In the dynamic world of startups, the ability to collect, comprehend, and utilize data can give you a competitive edge. Data can offer valuable insights into various facets of your business, from sales and operations to marketing and human resources. Leveraging data-driven decisions can lead to cost savings, enhanced productivity, revenue growth, and a personalized customer experience.

Even in the early stages of your business, when data might be limited, having the right systems in place can enable you to utilize historical data right from the inception of your business. This approach can help you establish a data-driven culture from the get-go.

Data can shed light on both historical and real-time performance across different areas of your business. For example, understanding historical sales trends and associated factors (like marketing promotions, seasonal variations, etc.) can guide your sales decisions. Moreover, data can enhance cash efficiency by providing insights into economic measurements like cost drivers and price fluctuations, leading to better returns for both the company and its investors.

The Power of KPI Trees

The type of data you need to drive decisions depends on your company’s goals. To identify the data you need to collect and analyze, you can create KPI Trees for each business objective. A KPI Tree is a tool that breaks down business objectives into detailed components, allowing you to track everything that influences a main business objective and understand their interrelationships.

Steps to Create a KPI Tree:

1. Identify your business objectives (e.g., increase profit).
2. Determine the primary KPI that aligns with each objective (e.g., total profit).
3. Break down the main KPI into metrics that cause this KPI to fluctuate (e.g., revenue minus costs).
4. Further divide all of the metrics into their components (e.g., costs can be broken down into variable and fixed costs).

Steps to Create a KPI Tree:

1. Define your business objectives (e.g. increase profit)
2. Determine the main KPI that best aligns with each objective (e.g. total profit)
3. Subdivide the main KPI into the metrics that drive this KPI to fluctuate (e.g. revenue minus costs)
4. Subdivide all of the metrics into their components (e.g. costs can be subdivided into variable and fixed costs for instance)

Data Driven Marketing Decisions

Data can be used to make informed decisions throughout the marketing funnel: awareness, evaluation, purchase, and delight. Most companies focus their efforts on the purchase phase to acquire and retain customers. However, data can be most effective in building brand awareness.

Brand Tracker Survey: A Tool for Data-Driven Marketing

A Brand Tracker Survey is a tool that can help you track your brand’s awareness and sentiment. This survey should be statistically relevant and include both customers and non-customers to gain insights into potential future targets. The survey should cover demographics, attitudes, behaviors, brand awareness, and brand attributes.

To gather the necessary data to answer these questions, various tools can be employed, including surveys, focus groups, and sales data, among others. These methods enable you to collect insights that inform your understanding of the audience’s preferences, motivations, and receptiveness to your brand messaging. By leveraging data in this manner, you can refine your marketing strategies and tactics, ensuring alignment with your brand’s core pillars while effectively reaching and engaging your target audience.

The Role of Intuition and Creativity

While data can guide you towards answering parts of your questions and hypotheses, your intuition and creativity are crucial in making the final decision. As Jeff Bezos, the founder of Amazon, famously said, “Make decisions with 70% of the information that you wish you had.” This approach becomes increasingly effective when you evaluate the efficacy of the data used in previous decision-making and continuously refine the process.

This post was written by Jeffrey Camp, CFA