How Startups Should Leverage Digital Analytics in a Recession
Today, Adam Greco, Product Evangelist at Amplitude, explains the importance of digital analytics, data and simplifying strategy for startups.
As product evangelist at Amplitude, a leading digital analytics platform, I have the opportunity to work with a lot of organisations to help them understand how to build better products, personalise their offers to customers, and make smarter product investments. What this all ultimately boils down to is behavioural data and how organisations track, analyse and leverage it.
As we enter into what could be a prolonged economic downturn, companies are, understandably, fearful. A third of UK consumers are buying less in this current economy, and individuals and businesses alike are being impacted by surging inflation, which has reached a 40-year-high of 10.1%. With so much uncertainty, leaders must prove the return on all of their investments — and this is where digital analytics comes in.
In this article, I’ll offer startup leaders some advice on how to be smart about their digital analytics strategy to cut down costs and improve revenue.
Digital analytics as a profit centre
When growth slows, one of the best ways to accelerate it is to leverage data to optimise digital properties. Oftentimes, data is the key to identifying ways to improve conversion rates or increase revenues. While many things can be cut during a downturn, I have rarely seen an organisation throw out its digital analytics team or platform in response. Many startups today incorrectly treat digital analytics as a cost centre within their organisation. They view digital analytics software and teams as something a company just has – like desks, computers, and phones. It is simply part of the cost of doing business. However, digital analytics should instead be viewed as a profit centre, and an economic downturn is a great time to shift this mentality.
Yes, it can be a difficult time to get buy-in for new investments. However, investments in your product are money that compounds over time. If implemented properly, investing in digital analytics should help organisations cut some existing costs while also increasing revenue. Regardless of what stage a startup is in, digital leaders should be able to show specific examples of how data was used to improve the organisation’s bottom line. If an organisation isn’t already tracking how digital analytics data and the resulting analyses are contributing to the bottom line, then it should use this downturn as the reason to start doing this right away. Using a profit centre mindset will also help digital analytics teams avoid low-impact projects and requests over time.
Focus on the data that matters
With so much data created by digital products, it can be overwhelming trying to understand where to focus. Despite how much data an organisation collects, there are likely only a handful of metrics that matter when it comes to saving or making money. Startup leaders need to take a step back and think hard about what data is critical to the success of their business. Startups in the retail space might focus on cart conversions, for instance, whilst technology startups may want to focus on free-to-paid conversion rates.
It’s not enough to know what metrics to track. Leaders must also know the ones to skip. Vanity metrics – like page views and clicks – lack context, have unclear intent and do not guide action and learning. Vanity metrics put optics before rigour, learning, and transparency. The metric or outcome may be heralded as a win, but often, things don’t add up. For instance, looking at an increase in the amount of time people are spending on a startup’s website doesn’t necessarily signal an increase in buyers – and the lack of context can lead to inaccurate attribution.
Simplify the strategy
It’s easy in a down economy to try and fix a series of little things. However, organisations must simplify their overall strategy, especially when they don’t have extra money to invest with. It’s very common for companies to have more than one analytics platform. But during an economic downturn, this should be streamlined. There’s the obvious cost-benefit of not paying for multiple providers, but it’s much more than that. Having multiple platforms presents several challenges. It makes it near impossible to see the entire customer journey experience, for instance, as it’s hard to recreate customer journeys that have been split across different platforms. Delivering personalised experiences also becomes a challenge without a unified customer profile, and with personalisation being a key differentiator for brands, this should be a major red flag.
Consolidating down to one platform will help solve many of these challenges. While there is no perfect platform, businesses must think about what is important to them and choose a platform that fulfils their needs. With one platform, startups will be able to unify data, empowering them to map out the customer journey and build more personalised experiences. Another benefit of using a single platform is that it will also save digital analysts from having to learn to use multiple products, freeing up their time to focus on analysis that drives business outcomes and success. In general, time will also be saved by using one platform. Rather than spending time trying to reconcile data across different platforms, the analyst or a few analysts can get straight to leveraging data and drawing insights to inform key business decisions.
Economic downturns can create stressful scenarios for startup leaders. But if there is a silver lining it is that they force leaders to focus on what is most important to their businesses.
My advice to startup leaders?
Take advantage of this time to focus on what matters most to your organisation. This focus will not only help your organisation make it through leaner times but will also orient your business around your money maker — your product — to promote long-term differentiation and growth.