes, that helps us identify performance breakdowns. In turn, that leads to a better understanding of each part of the process. Moreover, we can learn which steps are performing well and which we need to work on.

To demonstrate how data helps solve problems, let’s take a look at sports teams; they are a good example of businesses gathering data in order to improve their performance. Coaches actively collect data about each player’s performance; by doing that, they know what the players are doing well and what they need to improve.

 

3. Data helps us see performance

According to Tomasz Tunguz, companies that are data-driven are the best-run companies in the world. Moreover, such companies stand out from the crowd.

If we are running a business, we have probably wondered how our team, department, company, marketing campaigns, customer service, shipping, or other parts of our enterprise are doing at any particular point in time. With data, we don’t have to wonder any more; gathering and reviewing it allows us to clearly see the performance of each and every part of our business.

When we are not sure about the performance of our marketing efforts or our employees, we can’t know whether our money is being put to good use or not. What’s more, we can’t know if we’re bringing in more money than we are spending.

For instance, let’s imagine we have a sales rep that we consider a top performer and send him the majority of the leads. But after checking the data, we realise that he closes deals at a lower rate than one of our other sales reps to whom we don’t give as many leads. So that means that the other sales rep closes deals at a higher percentage.

If we hadn’t realised this, we would have kept sending most leads to the lower performing sales rep and thus lose money from unclosed deals. Using data to check performance can prevent that.

Here’s another example: we heard that the best place for advertising at the moment is on Facebook. Therefore, we decide to spend the biggest part of our budget on Facebook ads and another small portion on Instagram ads. Then, by reviewing the data, we see that our ads on Facebook aren’t performing as expected.

Then, by looking at numbers even more closely, we notice that our ads on Instagram are performing far better than we had hoped. However, we have already invested the majority of our funds into advertising on Facebook while not making effective use of Instagram. Thanks to data, we can see things clearly and achieve better marketing results.

 

4. Data assists us in improving processes

With the help of data, we can understand and improve business processes and thus reduce both the time and money we might be wasting. There’s no company that doesn’t feel the effects of waste. Instead of wasting money, we could spend our funds on other things, save people’s time, and achieve overall better results.

Marina Martin – a business efficiency consultant – says for Business Efficiency for Dummies that inefficiencies cost numerous companies up to 20–30% of their total annual revenue. We could use those 20% on many other things such as product development, customer acquisition and retention, etc., to enhance our business achievements.

Furthermore, according to Business Insider, poor advertising decisions are one of the main reasons companies lose money. Luckily, with the help of data, we can observe which marketing channels are performing well and which aren’t, and thus focus on those that offer the best ROI.

Also, we could investigate why certain channels aren’t performing well and work on improving their performance. That way, our money will generate more leads and we won’t have to increase the amount we’re spending on advertising and marketing.

 

5. Data helps us understand the market and our consumers

We can’t really know who our actual customers are without the help of data. Moreover, we can’t know whether our consumers like our products or if our marketing efforts are working in the most efficient manner. Lastly, we can’t know how much money we are spending or making in the process. When it comes to understanding the market and our customers, data is key.

In order to easily reach to our customers, we have to see them clearly first. Max Levchin – a co-founder of PayPal– states that our world is covered in data, which allows us to understand our consumers much better. The data we need is out there, we just need to use it to our advantage.

Yet, since there is so much data everywhere around us, we could easily get lost in it. That’s why we have to use proper tools that will help us interpret it correctly. Luckily, those tools are also at our disposal. In order to make the most of the consumer data, we could use a BI solution- by far the best way to access and understand data, and use it to increase sales.

With the help of data, we learn which of our products are currently the most popular on the market. By knowing which products are in demand, we can increase the inventory and meet the demand. On the other hand, without that information, we could witness a major loss. In a similar way, we might realise that we are scoring more sales on Facebook than on Instagram; that allows us to learn who our real buyers are.

In the modern age, it’s unimaginable to run a business without the help of data. If we are not effectively using data to grow our business and secure its place in the future, it will remain in the past. Lucky for us, we keep seeing the development in data processing and visualisation. That makes growing our business with the help of data much easier than before.

A modern BI tool is everything we need to visualise our data and get the information we require; that will allow us to drive our company into the future.