What Is Data Analysis?

by Neil Kokemuller ; Updated September 26, 2017
Businessman in front of computer

Data analysis involves digging through information to identify predictable patterns, interpret results and make business decisions. Software solutions often are used to perform efficient and optimum data analysis. Companies use analysis in areas such as strategic management, marketing and sales, business development and human resources.

Strategic Management

Company boards and executives meet periodically to develop forward-looking goals and strategies. Data is analyzed to ensure that goals and strategies are quantified, consistent with the company's current situation and based on business intelligence and not hunches. For leaders to establish a goal of increasing market share by 5 percent within two years, company revenue data is compared with industry revenue data to identify the current market share. Market share trends and projected revenue data are helpful in setting reasonable goals. Companies also analyze competitive data, such as revenue, profit and market size, to identify favorable strengths to leverage in planning.

Marketing and Sales

Marketing and sales functions are heavily driven by data as of 2015. Software programs are used to gather and evaluate market research. Companies use data to become more familiar with characteristics of target customers. Target, for instance, tracks all demographic data, such as age and gender, along with transactional behaviors of its customers through an individually-assigned "Guest ID". Tracking these details allow for highly targeted direct mail or e-mail promotional campaigns.

The prominent business marketing system, customer relationship management, is also built on data-driven software. Marketers use profile data and behavioral transaction histories to find activity patterns. Such patterns are used to target the right customers in the right way with promotional materials. This helps enhance sales and service activities. Salespeople use CRM to better manage ongoing interaction with prospects and customers, and to keep notes on core customers.

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Business Development

Business development applications with data analysis are closely tied to marketing applications. Retailers, for instance, often analyze customer data to figure locations for new stores. If an existing location attracts significant traffic from a 45 to 60 mile radius, for instance, the company may add new stores in nearby cities to cater to larger portions of those markets. Companies may diversify product mixes in certain categories by identifying which types of solutions appeal most to their highest-valued customers. Surveys often are used to gather and interpret data from customers about their preferences.

Human Resources

Data analysis is also used in human resources since it is more of a strategic process than business function. HR professionals use data analysis software for talent management, which involves projecting employee needs in different departments and positions in line with company goals. Data analysis also is used in employee evaluations and goal-setting. Customer service workers often are given customer satisfaction ratings. If the company determines that the average rating is 92 percent, it may establish training and development plans to raise the average to 95 percent within three months. Also, workers who achieve scores over 95 or 96 percent may receive bonuses or other incentives. Data-driving scoring systems are also used in promotion decisions, at times, to ensure objectiveness. HR departments track employee turnover and retention rates as well.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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