Home / Blogs / Startup Business / The Power Of Analytics For Start Ups Part 1



The power of “Analytics” for Start-ups (Part -1)

03, August 2016 | Prashant Mehta

(This is Part 1 of the whole article)

Startups particularly those which are in the e-commerce sectors are usually seen to avoid “measuring analytics”
Let us understand more on this.

1. What is “Analytics”?

In simple terms, analytics is the scientific and logical analysis of data or past trends to predict future outcomes.
Analytics is used to get actionable insights of the business which is then used to make strategic business decisions.

2. Why is Analytics Important?

Analytics helps to understand what is working and what is not in your business.

It answers simple and logical questions like:

How much are you earning per customer?
How many of your social media followers or website visitors are getting converted into customers?
Which social media campaigns are getting you maximum people and conversions?
What is the burn rate on your marketing spending?
Which product or service on your website is getting the most clicks from visitors?
Which customers are returning to visit your website?
Who are the highest paying customers?
Which location is resulting in the highest sales?
What are the demographics of your top customers?
(Demographics means age, gender, occupation, education, income level of your customers)
Let us take a real life example:

If you are operating an online fashion store. You allocate 50%, 30% and 20% of your marketing budget to Facebook (1000 fans), twitter (700 Tweeples) and Instagram (500 followers) respectively to run an online campaign.
The percentage of allocation is based on the assumption that more the number of followers, the higher the possibility of conversion rate on that social media platform from “followers to actual customers”.
Post campaign analytics revealed that Facebook, twitter and Instagram yielded a conversation rate of 35%, 15% and 50% respectively.
Now, you know which social media platform brings the most conversions and how to allocate your next marketing budget. That's the power of analytics.

Analytics and Metrics
Technically, metrics are a standard of measurement.
Metrics help you to count and track how accurately your business processes are functioning.
Analytics will draw insights from these metrics and forecast future trends.
For example:
How many customers uninstalled your app is a metric.
But, the answer to why customers uninstalled, can be derived from analytics.
The answers to “How” will be given by “Metrics” while answers to “Why” will be given by “Analytics”

Analytics are very useful in understanding the following metrics for all startups:
Gross margin
Cost of customer acquisition
Lifetime value (retention and loyalty)
Cash and customer churn
Burn Rate
Operational productivity

Stage of the Startup is important in Analytics
Stage 1: Initial Stage
If your start-up is in the initial stage then you must focus on analytics that measure engagement.
How many users / customers / visitors actively engage with your product or service on daily / weekly basis?
You will have the count of the number of clicks, visits, registrations, subscriptions or downloads.
But, you also need to know whether they are deriving any significant value from it. If a user registers on XYZ website, but doesn't buy or sell even once, there is no engagement.

Stage 2: Growth Stage
If your startup is in the growth stage then you must start using analytics that show whether there is an increase in the number of users / customers / visitors on weekly / monthly basis.
If yes, how many of them are repeat customers/visitors/users?
You also try to find out which feature of your product is a hit with them.

Stage 3: Maturity Stage
If your startup is in the maturity stage then you must start using analytics that measure unit economics and Net Promoter Score (NPS).
It should tell you what you are earning and spending per transaction or user, and which customers are loyal to you.

(In part 2 of this article, we will read about some of the key tools used in analytics by well-known ecommerce companies)


[email protected]
Visit us at www.altsmart.in
India's only information website on Alternative Investment Funds

Nucleus House, Saki Vihar Road, Andheri (E), Mumbai - 400 072.


I am Interested because...