Do you ever find yourself reflecting on the past before making a decision for the future? Now, this is what is referred to as data analysis. But, do you ever sit and think, why is data analysis important?
How would it be if we did not analyze data? In this guide, we’ll take you through the importance of data analysis.
So, let’s jump right in!
What is Data Analysis
In simpler terms, data analysis is the cleaning and transforming data to make meaning of it for decision-making. With so much data around us, there’s a need to analyze it to extract meaningful data.
For example, you’re running a business and later realize that you’ve been making losses for the past year. What will you do? The first option before you reorganize is to carry out an analysis.
Ask yourself, what happened last time? What did you do wrong? All the information that you gather from the questions gives you insight into the cause of the loss. The goal here is to gain insights before making a decision.
Importance of Data Analysis
Analyzing data is not as easy as it may sound. But, with a data analysis tool, you can analyze data patterns and get meaningful insights that you could easily miss.
There are several phases of data analysis. One of them is data visualization. The importance of data visualization is that it helps to transform data into charts, graphs and images.
Visualization plays a crucial role in data analysis. A data analyst gathers data, cleans it, and presents it in a visual format that the human brain can understand.
The visual formats can be charts, heat maps, infographics, tables, graphs, etc. So, is it necessary that we carry out data analysis in our day-to-day life? Let’s find out more?
1. It helps to understand your audience.
For a business, understanding your target audience is vital to your success. Data analysis helps to identify essential information about your customers.
The importance of data visualization is that it helps you represent the information in a visual format and get insights for decision-making. You can study what works for your audience, what they are looking for, and how your products and services impact your audience.
Remember, data analysis involves gathering data, cleaning it, and transforming it to make sense of it. It helps to understand your audience and attract potential customers to your business.
2. Make better decisions
By now, you understand that the main objective of data analysis is to get insights for decision-making. Data analysis and visualization are dependent on each other.
The importance of visualization is to represent the data you gather after a comprehensive analysis. You can present it in any visual format that works for you.
For example, a research institute will require past and current data to make future predictions. Data analysis makes sense of raw data, which drives decision-making.
3. Data analysis helps in problem-solving
How do you use data to solve a problem? The simple answer to this is through analysis.
It helps to look back and find out what has been happening for the last couple of years. Some of the issues can be easy to miss without proper analysis.
Data analysis helps to explore raw data to generate meaningful data. It helps to craft measures that prevent future problems that could be more destructive.
4. Keep track
Data analysis helps to keep track of data. It makes it easier for businesses to set a benchmark, create a business strategy, and set goals.
Keeping track can be tedious without data analysis. It helps you understand the different milestones covered and get insights into the future.
5. Data analysis helps to save time
Although the analysis process can be long, it saves you time when you’re making a decision. For example, an infographic summarises data by highlighting important information.
On the other hand, a pie chart or line graph compares different data sets, making it easy for the human brain to absorb and understand. Sankey Diagram can help you understand the flow of system. Scatter Diagrams are helpful to find relationships in data.
Making decisions from visual data is fast and effective. It saves the management time to analyze various data sets that could take weeks and months to uncover meaningful information.
6. Data analysis is more accurate
One of the reasons why you should consider hiring a data analyst is for accuracy. Earlier on in our definition, we mentioned that the purpose of analyzing data is to gain insights for decision-making.
Whether you’re an individual or a business, you need accurate data to back up the decisions you make. For example, you do not want to fund a project based on the wrong data.
Accuracy helps solve problems, make business goals, create business strategies, and identify weaknesses. Analysis reduces errors that could lead to more issues.
7. It eliminates guesswork
The first step in data analysis is to start by gathering data. Any information that is within your reach and niche can help in making an analysis.
Hence, it reduces guesswork and relies more on facts. Having solid data from factual data forms the basis of your analysis. In case of an argument, you have something to fall back to and provide evidence.
8. It improves your targeting.
Are you targeting the wrong market, audience, or fan base? Are you using the wrong forms of advertising? Your analysis results will guide you into making better targeting goals.
You make better decisions that improve your targeting goals and objectives. For instance, an analysis will help you understand why your PPC advertising is not delivering an ROI.
9. Identify your strengths
The importance of data visualization is that you identify your strengths by looking at the results. There’s so much consolation in knowing that your efforts are generating results.
For example, if you’re using a graph and notice the curve rising, it gives you an idea of what to maintain. Data analysis helps you make better decisions to continue delivering results.
10. Data analysis saves you money
An example is funding a marketing campaign that does not have a return on investment. After an analysis, you notice that you’ve been losing money.
You can work on new marketing efforts or change a marketing strategy. For a business, your goal is to maximize your reach and attract more customers.
11. Come up with new ideas.
Data analysis helps to generate new, innovative ideas that back up the existing ones. Individuals and businesses alike are looking for new ideas to stay on top of the competition.
Analysis helps to criticize the data, generate new ideas, or improve the existing ones. Everyone is welcome to take part in a discussion before arriving at a final decision.
As a business, for example, you can result in rebranding or change a product. Data analysis helps in discovering new opportunities.
The Bottom Line
Before you make changes to your existing plans, make sure that you carry out data analysis first. It helps to understand a problem and gather requirements based on the insights.
Data analysis helps to extract useful information and drive decision-making. The importance of data visualization is that it makes it easier to deliver data in a way that it’s easier to understand.
We all need data analysis in our daily lives. Whether you’re a business or an individual, you need data analysis to interpret information and increase productivity.