- Business intelligence (BI) analysis need to use data skills and business knowledge & intuition. A good business intelligence analyst does not look at a problem from only one angle. The job of a business intelligence analyst is an important and interesting one. It is a job that requires her to understand the essence of a business and strengthen that business through the power of data.
- How do we measure business performance. We start by collecting observations. For instance you can observe variables such as sales volume or new customers who have enrolled in your web site. Each monthly revenue or each customer is considered a single observation. However, no mathematical manipulations can be applied to these observations. What we must do is quantify that information.
- Quantification is the process of representing observations as numbers. For instance, you can say your revenues from new customers for January February and March were 100, 120 and 130 respectively while the corresponding number of new customers for the same three months or 10, 15 and 25.
- Measure: it is the accumulation of observations to show some information. For example, if you total the revenues of all three months to obtain the value of $350 that would be a measure of the revenue of the first quarter of that year. Similarly add together the number of new customers for the same period 50 and you have another measure.
- Metric refers to a value that derives from the measures you obtain and aims at gauging business performance or progress to compare. If a measure is related to something like simple descriptive statistics of past performance. A metric has a business meaning attached. Metric = Measure + Business meaning. For example, if you estimate the average quarterly revenue per new customer which equals 350 divided by 50 that is 7. This is a metric. Once again it is not just a number but a number that bears a business meaning metrics are very useful for comparisons. For instance, you can track the average quarterly revenue per new customer every three months and thus compare your customer retention and spending every quarter. In a nutshell, your observations lead to measure and your measures are used to create your metrics. You metrics have business applications. However, in a real business where the number of observations is significantly larger you can derive hundreds or sometimes even thousands of metrics. Can we keep track of all possible metrics we can extract from a data set?
- KPIs = metrics + business objective. KPI is key performance indicators. Key is related to your main business goals. Performance because they show how successfully you have performed within a specified time frame. Indicators because their values or metrics that indicate something related to your business performance.
- For instance, a metric could indicate the traffic of a page from your Web site that was visited by any type of user. KPI instead would show the volume of the same traffic, however, generated only from users who have clicked on the link provided in your ad campaign. Thus you could check if the ads you have sent are a source of motivation for your customers to click on the provided link and get to the specified page of your website which will determine whether you will continue to spend on ads or not.
- A KPI can be best defined as a metric that is tightly aligned with your business objectives.
- BI can be used for price optimization hotels use price optimization very effectively by raising the price of a room at periods when many people want to visit the hotel. And by reducing it to attract visitors when demand is low they can greatly increase their profits in order to competently apply such a strategy. They must extract the relevant information in real time and compare it with historical. BI allows you to adjust your strategy to pass data.
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