https://www.coursera.org/learn/analytics-business-metrics
What are Business Metrics?
What a business analyst or business data analyst do? To find out the right question to ask. Then, find the best answer you possibly can in the time, and with the resources available. the answer has a practical impact by translating it into a specific call to action. A specific recommended action, communicated to the relevant decision-makers. Using visual metaphors and non-technical language.
What is always the right question? What change, in our business processes can and should we make right now?
AB testing. Creating two different versions, A and B, and comparing which performs better.
Metrics are special numbers that help us to ask and answer the right business question. Metrics are numbers that we can impact when we change our business processes.
Traditional and Dynamic Metrics
Traditional business metrics include standard financial and managerial accounting categories. are impacted by dozens of different factors, many of which are completely outside the control of our business.
Dynamic Business Metrics: what change in our business processes can we make right now to increase revenues, maximize profitability, or reduce risk?
Changes significantly over intervals of a month or less? Specific actions the company can take that can significantly impact the metric in the short term?
announcing all your bad news at once is often a good business strategy.
Small changes in process, in our process, can lead to a big impact. F/E：page load time- if > 3 seconds 40% of web users will abandon completely. - Do load time performance testing for mobile devices.
Case Study for Financial Accounting Metrics: Cash flow and profits are concepts that are so distinct that corporate financial reports discuss them separately. A rapid growth scenario can actually be very dangerous in terms of cash flow even if it's fine in terms of profits. A Profitable, Growing Company can go Bankrupt. Unprofitable companies can survive and thrive for years or decades. Take Amazon, for example.
Revenue, Profitability, and Risk Metrics
Revenue metrics relate to sales and marketing. -outward-facing
Enterprise sales are expensive to do and therefore the payoff for each enterprise sale must be large. correct decision maker/budget/possibility/negotiate/"a soft circle sale"/actual official binding contract sales - that's when you book the revenue for financial accounting purposes
Computer sales
revenue metrics are for optimistic extroverts, profitability metrics for fastidious perfectionists, and risk metrics for informed skeptics.
Amazon.com as a Leading Example of Use of Dynamic Metrics.
the first step is using the thesaurus of synonyms to retrieve the most relevant categories in Amazon's own subject index. The second step involves identifying the best-selling books within the subject subcategories my search terms fit best. It is these best-sellers, weighted by their topical relevance, that Amazon displays to me.
Co-occurring sales is obviously a very important dynamic metric to Amazon:
Amazon's first line of promotion is the profit-maximizing frequently bought together metric.
The second metric is a kind of recommendation engine.
The third metric is a recommendation based on the purchases people made who looked at but did not buy the first book.
Frequently bought together book offered is chosen through A/B testing experiments by Amazon who has created best upsell revenue potential in the frequently bought together marketing slot.
Profitability(Efficiency) metrics to efficiency and logistics, production, and operations.
Inventory Management: inventory time should be minimized: negative float/ cost of storage/ wastage or obsolescence.
track inventory turnaround and days inventory at the individual product SKU level. analysis by geographic region of the country and by individual store.Each product SKU has its own expected days inventory, adjusted for region and seasonal factors using a mathematical model that helps determine how much shelf space should be allocated to it.
the number of times inventory of any particular SKU reached zero metric.
a hotel room typically has at least three potential prices for each night.
A rack, or listed rate, the floor rate, and an intermediate promotional rate
Only the floor rate is constant. The listed and promotional rates vary by day of the week and by the season of the year. So in theory, a hotel could rent the same level of rooms in one year for over 1,000 different prices.
Risk metrics to risk management, and are widely used by a company's creditors, and outside investors.
a successful example of risk management using big data in the product recall space is Costco's rapid response to product recalls. track down the source of contamination
Week2:
Business Data Roles: "Business Analyst" "Business Data Analyst" "Data Scientist" "Senior Software Engineer"
1 Identify critical business metrics (will be industry-specific)
2 Find and apply appropriate models for each metric
3 Evaluate the effectiveness of models used
4 Interview "clients" to define project requirements ("client" may be internal to the Corporation)
5 Excel skills - import data sets, run analyses, and display results using charts and graphs
6 Presentation Skills - effective verbal and written communication skills
7 Data Visualization Skills with Tableau
8 Able to identify new ways to combine business data to achieve business process improvement
9 Ability to "pull" needed data and recombine it using SQL Queries
organized all companies into five groups. ranked from least to most reliant upon proprietary software intellectual property for their business advantage.
In other words, they are ranked from most likely to least likely to be hiring for entry-level business analyst positions, as opposed to be hiring for more technical software development roles.
1. traditional strategic business consulting firms. Their business model is that they are paid for advice.
2. Traditional businesses in all market sectors: bricks-and-mortar companies
3.strategic business consulting firms that also recommend business process changes, but they specialize in building or installing custom software systems to implement their recommendations.
4.hardware and software companies
5.digital companies compete primarily against players in traditional markets. the heart of their value proposition is business analytics.
20-item checklist for evaluating a business.
1. Mobile-optimized version for web site (responsive design). Worldwide mobile loading times under 2 seconds. If High traffic from remote locations, uses Content Delivery Networks for Edge-Caching for rapid page-load times. Direct purchase available from Android and iOS applications. (For products and services)
2. Web site visitors' full click-stream is recorded for later analysis. (For products and services)
3. Visitor "Conversion" on web site is tracked at two levels - voluntary registration and first sale. (For products and services)
4. Ongoing program of A/B testing of web site features and text to optimize conversion rates and revenues. (For products and services)
5. Achieve and maintain high Google Ad Rank (ad content and web site landing page text factual and relevant to AdWords). (For products and services)
6. Realistic Estimates for FLV (Future Lifetime Value of a new customer), click-through rates, and conversion-to- revenue rates permit setting an upper bound on profitable Max CPC (Cost per click-through) to bid for AdWords. (For products and services)
7. Meaningful incentives for customers to interact with company online between store visits. An example would be targeted promotional offers specifically for those who register online. (For products and services)
8. Web site shows accurate local store inventory with images and prices. (For products only)
9. Customers can order-ahead online and pick up at the most convenient physical store. (For products only)
10. Collaboration with third-party shopping and delivery services to allow same-day (or faster) door-to-door delivery of online purchases. (For products only)
11. Service (such as evaluating credit and making a loan) is completed as fast or faster than online competitors. (For services only)
12. All interactions with a single customer - web visits, purchases at the SKU level online or in store, support calls and complaints, returns, etc - are stored in a common database and available for just-in-time viewing by Company representatives when talking to a customer. (For products and services)
13. Company has developed a paid recurring-revenue "membership" program that is attractive to a significant portion or to all customers. Examples, Mandatory Costco Membership, Amazon Prime. (For products and services)
14. Point-of-sale customization. When completing a purchase, customers are offered coupons or other incentives to purchase again in future - and offer is customized based on their unique purchase history. (For products and services)
15. Special programs to distinguish, reward, and retain the highest-level recurring revenue customers - "Whales" as they are called in the gambling industry. (For products and services)
16. Track churn rates and have a program to contact former customers who have "gone quiet" and are potentially lost - and provide incentives for them to return. (For products and services)
17. Track all SKU deliveries and sales patterns at the individual store level to prevent excessive days inventory. (For products only)
18. Track all SKU deliveries and sales patterns at the individual store level to identify "zero-inventory" items and avoid the opportunity cost of lost sales. (For products only)
19. Use a model that modifies inventory levels at the store level by region, season, and day of the week to optimize days inventory against opportunity cost. (For products only)
20. Offer effective price reduction and last-minute promotions to established customers to clear any inventory - such as hotel rooms and airline seats - that would otherwise expire worthless. (For products and services)
Web Marketing
should try to identify a much smaller group -demographic categories
AdWord Metrics：
acquisition cost for new customers=actual cost per click/conversion rate
cost of customer acquisition should less than the first year's lifetime value not LTV
When we segment our customers into groups and identify common characteristics, so we can figure out what kind of visitors later become our best customers and focus on attracting more like them, we're engaged in a fairly sophisticated form of segmentation. Where did a visitor to our website come from? what kind of devices? new or returning visitor? location? behaviors on the website: clickstream.
Organic traffic is the traffic that comes from accessing the site from visitor searches on Google, Yahoo, Bing, or other search engines. It is that traffic that you get “naturally” and most desired of all.
SEO:
Make sure our content is current, substantive and directly relevant.
Increase links to our website from all possible third-party websites.
Get third-party websites with authoritative reputations and substantive.
opinions to mention us and provide a link to our website.
Increase our “social signal” by increasing our Facebook page “likes” and retweets.
Financial Services Metrics(Money Management and Investing)
continuously compounded return (use Ln) or discreet method(use power 1/n)
IRR
volatility leverage: Sharpe ratio =(return rate - risk-free interest)/volatility
index fund managers. mutual fund managers.venture capital and private equity investors. hedge fund managers.
Venture Capital and Private Equity Fund investors make commitments to provide a certain total amount of cash over the 5 to 7 years “life” of a typical fund, rather than collecting the money upfront.
Hedge fund investors typically want the hedge funds performance to have low correlation to the major equity markets to target the highest possible risk-adjusted return on their combined portfolio.
15.
a key metric for hedge funds is the maximum drawdown from high water mark: maximum drawdown from high water mark is years to break even.
Assignment: A Business Case Study
Facts:
U.S. national chain of frozen yogurt stores
500 stores in 40 states
visitors per store has held constant
revenues per store are down 10%/no longer profitable
**= amount per purchase decreased by 10%
inventory is being thrown away unused
yogurt flavor posted on the menu customers want is often not available - inventory control
*inventory control and supply are not accurate.
stores closed when customers visit
increased competition from frozen yogurt sold in 24-hour grocery stores
Recommend business process changes to increase revenues and profitability
Data available:
4 years of cash register data for every store for each transaction, the date and time of the purchase, the specific items purchased, and the sales price of each item purchased.
4 years of delivery data that lists how much of each kind of yogurt mix, flavoring, and topping was delivered to each store each week.
Typical accounting data: annual revenues, annual cost of goods sold, in-store inventory on hand at the end of the year.
Question 1:identify one business metric from the available data
The average revenue per store
Question 2:For the identified metric, state whether it is a revenue, profitability or risk metric.
It is a revenue metric.
Question 3:Identify the metric as traditional or dynamic. Explain why you classified the metric as you did.
it is a traditional metric.revenue is included in standard financial and managerial accounting categories. it is impacted by dozens of different factors, which means it is not possible to know the reasons and how to take action base on the metric itself.
Question 4:Which of the data available in the case study would be used to derive the metric you have chosen?
1. Annual revenues vs cash register data. I would check/sum those transactions to check the difference between revenues in total, per stores, months. If there are big differences, investigate why?
2. Use cash register data to check which product are or are not popular in different areas/ seasons/ time, deeply investigate the reasons.
3. Use cash register data compare all different products (if the number of products is not too many) same periods previous years may be in different areas/ different types of stores to see popularity changes in products (including flavor, packages, size)and invest why. This helps for designing popular products and maybe a different way to provide the service.
4. Delivery data vs different product sales (come from cash register data): check the wasted amounts, this includes waste during operation and due to inventory expired. Invest who, and how orders of delivery were decided. Can select some stores (with best or worst revenue or profit, different area(countryside, west or east, etc.))
5. Investage the inventory data in part of stores: (A) check what products were sold out frequently, (B) check the inventory level in every product, in different months/ day or a week. 3 and 4 can help to optimize the ordering, delivery and inventory control.
6. Annual cost of goods sold against annual revenues: see how and why the cost of sales change. This leads to seeing what facts increase costs and how to lower them. Along with 2 can lead to adjusting the production lines (maybe stop produce some products with a high cost and low sales(in different areas and for different seasons))
Question 5:Propose a type of relevant business process change that would be supported by the metric you have chosen. Explain why and how your chosen metric relates to your recommended business process change.
It says that currently, inventory is being thrown away unused and also some yogurt flavors posted on the menu and customers want are often not available, which leads to cost and revenue lost /customer dissatisfaction respectively, shows there are defects in sales inventory control: order, storage, delivery process.
One single process we want to change is what amount/mix the order should place every order period (let's assume it is every Monday and Thursday). Assuming the figures of the order comes from the manager of a store using their experience and personal judgment.
I can design a calculation modeling system to forecast numbers for the future orders of each store, based on the historical (same period last year) and recent cash register data (including trends) of the store and other stores in the same area.
The model can be improved or trained more and more accurately, based on future data, using either human's continuous adjustments or a computer algorithm.
The benefits include:
All store managers can have a reference for placing an accurate order, which leads to a minimum chance of costs due to food expired and out-of-stock.
Can help head or regional management team supervise the orders from each store (for example, a store manager can make mistakes in numbers). Arrange materials purchasing, manage cashflow and market champagne, etc.
Help the production sectors (the factories) make decisions in labor, material preparation, delivery, etc.
Remember, an effective metric is one that is directly related to the business process being examined. As such, the metric can be used to help identify a business problem to be addressed with a business process change, and later can also help determine if the implemented change was successful (through seeing if the changes in the metric are in the direction you would expect after implementing the business process change).