1. Difference between business and analytical questions
Welcome. In this video, we're diving into the differences between business and analytical questions.
2. What's the difference?
Transforming the business question into an analytical question is an essential step of the process to ensure the selection of an analytical solution that solves the business problem. But what really differentiates these two types of questions?
3. CozySpace.com - Business questions
Let’s start with an example by considering our online marketplace for short-term rentals, “CozySpace.com”. One of the strategic goals of CozySpace is to increase total revenue by $30M in the next three years. To accomplish this goal, the pricing team initiated a project to define the price levels for each product group. They formed the business question, “At what levels should we set our prices to increase revenue?”. Likewise, the marketing team has also started working on adjusting its marketing strategy. Their business question is “What campaigns should we do to attract new customers?”.
4. CozySpace.com - Analytical questions
Following up on the business question of the marketing team, the analytical questions could be: “Which customer group generates the most and least revenue based on the last 6 months' sales?”.
And, “How have past campaigns affected the sales volume for each customer group?”.
These questions could be answered by leveraging historical campaign data and using descriptive analysis and data visualization to understand the effect of past campaigns on sales for these customer groups.
5. Two key characteristics
From this example, we can see a few differences that distinguish a business question from a well-formed analytical question.
There are two key characteristics:
One, the scope of the questions. The analytical questions are more specific compared to the business questions that have a broader scope.
And two. The methodology used to answer them. Analytical questions can only be answered using data and analytics. Let's see these characteristics in more detail.
6. The scope of the question
Business questions are often broad in scope and open-ended. Their scope is intended to provide a high-level solution to a business problem or goal, such as how to increase sales, improve customer satisfaction, or reduce costs.
Analytical questions, on the other hand, are often more specific and focused on a particular aspect of the business problem. They can be seen as specific questions that are formed to help answer broader business questions.
7. Characteristics of the analytical question
A well-formed analytical question usually follows the SMART methodology:
First, it is specific, to ensure that it is well-defined and easily understood by specifying variables that break down the problem further, for example, the customer groups.
It is measurable. The question should be able to be answered through data and analysis, with clear metrics and KPIs, such as revenue.
It is actionable and provides valuable insights that can inform decision-making.
Lastly, an analytical question is relevant and time-bound. The question is directly related to the business problem and specifies a time frame to be analyzed, such as the last six months of sales.
These questions are specific enough to provide the direction needed to proceed with analytical tasks.
8. Difference in the methodology used
A business question is qualitative in nature, more general and can often be answered with a combination of data and analytics, as well as intuition, experience, and expert opinion. While data analysis is an important tool for answering business questions, it is not always the only tool.
On the other hand, analytical questions typically can only be answered through the analysis of data and the use of statistical techniques.
9. Analytical inputs to the business questions
In our marketing example, the analytical question “Which customer group generates the most and least revenue based on the last 6 month sales?” can be answered by analyzing revenue data and using data visualizations to determine the highest and lowest groups.
The inputs from this analysis can then be used to answer the business question, “What campaigns should we do to attract new customers?”. Using this information, the marketing team can create targeted campaigns that focus on attracting customers from the most profitable groups.
The final decision about what campaigns to execute for each customer group can be decided using brainstorming sessions and input from experts.
10. Let's practice!
Now that you know the main characteristics that differentiate an analytical question from a business question, let's practice!