Successful entrepreneurs use data analytics for business strategy and growth - using KPI dashboards to provide quick insight and keep them focused. Leaning on your analytics can help steer you in the right direction and help determine your company’s future.
That’s why we’re going to be taking a closer look at how to leverage analytics. I’ll answer questions such as:
- What are metrics and analytics?
- Which metrics and analytics should we be tracking?
- How can we use analytics to improve my business strategy?
- What are some analytics pitfalls?
Whether you’re brand new to marketing analytics or have some experience tracking analytics for small business, you’ll pick up some useful strategies in this article.
Business analytics terms and definitions
Let’s start by looking at basic business analytics terminology. Here’s a general overview of the key terms:
- Data is the set of information you have to work with, the numbers that your software reports to you.
- Metrics are informational. They take that data and apply it to specific areas of your business.
- Analytics are strategic. They look at all of that and ask “why is that happening?”
- Finally, KPIs ask “How are we doing in the long term?”
Let’s get into the details of each of these terms.
Data are numbers and calculations that report various activities about your business (such as purchases).
Types of data include:
- Number of purchases
- Number of converted customers
- Total sale amounts
- How many people bought X product
A piece of data that measures how your business is performing in various areas. Metrics will inform the way you approach your performance. Here’s a look at some popular digital marketing metrics.
Types of metrics include:
- Conversion rate
- Bounce rate
- Cost per lead
- Customer lifetime value
Analytics are the analysis of metrics meant to help you draw conclusions. Think of your business strategy as an equation. The metrics are the individual components of the equation. Analytics is the act of putting those components together into something meaningful.
For example, as a business, your email open rates are an important metric to track. But what happens when you take your open rates for emails with discount codes and compare it to your open rates for emails without discount codes? Analytics! You’ve taken individual metrics and put them together in a way that allows you to make informed decisions about business strategy.
At the end of the day, business analytics and strategy is what separates the hobbyists from the entrepreneurs.
Key performance indicators (KPIs)
KPIs are measurements that gauge your company’s performance over time. These are usually compared to your competitors’ performance as well as your company’s past performance.
An easy way to visualize this is to think of a painting. Your tools are your data, specific areas of the painting are metrics, and the big picture is analytics. KPIs track how your painting performs compared to your past work and to other artists’ works.
Why you should avoid vanity metrics
One of the tricky things about metrics specifically is that not all metrics are equal. In fact, there are many metrics that don’t tell you anything useful. Yet, people still track them because someone told them they should.
These useless metrics are called vanity metrics. Vanity metrics are metrics that trick you into thinking your company is performing better than it is. These metrics often have large numbers attached to them, but they’re ultimately not useful data analytics for a small business.
A good example is the number of social media followers your company has. These numbers might make you feel good, but these often have no bearing on how your company performs.
You could have millions of followers on your social media accounts but if these people aren’t taking meaningful business actions, it’s not of much value to your company.
Thankfully, it’s pretty simple to identify a vanity metric. If a metric doesn’t help you strategize or inform your business decisions, it’s a vanity metric. If a metric does help you strategize or make decisions, it’s an actionable metric.
The goal is to follow actionable metrics while avoiding vanity metrics. You don’t even have to completely avoid vanity metrics, but you definitely shouldn’t use them to make important business or marketing decisions.
Key business analytics and strategy
There are many different analytics you can use to guide your business strategy.
Below, we’ll go over a few of the key metrics that inform some of the most important analytics for business.
Revenue performance is one of the most important pieces of data analytics for business strategy. Money is the lifeblood of your business. If you don’t consistently track revenue, you put your whole operation at risk.
For this section, we’ll be using Kajabi's analytics dashboard for an in-depth look at how you can analyze different revenue metrics to guide business decisions. If you’re not yet acquainted with it, we suggest watching the video on this page first.
Here’s what the Kajabi Analytics dashboard looks like:
There’s a lot you can access here, so let’s take a look at some of the most common analytics that you’ll want to know.
Net Revenue shows you how much money you’re earning on a daily basis.
Remember, gross revenue is your total money coming in. Net revenue is the amount of money coming into your business minus the amount of money being spent by your business (in this case on refunds).
You can also track revenue and refunds by offer. These are shown underneath the revenue graph.
Say you’re creating an online course, and you release it for sale. Instead of waiting a few days to see how it sold, you can track your net revenue on a daily basis to understand how much people are spending and when (i.e. what days and times) they’re spending it.
You can then use this information to improve future product launches.
Next, let’s take a look at Subscription Metrics. In Kajabi, subscription metrics include Monthly Recurring Revenue (MRR), Average Revenue Per User (ARPU), and churn. These are all integral to track if you offer any kind of subscription service or sell online courses.
Monthly recurring revenue (MRR)
MRR is all of your revenue normalized into a monthly amount. It’s useful for measuring growth and forecasting revenue.
You can use this metric to make strategic decisions for your Knowledge Commerce business. For instance, you can use your MRR to determine your ability to make investments that grow your business.
Let’s say your business has a sponsorship opportunity coming up in a few months that will cost $2,000. You believe this sponsorship opportunity will yield a healthy return on investment (ROI), but you want to make sure you can afford it. You check your metrics and find that your MRR is $3,000. Now, you can feel confident that you’ll be able to cover the cost of that investment.
Average revenue per user (ARPU)
ARPU allows you to see the average revenue that you’re earning per user and is a great indicator of profitability. When comparing your business to competitors, higher ARPU will often determine who has the more profitable business in the long run.
Also, you can use ARPU to analyze and adjust your price points. For example, let’s say you have three subscription levels set at $5, $15, and $25. After checking your subscription metrics, you find your ARPU is $21.
An ARPU of $21 tells you most users are comfortable spending around $21 for your services. Based on this information, you decide to eliminate the $5 subscription and focus on the more premium subscriptions.
Finally, churn calculates how many customers you lose over a certain period of time. Understanding churn is essential for customer retention.
If you check your churn rates and find that you lose the most customers in the summer months, perhaps you consider building a spring into summer promotional campaign to boost retention.
Or, maybe you find that most subscribers drop off after a year. In that case, you might start to offer a discounted subscription rate for year two.
A forecasting tool will give you estimations of what your subscription metrics may look like in the future. The forecasts are based on past performance, and could span days, months, or possibly years.
Obviously these figures won’t be 100% accurate, but they’re useful for getting a rough idea of where your business is heading. After all, that’s the whole point of data analytics for business: looking at your metrics and data to improve your business in the future.
Next, let’s think about opt-ins metrics...
Opt-in analytics measure the performance of your lead capture forms and landing pages.
There are many helpful metrics to analyze, including Opt-in Forms by Submissions (the lower left hand box with the blue graph). This metric displays the total number of opt-ins for your top-performing forms.
With this information, you can duplicate features on your top-performing forms to forms that aren’t performing as well.
To get even more specific, you can filter your total opt-ins by forms, landing pages, and date. These analytics can help you evaluate the performance of specific pages so that you can always tell exactly what’s working and what’s not.
For example, if one of your landing pages is performing more poorly than the others, that will be reflected here. Or if you launched a promotion over the weekend, you can filter by date to see how it affected your opt-in metrics.
Kajabi offers many more analytics, including Unique Page Views and total sales from specific payment processors, so you can really get detailed in your analysis. For more information about the other Analytics that Kajabi provides, check out our Help Center article on the topic.
Use analytics to create and track KPIs
Of course, you can’t just review your analytics and be done with it. Don’t forget that the goal of business analytics and strategy is to help you improve your performance. That means using analytics to guide your business decisions.
The best way to do that is to measure your analytics against your goals. Remember talking about KPIs earlier? This is where they come in. KPIs frame your analytics so you can tell if you’re achieving your goals or falling short.
There are all kinds of KPIs. There are financial KPIs, like cost per order, sales by region, and total profit. Then there are customer-specific KPIs, like customer lifetime value, customer acquisition cost, and customer retention.
You can also have employee-specific KPIs, like employee satisfaction and turnover. But the most important thing is to measure these KPIs against your goals. If you’re not doing that, then you’re essentially just watching your business data without any plan in mind.
When crafting KPIs, ,any businesses choose to use the SMART goal format. A SMART KPI will be:
- Specific: Use exact numbers and definitions to describe what success looks like.
- Measurable: Can be tracked and measured using the available data and analytics for your business.
- Actionable: Team members know what tasks must be performed to reach a particular goal.
- Relevant: Smaller goals all track back to the larger goals and aspirations of the business.
- Time-bound: There’s a timeline and/or deadlines that the goals must abide by.
Closely track KPIs and compare them to how you’ve done in the past (to evaluate growth) and how you want to do in the future (to help you form goals).
Optimize your business with Kajabi
There are many different business metrics you can track. That’s why it’s important to identify which analytics are most applicable to your business goals, or KPIs.
When you put analytics into action, you can make calculated decisions for your business and keep track of what’s working and what’s not.
With Kajabi, you can easily use data analytics for your business strategy. The platform provides you with actionable metrics that become your key performance indicators when you apply analytics.
Kajabi’s tracking tools can be used to make key decisions from guiding marketing campaigns to determining subscription tiers. If you’re ready to take your business to the next level using analytics for small business, start your free trial of Kajabi today!