If you want to grow and develop your business then there are 10 business analytics you should be doing.
Many businesses do not appreciate the necessity of analytics and this is particularly so for small and medium sized businesses. It should not be neglected as it is a vital part of staying ahead of your competition and keeping track on what is working and not working in your business.
Here are some of the analytics that businesses of every shape and size should get to know and understand in order to grow and develop..
1. Cash flow analytics
Cash flow analytics helps you to see where your money is being made and where it is being spent. This enables you to plan in advance and predict future problems more accurately so that they can be avoided.
Having an understanding of how money is moving around your business and knowing what assets you have that you could quickly convert to cash (should you need it) will help you pay those unforeseen bills or get you through difficult or slow periods in your business.
Businesses need a certain amount of operating cash to pay salaries, buy or repair machinery, purchase raw materials or pay suppliers. Tracking and analyzing your cash flow will help you to prepare for these necessities and will mean that you are less likely to run into difficulties.
2. Product profitability analytics
Even if you know that your business is profitable, do you know where most of that profit is coming from? It is a commonly known fact that 20% of your customers will produce 80% of your profits. It is also well known that certain products are much more profitable than others. Knowing where you profits are coming from means that you can develop these further and make more money with no more effort or cost involved. It also means that you will know which products are losing you money so that you can make a decision about what to do about them before they cause a problem for your business.
3. Customer profitability analytics
Identifying which customers are making you money or losing you money will also be time well spent. There is a myth in business that any customer is good, but this is not always the case. Much the same as products, customers also fall into the 80/20 rule. Knowing which customers are making you the most money will help you to decide who to target your advertising at and those who are losing you money you can make decisions about what to do with them before they lose you even more.
In other words there is likely to be 20% of your customer base who account for 80% of your profit. Conversely there is also likely to be another 20% of your customers who account for 80% of your customer-related costs. Knowing which is which is important.
If you don’t know which are the customers who make you money and those customers who lose you money then you will treat all your customers the same and this will affect your profitability as a company.
This knowledge can help you to focus on the highest profit centres by really looking after those customers who are profitable and encourage the ones who cost you money to go to your competition.
4. Market size analytics
Analysing your market is also a process that is well worth the effort. Knowing how large your market is for your products or services will tell you instantly what potential there is for growth within that marketplace. You should be looking at what people are buying that is related to your products, how much and how often.
Knowing how your market is performing is good but knowing its potential is better as this is the information that will help you decide which direction to go in and what products or services to create or develop to fulfill those needs and requirements.
It seeks to work out how many people want or may want your product or service and how to prepare your business to meet those needs. Not doing this analysis means that you will guess and this can lead to loss of money and time because you are competing in the wrong market at the wrong time.
5. Non-customer analytics
Non-customer analytics is about understanding what people who are currently not your customers think about your product, services or brand.
If you only concentrate on your customers and your competition is profiling those same customers then you are going to end up in a position where you are getting an ever smaller piece of an ever shrinking pie. Eventually you will only be able to compete on costs and this will lead to a downturn in profits. Instead, looking at bringing new customers into your business is going to keep you moving forward and keep your business profitable.
What are the customers (who are not currently your customers) buying instead? Where are they buying it from and how often are they buying it? By doing this non-customer analysis you are finding out what your company needs to do to meet the needs of these potential customers which means you don’t have to cut costs or enter into a trade war with your competitors. If you do research this well enough then you will have a good idea of what product or service to develop that is ahead of what others are doing and this will give you the competitive edge.
Obviously if you can find new markets or new pockets within larger markets that have yet to be approached by you or your competitors then you have an opportunity to increase revenue cost effectively.
6. Pricing analytics
Analysing the price that people are willing to pay for products is an ever increasingly important part of business these days, especially in highly competitive markets.
What if you could find out exactly how much your customers would pay for your product ahead of time? Price analytics is the process that delivers that outcome.
It enables you to set your price at the correct level so that you can capitalise on the easy to get customers but also on those who may be willing to pay a premium for your services or products. Having this information means that you can increase the volume of products to suit the demand and also make more profit by using some imaginative pricing techniques.
Another major benefit of price analytics is that you can adjust your price depending on what your competition are doing, this way you will never be far more expensive or far too cheap.
7. Customer lifetime value analytics
A customer may or may not be profitable to your company the first time they make a purchase. This could depend on how they came to be a customer. If you enticed them with a free offer or a much reduced product price then they are not going to be profitable from the outset. But, if that customer then goes on to buy your most expensive product or service then they have become extremely profitable for you.
Know what the averages of your customers spends are will help you to determine their lifetime value to the company. A company that has am integrated product line such as Apple will continue to sell products to the same customers over and over again. Someone who buys an iPhone may then go on to buy an iPad and then an Apple Mac. A company such as Tesco or Costco will have customers who shop there every week and will spend a certain amount each week. Both companies can then work out the average their customers will spend over a lifetime to work out how much they can afford to spend to acquire that customer ie advertising and marketing budget.
8. Social media analytics
The process of gathering and analysing data from social media is what we mean by social media analytics. The rise of social media has created a mass of data from individuals who are customers or potential customers.
Analysing this information can give you a real time glimpse into what your customers think about you and are saying about you. This is invaluable feedback for your business and gives you an ideal opportunity to respond to their requests or expectations.
These insights can be used to increase revenue by tapping into un-met customer needs, reduce customer service costs, and highlight customer service issues that cause loss of business or reputation. They can also be used by product development to gain real world feedback on products and services.
9. Customer engagement analytics
Customer engagement analytics is a highly evolving field at the moment where businesses are trying to map the entire customer interactive journey on and off-line. Essentially, it is the process of assessing how well (or otherwise) you engage your customers with your products, services or brand through these various interactions.
Business is notoriously bad at customer engagement, and yet it impacts bottom line results. When customers want to speak to you and get passed around several departments, having to explain the situation all over again to each department can be infuriating for them.
Customer satisfaction is not the predictor of behaviour that many companies once assumed it was. The argument has always been that satisfied customers = loyal customers = profit. Unfortunately in the modern world of multiple options and constant deals whether a customer is satisfied is not necessarily enough to keep them as a customer. Customer engagement, on the other hand, can fix this problem.
10. Project and program analytics
Knowing how effective your projects have been will enable you to tweak or change them in the future.
There are always three key components that successful delivery is measured against:
- schedule – is the project on schedule?
- budget – is the project on budget?
- deliverables – is the project delivering the specified outcomes?
Project and program analytics assesses performance against schedule, budget and quality of output.
Most strategic and change initiatives are delivered via projects or programs. If they are unsuccessful, too disruptive or do not get finished on time, on budget or to the right standard then the implications can be felt right across the business.
Keeping an eye on project and program performance as they progress is far better than setting out the target and crossing your fingers that it will be met. On-going assessment can help you to anticipate any potential problems
Thank you to Hiscox for the original idea for this post. If you would like to know more then please contact me using any of the methods below.