The Importance of Making Data-Driven Decisions
Everyone has access to data, the trick is knowing how to track it properly and leverage it effectively. According to IBM, 62% of retailers report that the use of big data and analytics is creating a competitive advantage for their organization. Knowing what your customers want and when they want it is at your fingertips - you just need the right tools and processes in place. You have an opportunity to turn data into a competitive advantage for your business by learning how to track trends and draw actionable insights. And these are insights that can benefit every department or role within your company.
Inventory, operations, purchasing, marketing, finance, shipping and fulfillment all stand to gain improvements from better business analytics and actionable data reporting. The following are just a few of the data-driven actions companies can take with comprehensive insights:
- Improve operational efficiencies
- Increase productivity
- Drive greater profitability
- Reduce costs and eliminate waste
- Harness forecasting capabilities for smarter purchasing
- Optimize eCommerce site search, experience, and conversion rates
- Streamline shipping and fulfillment
4 Steps to Better Business Intelligence
Determine Key Metrics and Reports - What questions do I want to be able to answer? What decisions do I want the ability to make? What are the most important business and operational reports and trends to your company and/or industry? Not only do you need to understand what reports you’d like to run, but also what metrics are associated with those reports. For instance, if you want to understand your profit margins, you need to track total revenue and cost of goods sold.
The value you will gain from your data reports will be directly related to how focused your metrics are on the factors driving your business success. A few of the most common key performance metrics (KPIs) for retail companies are:
- a. Profit margins
- b. Sales velocity
- c. Days of supply
- d. Turn
- e. Sell-through Rate
Implement Tracking Mechanisms - If you can’t measure it, you can’t manage it. Once you know what you want to track, you need to assess if you can currently get access to that information or if you need to establish new ways to collect that data. And, if you have specific data points coming in from multiple sources, that data must be properly consolidated. For example, if you have sales coming in from your own branded website as well as your Amazon store and your brick-and-mortar store, all those sales (and inventory!) numbers need to be flowing into the same analytics dashboard.
Keep a Pulse on Trends - Once you are properly collecting and managing all your business data, it’s time to start analyzing and tracking trends. You should check the trends of your top-line business stats weekly, if not daily. Are orders going up? Did you see a boost in value per order? How many new customers did you acquire? And make sure your employees know the right top metrics you are tracking.
It’s also good to keep in mind that you may not have chosen all the best metrics and reports at first. Don’t be afraid to iterate on metrics and goals.
Draw Actionable Insights and Implement Changes - Now that your data is unified in a centralized dashboards you can start pulling actionable insights. What channels are selling most? Which channels have the highest order value? Are your warehouses being utilized efficiently? With the big picture laid out more clearly in front of you, you’ll be able to make smarter, data-driven decisions. If you see you’re selling 2x more shorts in Florida than in Washington, maybe you should move more of your shorts down to your Florida warehouse to reduce your shipping costs.
Let Data Guide Your Customer Experience
From how a shopper finds and enters your eCommerce site, to the product pages they visit and the items they choose to purchase, your online store contains a wealth of insight-rich data. It’s this data that can be used to help you design and optimize your site to make your customers’ experience with your brandas seamless and predictable as possible.
According to the National Retail Federation, search marketing – including search engine optimization (SEO) – is the most effective source for acquiring new customers for 85% of online retailers.
So, where to begin with optimizing for search?
Use solutions like Google Search Console and Keyword Tool to identify the keywords you should be incorporating into your content to get in front of the right audience. Not only can data inform how users are searching for you, but it can literally tell you the words to write to be found through organic and paid search.
Once a potential customer finds you through search, make sure the page they land on is relevant to the item they searched for initially. For example, men’s apparel retailer Jos A Bank has secured high ranking organic and paid search positions on Google.
The landing page a customer sees differ based on whether they found the website through organic or paid search. If a customer specifically searches for “men’s suits,” the organic landing page will feature a general suits page featuring various suit categories. If they click on the paid ad, they get directed straight to a product page to optimize for conversions.
Shopping On Your Site
Currently, over 68% of shoppers abandon their shopping cart without making a purchase. Before you optimize any one part of your site, make sure you understand where in the process people are abandoning their cart.
For example, if your cart abandonment rates are high, don’t immediately jump to offering free shipping. Perhaps 90% of cart abandonments are actually a result of out-of-stocks, which tells you the money you considered investing in shipping might be better spent on an effective inventory management solution. Using data to understand the customer’s path through your branded site will allow you to make smarter business decisions and deliver on what your customers actually want.
If your ecommerce site isn’t mobile-friendly, you’re putting yourself at an immediate disadvantage. Google has declared responsive web designs for desktops, tablets, and mobile phones are now an industry best practice. Not sure if your site’s mobile-friendly? Check your site with Google’s free tool.
While it’s true mobile sales are soaring, it’s important to understand how your customers are interacting with your mobile site before spending time and money on drastic changes.
With mobile shopping accounting for more than 20% of ecommerce sales this past holiday season, it’s clear that many customers are choosing to shop via mobile. However, plenty more are using mobile to search, redeem rewards, and even navigate in-store, while doing the actual purchasing either in-person or from a desktop. So before you focus entirely on a speedy mobile checkout, use web traffic data to understand exactly which point(s) in the mobile customer journey should be optimized specifically for mobile.
Similar to understanding how your customers are using their mobile devices to shop, it’s important to consider load time when determining which features, designs, and experiences you include on your branded website. Before you add every bell and whistle to your website, use data to help guide you to what matters to your customers.
On average, over 30% of customers will abandon a webpage that takes 10 seconds to load. Additionally, a one second delay in page response can result in a 7% reduction in conversions. Don’t overlook critical technical stats like this when optimizing your ecommerce site.
Understand Buying Habits
Saving customer data not only allows for a much more pleasant customer experience, but provides you with critical information about your target demographic, bestselling products, how customers are finding you, and so much more. Knowing what people want to buy and when can help you increase email click through rates and improve on-site conversions.
How Retailers Are Using Data
While aggregating, tracking, and utilizing data is no easy task, many retailers have found ways to make data work for them. Here are a few examples of real-world scenarios in which overcoming the challenges of using data, combined with asking the right questions, resulted in huge success for retailers:
Data Knows What Customers Want: Ever since the designer eyewear company, Warby Parker, was created in 2010, the business has relied heavily on data to drive decisions and learn more about its customer base. One of its most popular programs, “Home Try-On,” in which customers are sent five eyeglass frames free of charge with the opportunity to send back those they don’t want, is possible because of data.
The impact? Using data based on previous purchases, the company’s algorithms predict demand as well as the styles a customer might want. Warby Parker’s Director of Data Science, Carl Anderson, told Data Science Weekly they learned through this program that their colonial monocle has “an extremely high conversion rate,” leading them to “tweak our basket analysis algorithm specifically to account for it.”
Subscription Services Inform New Product Development: From fisherman’s tools to makeup to dog toys, there seems to be a subscription box for everything these days. That’s because data is enabling these companies to know what their customers want – all while gaining more information with each new subscription.
According to Harvard Business Review, “When consumers sign up to receive goods via subscription, retailers can gain access to a rich source of consumer purchasing and preference data. They can also use subscription services as a vehicle to test products prior to launch.”
Beauty, wellness, fitness, and fashion subscription company, FabFitFun, recently used customer data from their subscribers to launch a new makeup line, called ISH, with celebrity makeup artist Joey Maalouf. FabFitFun Co-Founder and CEO, Michael Broukhim, said, “ISH is a perfect manifestation of us listening, seeing whitespace, and launching something novel and special.”
Data Keeps You Competitive: Knowing what your customer wants and when they want it can be available at your fingertips – you just need the right tools and processes in place.
Take Vera Bradley, for example. The popular quilted handbag and accessories company spoke at the 2014 National Retail Federation’s Big Show, sharing how they use customer data insights to better segment and target their marketing emails. As a result, they managed to send 63% less emails while achieving a 101% increase in click through rates and a 275% spike in conversion rates.
Make Your Data Work For You
Data is everywhere, but being able to use it effectively is a competitive advantage. Once you have a system in place that provides you with increased visibility into your data, you can use it to inform product development or break into new markets.
Don’t be afraid to make drastic changes – these are most likely to show you a difference in conversion – so long as the changes you’re making are based on something more concrete than a hunch.
When data is used effectively, it has the power to improve efficiencies, increase productivity, boost revenue, and ultimately save businesses money. Taking the time to more effectively use your data to make decisions isn’t just a nice-to-have; it’s a must-have.
Things To Do Today
- Determine what the most important metrics are to your business
- Establish ways to accurately track that information
- Integrate all your data into a centralized dashboard for increased visibility
- Run actionable reports based on your data analysis
- Implement operational and tactical changes based on your data reports