What is Business Analytics and Why is it Important?

In modern businesses, data analytics is an integral part of decision-making. Managers, executives, business owners, and business analytics professionals analyze data from multiple sources for many reasons. They may use data to improve sales and marketing, streamline operations, or customer satisfaction.

Using qualitative and quantitative data analysis techniques discussed in this article can provide actionable insights that help you streamline business processes and improve operational efficiency. By measuring key performance indicators and analyzing customer data, you can discover patterns and insights that inform business decisions. Developing reports based on these insights helps you create strategies to improve different aspects of your organization—from how you sell products and services to your business operations, and beyond.

Read on to learn about various types of business analytics and how you may use them in your career.

Business analytics involves using statistical analysis and data modeling tools to identify patterns, relationships, insights, and other information that can guide your decision-making process.¹      

You can’t define business analytics in one category because you use this tool to assess multiple business functions and make strategic decisions. The four types of analytics include:

This statistical method describes and summarizes historical data to help understand business events.

Diagnostic analysis uses past data to investigate the potential causes of an event, such as shipping delays.

Predictive analytics analyzes data to gain insights into trends and predict future outcomes.

The goal of prescriptive analytics is to determine the best course of action in a given scenario based on predictions and business rules about operations and decision-making.

The type of analysis you choose to use will depend on your business goals. You may be interested in improving employee efficiency by changing daily processes, for example, or you might seek to understand customer preferences better so you can manage your inventory levels more effectively. Once you’ve set your goals, you can begin your analytics process by collecting the raw data. You must gather enough raw information to interpret data and identify trends and outliers accurately. Collecting data from multiple sources, such as structured and unstructured data, can improve your accuracy, although it may complicate the analysis process. ²

After you’ve collected your data, you will use diverse modeling tools to identify patterns and predict potential outcomes. Depending on the scope of your project, these may range from traditional statistical methods to natural language processing or machine learning for big data analysis. On the other end of the spectrum, you could assess a small sample if constrained by time or unable to access a large volume of data.

You might use a correlation analysis to determine the relationship between two variables.³ If you’re working in manufacturing, for example, you could use correlation analysis to determine how changing processes in your warehouse would affect productivity.

Many business analysts use regression analysis to analyze factors that might impact a goal. It is commonly used to analyze complex topics such as customer behavior, trend forecasting, and financial variables.⁴

Once you’ve analyzed your data, you can use data visualization tools to interpret the results and make recommendations or business decisions.

Running a business comes with risks. Every time you start a business, launch a new product or pursue a new client, you could fail. Understanding what business analytics is and how to use it can help you with risk management.

For example, if you're operating a clothing store, you could benefit from using predictive analytics in your purchasing. To predict which items will be most popular as the season changes, you would analyze sales numbers from previous years to see which pieces had the highest sales volume. You would then compare this information with trend forecasts from retail analysts. With the data on hand, you would know how much inventory to order to fill customer requests without carrying excess stock.

As a business analyst in an existing company, you can use analytics to improve processes that may be costing your company too much. For example, if you work for a healthcare company, you might find that manual billing errors are causing multiple claim denials. You might recommend implementing software that automatically checks bills and flags them for errors before you submit them for payment. Doing so reduces your company’s claim denials and saves administrative staff time manually revising bills.

Business analytics tools can also help you identify market trends and develop new ideas for growth. For example, if you're managing a company that delivers groceries, you might determine that exurbs and rural areas are not currently being served. You could calculate how much it would cost to deliver to these customers and use the information to decide if you want to provide that service.

Data analytics helps you understand your customers and their preferences better. Informed by the data you gather, you can tailor the user experience for each customer.⁵

Learning about customer preferences informs your marketing campaigns. You learn about your best customers and how to market to them with messages that address their needs and concerns. Further, business analytics can help you understand which messages are most successful. This data lets you tailor your promotional materials to your audience via the marketing channels—social media, email, and so on—that they use most. If applied correctly, this business intelligence can help improve your sales.

You can also use business analytics to identify and mitigate risks. For example, your business analytics may show you that one of your shipping vendors is consistently late with deliveries. In this case, you might start looking for new vendors who can shorten your delivery times and improve customer service.

Business analytics also helps you innovate your products and services. As a business analyst, you can present your research and development team with customer needs and priorities. Your team can then use the data to create new products or improve existing products to meet these needs most effectively.

By definition, business analytics is the process of using data to make business decisions, so it’s not surprising that it has many applications.⁶ Multiple businesses use analytics to forecast trends, order inventory, and develop their marketing strategies.

In the healthcare industry, business analytics helps improve patient outcomes and reduce costs to service providers.⁷ For example, business analytics helps healthcare companies compare treatment types with patient outcomes to see which processes work best. Technology companies use data to improve diagnostic and treatment tools, improving patient comfort.

Companies in the finance sector seek staff with business analytics skills to assess businesses in multiple industries and determine which have promising futures. A business that looks like it is on the verge of success is worth investing in, because brokers or their clients stand to make money once the company reaches its potential. Financial advisors use this data to recommend stocks, bonds, and other investments to their clients.⁸ Others in the financial industry may use business analytics to find new startups or projects to support.

Coca-Cola uses analytics tools powered by artificial intelligence to assess social media mentions and photos, refining its marketing based on the customer insights this process provides.⁹ These tools help Coca-Cola understand which customers share their products online and why. They can then fine-tune marketing campaigns to generate more clicks and, ultimately, more sales.

Business analytics provides valuable information, but the process isn’t perfect. As a business analyst, your data is a limiting factor. Access to quality data is a necessity. That’s why it’s important to use multiple data sources and format all your information the same way before you run your analytical models.

Additionally, customers are concerned about their privacy. According to studies discussed in a 2023 article by the International Association of Privacy Professionals, nearly 70% of consumers want companies to protect their data.¹⁰ As a business analyst, you are responsible for collecting and using customer data ethically.

Artificial intelligence (AI) is one of the biggest emerging trends in business analytics, as seen in the case of Coca-Cola. Because AI can analyze large volumes of mixed data, companies use it to perform in-depth big data analyses. A human business analyst would spend weeks looking for every mention of “Coke” and its various products on social media, but AI can do it in seconds. Humans then interpret the data to identify the trends and convert them to recommendations.

AI is also helping business leaders understand other companies better: They can use data analytics on historical and market data to predict future behavior and develop other forms of business intelligence. AI can also help them monitor and choose their inventory based on what their customers want instead of making educated guesses and having to unload excess backstock at cost or at a loss.

The large datasets driving modern business analytics take up a lot of space on company servers. For this reason, many companies are using cloud-based programs and storage solutions for their data analytics.

Throughout this blog, we've explored how leading organizations use business analytics to uncover insights that drive winning business strategies. A master's degree in business analytics helps you build the skills to find and effectively harness these data-driven insights.

In the Online MS in Business Analytics at Santa Clara University Leavey School of Business, you will learn from industry leaders in Silicon Valley. Customize your degree to suit your career goals once you've mastered the core curriculum that prepares you to meet the challenges of the analytics field.

Connect with a network of accomplished faculty and peers, and prepare to lead in a data-driven world. Schedule a call with an admissions outreach advisor today to take the next step in your career.