It happens every day in business. You are asked to make a choice that will have a significant impact on the business. How do you decide?
Typically, it is gut instinct, influenced by emotion, bias, fear and/or pride that forces us to commit to a choice. A choice that you are not necessarily comfortable with, nor are you confident that it was the right one.
What Are Data-Driven Decisions?
Data-driven decisions rely on data rather than experiences or intuition. This is important because data can’t lie. Instead of being influenced by personal preferences or sunk costs, data is empirical.
Recently, a client was preparing to launch new creative for a long-running program. Rather than moving forward with the banner ad they liked better, we worked with them to set up an a/b split test of the two different designs. The second creative, the one they didn’t like as much for aesthetic reasons, outperformed their personal favorite, resulting in a 1.6% higher click-through rate.
Data-Driven Decisions Improve Results
A survey of more than 2,100 senior executives showed that highly data-driven organizations are three times more likely to report significant improvements in decision-making compared to those who rely less on data.
Other studies support this finding as well.
Organizations that use consumer behavior insights strategically outperform their peers by 85 percent in sales growth margins and more than 25 percent in gross margins, according to research by McKinsey Global Institute.
As the data available to you increases, so does your ability to improve your business. You are able to identify challenges and opportunities and adapt with agility for a sustainable approach to business growth.
How To Make Data-Driven Decisions
As more companies expand into digital marketing and more devices such as phones, refrigerators and cars become internet-connected, more data is generated and collected. Using data to improve marketing results requires a shift in process and strategy. Here are four ways to take advantage of the data your business can generate.
1. Understand your goals and objectives
To make data-driven decisions, you must know what it is you are trying to accomplish. It’s like Genichi Taguchi said, “If you cannot measure, you cannot improve.” Having an understanding of what you are trying to achieve and identifying key performance indicators will help you determine what business or marketing activities should be measured, and ultimately, improved.
2. Collect the data
Setting up infrastructure, like Google Analytics, is key to data collection. After discussing your internal goals and KPIs, you can use Google Analytics to extract the data you want to measure to identify challenges and capitalize on opportunities. Keep in mind that one data point does not give you the information you need. Instead, you must look at multiple points over time.
3. Implement a feedback loop
A feedback loop helps you understand data through qualitative insights. It creates a dialogue, or feedback, to show you if your marketing efforts are resulting in positive returns, or just making noise.
4. Use the data to generate insights
Just having data isn’t enough. You must make the data actionable by generating insights or data-driven findings that can be used to create value for the business. Many companies struggle to organize data in such a way that insights can be found. But when data is presented correctly, it creates tremendous value for your business.