Data Driven Decision Making: A Complete Guide
In our digital world, we have more access to data than ever before. We have accessible records of activity, sales and more, making it simple to track the growth or decline of our websites and businesses. All of this data plays a crucial role in driving business decisions. If a certain product is selling well, for example, it may be worthwhile to have more of it in stock and advertise it more frequently. Conversely, if an item isn’t selling, it may be time to take it off the production line. This type of thinking is considered data driven decision making.
You may be wondering how to start obtaining these insights so you can make these kinds of informed decisions. The first step is to create a website so your product, business or idea can be shared with the world. When you build your website with Wix, you’ll have access to an integrated website analytics tool so that you can start gathering data immediately. This article will teach you how to analyze that data and how to make data driven decisions moving forward.
What is data driven decision making?
Data driven decision making, or DDDM, is the process of making decisions, usually for a business, based on concrete data. Data drives decisions in many companies today and is often considered one of the main factors responsible for their success.
Typically, people use data analytics tools to collect data and create reports that enable them to make strategic business decisions. Say, for example, you sell shoes. You love the pink sneakers on your site, but it turns out that those pink sneakers only sold 3 times in the span of a month. On the other hand, the blue sneakers have sold 40 pairs in that same time frame. Data analytics platforms will provide this exact data. They will indicate how many pairs of each shoe sold, where they were sold and what the overall profit was.
Then, it’s up to you to take that data and draw conclusions. These conclusions, or data driven decisions, might be to advertise the blue sneakers more often since they are producing larger profit margins. It is therefore more worth your money to advertise the blue sneakers than it is to advertise the pink sneakers, despite your personal feeling towards the shoes.
Why is data driven decision making important?
Data driven decision making is important, quite simply, because it can lead to better organizational success. It can help your business make more money and grow. If you make decisions based on gut feeling alone, you might end up putting your budget in the wrong places. Instead of spending money on something that you know will provide good returns, you might spend money and see none of it back in your pocket. This economical loss can hurt your business in the short term and stymie your ability to grow in the future. Data can help you avoid these types of mistakes.
Data driven decisions also help you make more confident choices and explain them more accurately and persuasively to interested parties. This is particularly relevant when backing up your decisions to investors or employees. This data can show both you, as well as the people around you, that you are making informed decisions and have a carefully considered business plan. Overall, this level of confidence boosts your business and bolsters the trust others have in your company.
How to make data driven decisions
Now that you have a sense of just how important data driven decision making is, you might be wondering, what now? How do I implement this strategy? Here are a few steps to help you reach these decisions:
01. Identify objectives
The first step to making informed decisions is to understand exactly which data matters to you. You might consider thinking about the type of business you run and your general goals. For example, if you have a blog, your goal might be to increase the number of readers or subscribers. If you have an online store, on the other hand, you’re likely aiming for sales and profits.
02. Find the right metrics
The objectives that you have identified are often referred to as KPIs, or key performance indicators. KPIs are the metrics, or data, that you specifically look at to help hone in on your goals and grow your business.
If you are trying to open a business, you might look at certain metrics that indicate brand awareness, such as direct traffic to your site and users who reached your site by searching your brand name. Alternatively, you can focus on your total amount of revenue you have brought in, or specifically at your profit (the money made minus the money spent). Any of these are valid metrics, depending on your goals at the given time. You may also choose to change your metrics over time, as your brand grows.
You can analyze these metrics directly from your professional website. Wix Analytics automatically breaks your data down into distinct sections such as traffic, sales and people. This way, you can determine the proper objectives within each section and can have varying KPIs depending on the type of information you are looking at. For instance, you can have traffic objectives as well as sales goals and easily differentiate between them in order to more accurately predict future growth and revenue.
03. Create the proper reports
Once you have identified your metrics, it is essential to be able to view these metrics when influenced by a variety of conditions. Reports enable you to see your data as broken down by variables such as geographical location or historical time frame. They also help you visualize correlations between data points so that you can see the relationship between site traffic and sales, for example. These comparisons can help you predict what to expect going forward, and can assist in your understanding of what caused business growth.
One effective way to create reports is to use Wix Analytics. This tool consolidates all data from your site and has built-in reports that contain the essential information at the ready. Another useful aspect of this tool is that you have the option to build your own reports based on your individual KPIs or interests. This way you can interact the data points that are most significant to you and understand what is important for your personal business.
04. Track changes over time
Examining these reports also enables you to swiftly notice changes over time. You can look at various time frames, including changes to your site or business since yesterday, last week, last month or last year. On top of that, you can compare time frames, letting you easily see growth week over week, month over month or year over year.
These comparisons make it simple to see peaks or identify challenging times. They can also be an indicator of certain patterns in your traffic or sales over time, helping you easily anticipate future trends. Alternatively, you can view trends reports which consolidate this data for you.
05. Analyze these changes
Once you have identified these patterns, you’re better equipped to understand when to expect the most traffic or sales. If last year you saw more traffic around the holidays, you might expect to see a similar trend this year.
Fortified with this information, you can then more confidently understand when it is most worthwhile to spend money, or at what points in the year it is more logical to ease up on advertising. You can also prepare your inventory so that you can avoid running out of stock. If you have a blog, you can use these patterns to understand the best posting hours or when to expect the most traffic.
06. Optimize according to analysis
This step is where the data driven decision making truly comes into play. After analyzing your data in the short term and taking note of changes over time, you’ll be able to optimize your business strategy and make better decisions going forward. As you may have been taking note of throughout the previous steps, checking data lends itself to optimization. But in case you haven’t yet drawn any conclusions, now's the time to look back at your data and analysis, and start making business decisions accordingly.
You can analyze how much money certain products brought in, what time of year they sold the most and in which geographical location they were most popular. You can then model future products on the best selling ones, or you can advertise the best selling product more.
Alternatively you can decide that in New York you are going to advertise one product, whereas in Georgia it is more worthwhile to advertise another product. These types of nuances might be difficult to realize without data and can serve as a helpful guide as you decide how to allocate your budget and attention.
This method of viewing data, analyzing and optimizing your decisions is a never-ending process. There is always something to learn from data and consistently new insights. You might also notice that traffic and sales shift overtime with general market trends or the emergence of a new competitor. You must carefully consider each of these factors to ensure continued success. Of course, the best way to truly contemplate these factors is when you have data and understand the impact of data driven decision making.
By Amanda Weiner
Content Optimization Specialist