3 Things That Successful Entrepreneurs Know About Data
“Data is valuable!” “Capture the data!” “Monetize the data!” “Don’t share the data!” We've all been told to collect as much data as we can, and we've complied. But what what do we do, now that we are up to our eyeballs in data? After all, even a small store can successfully track a million metrics. So, how do we proceed, and where do we get the time?
Is data (or a dashboard) really valuable if we can’t easily use it to make crucial business decisions and take action?
Certainly, it's common to feel overwhelmed by charts, numbers and business acronyms on dashboards. And certainly most business owners are not data scientists and would rather do anything than dedicate precious time to learning about data analysis. That’s why most of us push the task to the end of our massive to-do list.
But we don't have to feel overwhelmed. A preliminary, ideal solution, for example, is a "plug and play" data-analytics dashboard to simplify all that data. Here are four things to keep in mind when choosing a platform to track yours:
- Compatibility with other tools. These might include your ecommerce store, your POS or other tools and apps, like shopping carts, social media and website analytics.
- Ease of use: The data should be presented in a way that is uncluttered, understandable and easy to take in. Can you set targets and chart your progress?
- Insight: Will you have access to trends? Comparable benchmarks to learn from and use to track your success? Strategy recommendations based on your own numbers?
- Action: Does the dashboard allow you to create and/or directly take action based on the data you have collected? Does it save you time and help you achieve your goals?
With only a limited amount of time to devote to this activity each day, you should ensure that your dashboard highlights the key metrics that matter the most. This will let you zero in on only the most important things you can do to grow your business. Here are three things to look for:
1. Past customers are your key to profits.
Armed with newfound data on revenues, orders, best-selling items, etc., you may feel a desire to rush out and find new and exciting customers. But you should instead focus your energies on your existing customers, as this will give you the best impact on your bottom line. In data-speak, this is known as your "repeat customer rate" (the percentage of your customers who have purchased previously).
In fact, retaining and growing a customer can be up to five times less expensive than acquiring a new one. Even more surprising is the finding that the probability of selling to an existing customer is between 60 percent and 70 percent, while the probability of selling to a new prospect goes down to 5 percent to 20 percent. That’s a huge difference! Not only do you have your existing customers' contact information and buying preferences, but they already have a positive impression of your brand.
Consider the case of Candi Factory, the Toronto-based creator of what has been described as the world's most comfortable women’s underwear and men's briefs. Candi Factory's customers simply love the brand, but let’s be honest: Undergarments are not something that stay at the forefront of our minds. That's why Vantage helped Candi Factory focus on the very specific group of past customers who were in the “hot zone” (likely to purchase). Our platform built and ran some incredibly effective Facebook ads. Those ads achieved a 23 percent CTR (click-through rate) and converted 3.5 percent of the list to repeat customers. Unheard of!
2. Past and valuable customers are your key to profits.
Not all customers behave the same way. Some come and go, others stick around. Some will buy only the hot deals and loss leaders; others will be more profitable and might even buy enough that you know them by name. The total profits made over a customer’s lifetime have a business term: "customer lifetime value" (CLTV).
CLTV is very important to calculate, but unfortunately it can also be fairly complicated. How do we assign estimates upfront as, upon first arrival, all website visitors look the same? A good analytics platform will help identify patterns: Perhaps new customers attracted by Twitter aren’t as valuable as those who received a forwarded newsletter with a warm introduction and a 5 percent discount code. Maybe 10 percent of coupon-holders purchase twice as often, and in the long-term make up for the lost margin through their more frequent purchases.
Your repeat customer rate and customer lifetime value metrics will help you assess how you are spending your efforts and investing your resources and point you toward your most valuable customers.
3. It's important to find stories in your data.
One of the simplest ways to move from looking at data to planning action is to create a "story" around your information by taking your key metrics and turning each one into an alarm that can be triggered and acted upon. For example, if your repeat customer rate is too high, you need to attract new customers to ensure that you’re growing and expanding your influence (perhaps using a look-alike methodology to seek out customers who resemble your highest-value customers).
If your repeat customer rate is too low, you’re wasting too much money attracting new customers. In this case, a good marketing action might be an email campaign to encourage past customers to come back and check out new services, stock or sales items.
Applying specific actions to each metric trigger can build context and transform your data, from a random collection of intangible numbers to a real and concrete set of business activities. All of a sudden, previously meaningless data points become mile-markers on a bigger journey toward a defined end goal.
Try it, yourself. Whether you are working with a decked-out analytics dashboard, or raw data that you have scraped from your sales records, take one metric and tie an action to it. You might be surprised how quickly it changes your comfort level with data and transforms you and your team into a data-driven money-making machine.