Big data is everywhere these days, and the positive influence that shrewd use of data has in the enterprise is well known. Dresner has found that 64% of enterprise leaders say cloud-based business intelligence (BI) is either critical or very important to their organization. However, data’s impact on small businesses goes relatively unnoticed – and under-realized.
One key reason for this gap can be found in the manner in which most BI and data analytics software solutions are seemingly tailored towards enterprises. Many SMB leaders are surprised to learn that they too can successfully leverage these insights to inform and refine their business strategies, and often without the need for help from dedicated data specialists.
However, small business digital transformation is ongoing and accelerating, and as more small business operational processes take place in digital spaces, the data signals become more available for analysis. Forbes’s 2022 Small Business Survey revealed that 78% of polled small businesses are accelerating their investments in various types of tech, including customer analytics, in order to be able to serve more customers with better experiences.
While increasing investments is essential, it isn’t of much use unless SMB owners can make sense of their data. Here are five ways small businesses can use data to push their businesses to the next level.
Increase Customer Lifetime Value (CLV)
Lifetime value or CLV is often spoken of in a SaaS context, but this metric applies to local small businesses too. As a KPI, CLV gives a business a good idea of how much money they can expect a customer to pay throughout the relationship.
It offers a great base for further business budgeting decisions, such as allocating marketing expenses. However, to boost CLV, small businesses must look at their data for indicators that reveal revenue drivers. For instance, which products are customers buying the most, and how are they using those products? What products and services might make sense as elements to accompany the business’s most popular existing offerings?
The answers to these questions often lie in unstructured social media data. Technology influencer Bernard Marr is a huge proponent of SMBs leveraging social media signals for market opportunity and brand sentiment analysis.
“Social media has become a particularly valuable source of data,” he writes, “making activities such as identifying niche markets and analyzing customer feedback much easier and cheaper. Twitter – where almost all conversations are effectively held in public – is easier to mine than most platforms.”
Data analysis of this sort can lead SMBs to offer more tailored services to their customers, strengthen relationships, and boost revenues in the long run. The result is higher CLV and a more resilient business.
Eliminating Cost Sinks
Cost control is all-important for small businesses. Fewer resources mean SMB owners must get their decisions right or have in-depth knowledge of an issue before taking action. Data offers SMB owners insights into what works and what doesn’t.
While large enterprises use big data in a predictive fashion, smaller companies can gain a lot by using their historical data. For instance, an SMB owner can use logistics data to identify their best-performing vendors and allocate deliveries accordingly.
Other use cases involve improving manufacturing efficiency, sales channel identification, and product sales analysis. SMBs can pinpoint product lines that are underperforming and use data to dig deeper into the root causes of this issue.
Whether a lack of customer demand or supplier underperformance, data has all the answers they need.
Create Business-Specific KPIs
Every small business is different and needs customized KPIs to measure performance. The problem is, without easy access to data exploration, an SMB leader can’t determine which metrics measure business performance efficiently.
Data analysis will reveal key business drivers, and owners can create custom metrics based on them.
For instance, with the right analysis dashboards in place, a local executive coaching service might notice that customers who purchase a series of coaching sessions show up for more appointments than those who opt in for one-off sessions. As a result of this insight, the coach might offer sales promotions to past customers, incentivizing them to purchase multi-session bundles.
Itzik Levy, CEO and co-founder of small business management software vcita, highlights a few other use cases where custom KPIs can come in handy. “With BI [SMB owners] can make smart decisions that put resources to better use,” he suggests, “like optimizing lead nurture sequences to emphasize services that drive the most loyalty, or investing in better tech to track sales. Access to this information will help them step away from the daily grind and maintain a bird’s eye view of their business.”
Reducing Marketing Costs
The best marketing and sales strategies are driven by analytics these days. Data plays a huge role in optimizing marketing campaigns, and every advertising platform offers users a wealth of data analytics. Small business marketers can zero in on their most profitable marketing channels and identify key user interests to target.
As a result, generating greater returns on ad spend is relatively easy, thanks to data. An additional benefit of using data to improve marketing is the ability to automate content creation. For instance, an SMB leader who notices a spike in clicks related to certain interests on Facebook can use an AI program to quickly generate content related to the topic.
Connecting data to automation can thus boost both paid and organic marketing channel ROI. Business consultant Serenity Gibbons lays out a compelling use case for leveraging data-driven insights and connecting them to automation. “Creative AI has advanced to the point that it’s now possible to create thousands of hyper-personalized iterations of the same basic marketing message,” she writes.
“Using what you know about each prospect, from their income to their purchasing history to their relationships with your competitors,” she continues, “you can (and should) leverage marketing automation to develop compelling, laser-targeted content.”
Answering Critical Hiring And Capacity Questions
Small businesses face routine shocks, and this makes creating hiring plans challenging. Data can smooth these shocks by offering owners both backward and forward-looking projections that can solve hiring decisions.
For instance, after accounting for existing revenue trends, SMB owners can use historical data to project the number of sales they can expect in a given year. Based on these projections, they can reverse engineer how many resources they need to hire to meet their targets.
Using data to inform hiring decisions helps SMB owners account for new employee ramp-up times, create hiring calendars, and project the impact of seasonal economic variations.
Enterprises use business intelligence data this way routinely. However, thanks to the democratization of BI, small businesses can now use the same methods.
New Insights For New Business Conditions
The world of business is more data-driven than ever before, and small businesses are no longer shut away from these insights. Thanks to greater data collection efforts and the wider availability of BI platforms, SMBs can power their businesses to higher levels and create better customer experiences.
