- IMD Business School
Digital transformation

Descriptive analytics: importance, benefits, & example

Published: January 2024

Have you ever wondered how businesses make sense of the mountains of data they collect daily? The secret lies in the realm of data analytics, where one type of analytics – descriptive analytics – transforms raw data into invaluable insights.

In this article, we’ll explore the importance of descriptive analytics, examine its remarkable benefits, and showcase real-world examples of how various industries use it successfully. 

Prepare to unlock the mysterious world of descriptive analytics and explore how it could elevate your business. By the time you finish reading, you’ll be armed with the knowledge needed to harness your data and steer your organization toward greater success.

  1. What is descriptive analytics?
  2. How descriptive analytics can help your business?
  3. What are some data analysis and visualization techniques to try?
  4. How do you apply descriptive analytics in action?
  5. How can you drive better business decisions with data?

What is descriptive analytics?

Descriptive analytics is one of the foundational aspects of data analytics that transforms raw data into easily understood patterns, trends, and insights. It’s a prime example of data aggregation that uses business intelligence and data science. This analytics process focuses on giving decision-makers an overview of historical data and an understanding of how certain events or actions unfolded. 

Unlike predictive analytics or prescriptive analytics, descriptive analytics isn’t about predicting future outcomes or recommending a course of action. Instead, it gives you a clear snapshot of past data so you can understand the key factors that contributed to specific situations.

Now that we have a basic idea of what descriptive analytics is, let’s dive into its purpose. Imagine having a massive amount of data and trying to make the most of it – descriptive analytics works to present the data required in a more digestible format. 

Organizations can then spot important developments, challenges, and opportunities that can shape future strategies and improvements. They can also leverage these insights to monitor key performance indicators (KPIs) and assess how well certain initiatives are doing.

How descriptive analytics can help your business?

Let’s go over how descriptive analytics can help your organization.

  • Enhancing business performance: Descriptive analytics helps businesses identify data trends and patterns. For a simple example, let’s imagine a clothing store tracks past sales metrics to notice that jackets sell like hotcakes during the fall.

This insight offers the business an understanding of customer behavior, which ultimately helps it develop targeted marketing strategies, increase sales, and boost performance.

  • Leveraging historical data: One of the most powerful things about descriptive analytics is its ability to give meaning to historical data. Businesses can use past data to gain insights into the root cause of what shaped their current situation. For example, take a company that uses AI, machine learning, and descriptive analytics to analyze historical sales data and customer demographics. 

This analysis can deliver tangible benefits for demand forecasting. By understanding patterns in previous sales, the company can better predict future product demands and adjust its inventory accordingly. This helps the company avoid excess stock, minimize waste, and improve its bottom line.

  • Improving communication: Descriptive analytics can work wonders when it comes to packaging complex data into something easily digestible. Let’s say a team leader wants to share information on project progress with their team and stakeholders. 

Using descriptive analytics, they can convert that raw data into visually appealing charts or graphs. This helps ensure everyone gets the picture without swimming through a sea of numbers, making communication much more effective and enjoyable.

  • Enabling data-driven decisions: Lastly, descriptive analytics empowers businesses to make well-informed decisions by providing solid data. Imagine a restaurant owner examining customer reviews to gauge a dish’s popularity. 

Descriptive analytics could highlight patterns and trends, such as a specific dish receiving rave reviews or another with less-than-stellar ratings. The owner can then decide to promote the popular dish or improve the one that’s not performing well. This data-driven approach enhances decision-making and increases the chances of achieving business goals.

What are some data analysis and visualization techniques to try?

Now, we’ll explore some data analysis and visualization techniques that are at your disposal thanks to descriptive analytics. These analytics tools help paint a full picture of our datasets while keeping them interesting and easy to understand. 

  • Data mining: Data mining is essentially treasure hunting in the world of data analysis. As a descriptive analysis technique, it involves sifting through large data sets to identify patterns, trends, and correlations that tell an informative story behind a given situation. 

Data mining helps businesses make sense of their data by uncovering those valuable nuggets of information hidden beneath the surface.

  • Charts and graphs: A picture is worth a thousand words, and that’s especially true when it comes to presenting data. Line graphs, pie charts, and bar charts all help communicate complex data in a simple, visual format. 

Charts and graphs make it easier for businesses to quickly identify trends or anomalies, so stakeholders can grasp the information and act accordingly, or get on board with new plans and proposals.

  • Visualization tools: Tools like Tableau take data analysis and visualization to the next level. You can use intuitive drag-and-drop interfaces to create eye-catching visuals that really bring your data to life, even if you don’t have graphic design or coding skills. 

And the best part? These tools save you a ton of time and effort compared to wrestling with Excel. Advanced visualization capabilities let you explore data from multiple angles, identify hidden patterns, and tell a compelling narrative.

  • Dashboards: The days of flipping through countless spreadsheets are behind us. In the realm of descriptive analytics, dashboards offer a one-stop shop for all your key metrics, attractively displayed in real-time. They consolidate and present important data in a way that’s engaging and easy to understand. 

Customizable dashboards tailored to specific roles or goals enable stakeholders to quickly gauge the performance of various business aspects. This accessibility supports faster decision-making and keeps everyone on the same page.

How do you apply descriptive analytics in action?

Let’s take the magic of descriptive analytics from theory to practice. We’ll explore a few real-world examples of descriptive analytics in action to help you get the hang of it. These use cases show the power of descriptive analytics and how it can help your business flourish.

Gaining customer insight

Businesses must understand customers’ preferences, habits, and behaviors to truly connect with them. Descriptive analytics lets you analyze data from sources like customer reviews, purchase history, feedback forms, and surveys. 

Identifying data trends and patterns equips you with valuable insights that enable you to tailor your products or services to customers’ needs and preferences.

Monitoring business performance

Keeping tabs on how your business is doing is essential. Descriptive analytics allows you to track various metrics and key performance indicators (KPIs), giving you a clear picture of your business’s health. 
For instance, you can analyze sales trends to determine which products are most popular, or dig into website data to identify areas needing improvement. Knowledge is power, and these insights help you make data-driven decisions that can boost performance and help your business grow.

Improving marketing campaigns

Descriptive analytics can help you optimize your campaigns by analyzing data points, such as social media engagement, email open rates, or number of subscribers. By understanding what works well and what doesn’t, you can tweak your strategies and allocate resources more efficiently. 

For example, Australian-based swimming pool builder Narellan Pools experienced a decline in sales and knew they needed a targeted marketing strategy. So, the company compiled and analyzed five years of marketing data and used the insights to drive a 23% increase in sales in one year, spending only 70% of its media budget.

Supply chain management

Optimizing supply chain efficiency is a big win for businesses (think synchronized inventory control, reduced lead times, and seamless logistics). Descriptive analytics can help you achieve this by analyzing data related to supplier performance, inventory levels, and transportation. 
These trends can help you identify bottlenecks or inefficiencies so you can take timely steps to improve your overall supply chain performance.

How can you drive better business decisions with data?

Descriptive analytics helps businesses better understand their customers, improves workflows, fine-tunes marketing campaigns, and has the power to totally transform decision-making for the better.

As we step further into the age of data-driven decision-making, businesses should make the most of descriptive analytics to stay competitive and agile amidst changing markets. Mastering these techniques can pave the way for smarter, more informed decisions, helping your business stay on top.

Enhance your digital strategy and analytical skills with IMD’s Digital Strategy, Analytics, & AI Course. You’ll improve your decision-making skills and be the change-maker your organization needs. Jump-start your journey and let data be the driving force behind your success!

Read more Digital Transformation articles