Friday, April 10, 2015
Basing Business Decisions on Data, not Feelings
The age of flying by the seat of your pants in business is all but over. Because literally everything is going digital, there is simply too much data for you to base a decision on anything except quantifiable evidence. There is also a great disadvantage to doing business by "your gut" rather than data – you can rest assured that your competition is looking at the numbers and making great business decisions based on that data.
- New Methods of Gathering Data
Big data and marketing analytics that are freely given away by many distribution companies now give business the quickest way to make sense of the behavior of customers. No longer do businesses have to rely on focus groups and surveys, both of which have been proven to create false premises for business. In these old methods of person-to-person analytics, the respondents are only looking to please the surveyer in most cases. This leads to answers that are completely useless when it comes to justifying a monetary decision.
– The New Coke Fiasco
Many people believe that the New Coke fiasco would have never happened if the Coca-Cola Company had done business on the numbers instead of on gut feelings. Focus groups, which are basically clusters of people who are giving their opinions on things, created all of the fervor inside of Coca-Cola for the New Coke product. Based on the gut feelings of the seven or eight people who were in the New Coke focus group, Coca-Cola laid out a multibillion dollar strategy to launch the new product into a worldwide market. Of course it did not work; however, if the company had simply paid attention to the numbers that showed that no one was looking for a new product, they would have saved themselves billions of dollars as well as a great deal of respect in the business community.
- Precision Statistics
The statistics that are given to businesses today for free online are now much more precise than they ever have been. This means that there is virtually no need for a business to take the opinions of its customer base one by one. Even in the aggregate, gathering opinions that are based on responses to questions rather than on actual behavior is a definite no-no. Neither the feelings of your customers nor your own feelings should be considered when it comes to money – statistics rule the day.
Jonah Engler is a successful entrepreneur, investor, franchise owner and coffee lover who hails from New York City.