Merits and Demerits of Statistics in Business

Well, from this term, you can guess a little bit that it has something to do with analyzing statistics or data to get benefits in the business, right? Well, you’re not wrong actually. Statistics in business means the analysis of data and with those insights in hand, a business can very well make better decisions that’ll be the one thing that will drive growth, you know? But how is it done? Well, it actually consists of two steps, first one is data collection such as sales numbers or customer feedback, and data analysis which means looking for patterns or trends in the data. Now let’s understand the pros and cons of Statistics in a Business:

Merits of Statistics in Business

1. Get Inside Your Customers’ Heads

Can you even imagine what would happen if you knew what exactly your customer was thinking? Well, that would literally be revolutionary or something like that, don’t you think? The thing is, using statistics is just like that, well, you can’t tell 100% what your customers are thinking, but you can predict that for sure.

2. Spot the Trends Before They Hit

It is true that by using statistics, you can visualize data to see the trends in the form of graphs and charts. That way, you have a better look at the data on your own, and if analyzed correctly, you won’t have a hard time predicting things, so think about what data analysts can do with that information.

3. Make Smarter Decisions with Regression Analysis

Don’t know what regression analysis actually means? Well, let’s say you come to two decision or actionable plans with data analysis and statistical analysis, but now you want to know which plan will be more effective and have a greater impact. In that case, you mathematically sort out the best action plan. That right there is regression analysis, and it can only be done when you have proper statistics in your hands.

4. Know Your Customers Better with Cluster Analysis

Let’s start with an example, the retail company might take the data of the income of the household, the size of the family, and the profession of the head of the family. On this data basis, they can classify the consumers into groups such as ‘small family, high spenders’ or ‘large family, low spenders’. Now, the company knows whom to target, for example, if there is a small family that spends too much, the company can craft a message that specifically talks about small families that are devoted to brands to get them a coupon and boost their loyalty.

5. Stay Ahead of Risks

It sounds totally out of this world thing or something magical that there is a way to predict risks even before they can hit your business. Sure, there’s a way, and yes, we are referring to the accurate analysis of the statistics or data. It could be that you find a trend through data analysis that your sales are going down and there is a reason for that, which can very well indicate that there is a recession coming or something like that.

6. The Operational Efficiency Is Something To Talk About

You see, oftentimes it is the case that businesses tend to focus their analysis on the data derived from them, which helps to identify the areas that need improvement. One example can be found in a company that uses statistics in order to find out the best possible way to schedule the employees and manage the inventory, you know?

Demerits of Statistics in Business

1. Misreading the Data

The way data can be misinterpreted is one of the most important things to be aware of because it literally is one of the major disadvantages of using statistics in business. And how’s that? Well, in cases where the data is poorly analyzed, it can lead to the wrong conclusions and poor business decisions, and that is not a rare thing, to be honest. A good example of this is when a business does not fully understand what the data is actually showing, and with that, they go on to make some decision that completely backfires.

2. Numbers Aren’t Everything

If a business is too dependent on just numerical data, it may not take advantage of important qualitative insights such as customer feelings or motivations. It is true that the numbers you see on your screen or sheets are real, but those numbers can’t show how your customer feels before or after buying your product, right?

3. The Complexity and Cost

See, not every business out there can use statistics to their advantage, and there are reasons for that. Like it could be that the business is too small and they don’t have enough budget or resources to pull this off. If that’s the case, well, you can’t do much about it.

4. Watch Out for Data Privacy Issues

When working with large amounts of data, companies often take on sensitive customer information as well which makes them more vulnerable to breaches of privacy, and it has happened so many times that the customer data leaks out there, which then becomes a huge problem or the business because now they have to answer to the authorities as well as customers. So make sure, when you are dealing with data, you are handling it right and taking care of the security side of things.

5. Bias Is Kinda The Hidden Danger

By incorrectly conducting surveys or misinterpreting the data, biases can impact statistics. And as a business owner, if you aren’t even aware of these biases, you’ll have a hard time figuring out where things are going wrong, especially when the discussion is about the most important decisions for the business.

Comparison Table for Merits and Demerits of Statistics in Business