Analytics in Business: Definition, Steps and Tips

By Indeed Editorial Team

Published August 2, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Data analytics are an essential aspect of business planning and management. Business owners use data to understand their business successes, identify growth potential and develop strategies that help their businesses thrive. Learning about what data analytics for business are and how to apply them can help you use data to support your business planning and grow your company's operations.

In this article, we define what analytics in business are, explain why they're important, outline the steps in the business analytics process and provide some tips for conducting successful analyses that benefit businesses.

What is analytics in business?

Analytics in business is the process of using specialized analytical tools to collect, analyze, interpret and project data for various business uses. Some applications of analytics in business include:

  • Collecting and processing data related to historical strategies and models

  • Analyzing data to understand current trends and patterns in customer behaviors

  • Projecting the results of different business strategies based on historic data to forecast business growth and help with decision-making

  • Gaining insight into current workflows to optimize them while supporting the needs of employees and customers

Related: Business Intelligence vs. Data Analytics: Key Differences

Why is analytics important in business?

Analytics are important in business because they help businesses gain insight into the successes of their current operations, acknowledge areas for improvement, identify opportunities for growth, find risk factors and develop strategies to ensure business success. Having data to support business decisions helps executives and managers understand where their businesses are succeeding and how they can continue to improve their operations.

The more detailed their analyses, the more they can plan strategies that address specific aspects of their business model. For example, data may reveal that their business can benefit from marketing its products to a wider customer base.

Related: Business Analyst vs. Financial Analyst: Definitions, Differences and Career Outlook

5 steps in the business analytics process

Here are the steps for how businesses use analytical processes:

1. Identify the goals of the analysis

Establishing well-defined goals allows professionals to identify the purpose of their analysis. It's important to choose goals that are specific, measurable and relevant to the business' needs. When professionals have a clear goal for their analysis, it helps them create a plan for gathering relevant information and interpreting it in a way that helps them gain insight into their current operations and future strategies. Understanding the intent of the analysis creates a point of focus around which business analysts can develop a methodology that reveals important information about their company's successes and growth potential.

2. Choose the methodology for the analysis

After setting a strong goal for the analysis, start creating a plan for how to conduct it. There are many types of analytical tools available to business professionals, and knowing which tools can best serve your specific needs is an important part of creating an effective methodology. In particular, choose the analytical tools that are most relevant to your analytical goals. Have a plan for how to collect the needed data to perform the analysis.

For example, you may need to develop customer satisfaction surveys and create a plan to distribute and collect them to gather data about your current customers' opinions about your business. Additionally, have a strategy for how you wish to analyze the data you collect from the surveys. Set deadlines for collecting and analyzing the data so you can prepare a report that addresses your findings and provides important information for strategic decision-making.

3. Gather relevant data

Once you've developed a plan for conducting your analysis, initiate it by gathering relevant data. Use your methodology plan to prepare the materials needed to gather relevant data. The methods you use to collect the data depend on what kind of insights you're looking to gain. For example, if you're looking to understand how seasonal patterns of customer engagement affect your sales, develop a system to track how customers engage with your business over time. Collect data specific to the amount of customer engagement during defined periods of time so you can use that information for your analysis.

4. Clean the data and perform the analysis

After collecting the data, you need to clean it before conducting the analysis. Cleaning the data means removing extraneous variables that may not reflect the reality of your business' operations. In particular, outliers may introduce biases into your data that hinder the quality of your analysis. For example, a single bad review from a customer based on a circumstantial issue with shipping a product may not be a fair representation of your overall reputation. You may choose to disregard the review if it doesn't align with the purpose of your analysis based on your definition of the goal.

Conduct the analysis once you've finished cleaning the data. Follow your methodology plan and use analytical tools to process the data into a form that you can interpret. Depending on your goals, you may interpret the data in multiple ways to gain a comprehensive understanding of what it represents for your business. A thorough analysis may help you understand your business's strengths while identifying potential areas for improvement.

Related: Top 8 Business Analyst Certifications for Beginners

5. Put the analysis into context and report your findings

Lastly, contextualize the results of the analysis by explaining what your findings mean for the future of the business. Draft a report that explains how you performed each stage of the analysis and what your findings represent. You may show what current business decisions are most effective for meeting the company's overall goals or identify opportunities for improvement, which you can expand on by suggesting data-supported action plans.

Use your findings to compare solutions to current company problems and make strategic recommendations to benefit the company's current business model and encourage its growth.

Types of business analytics tools

Knowing the different types of business analytics tools can help you choose which are the most applicable to your company's needs. Here are some common tools that businesses use in their analytical processes:

Descriptive analytics

Descriptive analytics are tools that help businesses understand their key performance indicators. They identify details related to the business' current operations. For example, tracking user engagement with the company's social media platforms offers information about how, when and why users view and interact with their digital platforms. Having information about current trends and patterns is important for helping businesses understand their current successes and areas for improvement so they can make adjustments and develop strategies that improve their performance.

Predictive analytics

Predictive analytics are tools that help businesses forecast business trends and how current strategies may change future outcomes. These tools help businesses understand how current strategies or theoretical strategies are likely to impact their business so they can make effective choices depending on their goals. As an example, a predictive analytics tool may allow a business analyst to run simulations based on different potential strategies. The analyst can then review the results of the analysis to compare how different strategies are likely to affect the business' goals, which they can use to offer strategic recommendations.

Visualization and reporting

Some analytics tools focus on visualizing and reporting data rather than processing it. These tools are important for contextualizing data and presenting it to an audience so they can understand the processes used in collecting and interpreting it. Visualization tools put data into graphics like charts so it's easier to understand at a glance. A reporting tool is a system that allows analysts to present data in written or visual formats so that their audience can understand the finding and make important decisions based on the presented information.

Data collection

Data collection tools help business analysts access, record and store data for analytical use. These tools may include databases or software programs that automatically record data for the analyst. Many digital programs have built-in data collection tools that analysts can access to review how users interact with their online platforms. For example, social media platforms often use data collection programs to track user engagement, such as by recording the number of users who interact with a webpage over a period of time and how long they spend viewing digital content.

Related: Top 8 Data Analytics and Big Data Certifications To Boost Your Career

Data mining

Data mining is the method used to extract patterns from large sets of data. It's used for finding important trends within extensive data sets so that analysts can use those data points for specific purposes. Often, data mining involves applying technology like machine learning to work with sets of data that are too large for individuals to work with manually. Data mining programs can review data sets based on established parameters to identify information that has value for analysts. Analysts use data mining tools when working to understand how trends in large sets of collected data represent business-related concerns.

Tips for conducting successful analyses

Here are some additional tips to consider when performing business analytics:

  • Use professional analytic software: Many methodologies and tools help to make business analytics easier to use, and using professional tools is important for gaining high-quality, accurate results for your needs.

  • Combine different processes: Combining a variety of tools and processes can result in more comprehensive findings that better represent the complex variables that influence business success.

  • Get expert opinions: Business analytics can bring together modeling from finance, budgeting, marketing and other areas of specialty to offer diverse perspectives and create comprehensive plans to improve business performances.

Explore more articles