Most of us use the word “statistics” with apparent familiarity. We may know enough about the basics of statistics to understand a baseball player’s batting average or read a news report about political polls. However, any effort to answer the question, “What is business statistics?” requires a deeper understanding of statistics.
In short, when seeking to understand business statistics or statistical techniques in business and economics, we must operate from a foundation of the more precise methodology of statistics. Broadly speaking, this means dealing with “gathering, selecting, and classifying data; interpreting and analyzing data; and deriving and evaluating the validity and reliability of conclusions based on data.”
Applying the science of statistics to the more specific field of statistical analysis for business is more crucial than ever in an era heavily defined and driven by data. Businesses and organizations are constantly working to make sense of and utilize much of the 2.5 quintillion bytes of data being generated worldwide each day. The only way for any business to do that effectively is to rely on statisticians trained in statistical techniques in business and economics.
What Is Business Statistics?
The most simple and straightforward answer to this question is that business statistics is the application of standard statistical methods in business environments. The application of statistical techniques in business and economics includes and builds on most of the basic concepts in the field of statistics, including:
- Mean
- Mode
- Median
- Bar Graphs
- Bell Curves
- Basic Probability
- Hypothesis Testing
- Regression Analysis
How Do Businesses Use Statistics And What Are Common Statistical Techniques In Business and Economics?
The use of statistical analysis for business takes on many forms in a wide variety of contexts. Businesses use statistics to project sales numbers, evaluate production methods, develop short- and long-term strategies, build and adjust organizational structure, and much more.
In fact, there are few areas of business that are not affected by whether or not statistics are understood and utilized effectively. Here are some of the most crucial applications of statistical techniques in business and economics.
Financial Data Management
Of course, any business relies on financial health for its ongoing viability. The most familiar aspect of financial maintenance for businesses is bookkeeping and accounting. Certainly expertise in those areas helps any business stay organized and efficient in the use of its resources.
However, the long-term security and growth of a company also depend on making wise use of the volumes of data going into and coming out of the accounting process. Financial data management is one of the key statistical techniques in business and economics. It makes use of various tools and methodologies to record, track, and make use of a company’s financial information, including:
- Specialized Software
- Algorithms
- Analytics
- Reporting
- Data Visualization Tools
It is crucial for any company to not only accurately track but also effectively apply financial information. This is how healthy budgets are developed, reliable financial projections are made, and accurate records are kept for legal and compliance purposes. Financial data management is one of the most important tools of statistical analysis for business.
Measuring Organizational Performance and Efficiency
Another important example of the use of statistical techniques in business and economics for companies is assessing various areas of performance. Certainly the bottom lines of profit and loss can tell the most basic story about how a business is faring. However, there are many other crucial indicators that can only be examined and understood through business statistics.
For example, any company that produces physical products will have to perform product testing. Especially in cases of mass production, it simply is not possible to physically examine every item coming off of increasingly automated assembly lines. So, one effective use of statistical analysis for business is in product sampling, which estimates overall production quality by analyzing a designated segment of products.
Companies also employ various statistical tools to gauge the overall efficiency of their workforce and of their organizational structure. This can include measurements of employee output, examinations of time utilization, and other areas vital to maximizing the resources of the business. The data gathered can then be examined by statisticians to measure performance and efficiency and create models for improvement.
Improving Business Operations and Decision-Making
As tools of statistical analysis for business are used to measure efficiency and performance, companies can further utilize those statistics to make improvements in their operations and decision-making. Once again, this application is relevant in many sectors of a business, including:
- Sales Analysis and Growth
- Identifying More Effective Marketing Strategies
- Better Employee Training and Management
- Leadership Development for Executives
- Improved Staffing and Scheduling Efficiency
- More Effective Organizational Goal-Setting
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If sales are lagging, a statistician employing statistical techniques in business and economics can help isolate the problem and identify solutions. For example, the analysis might indicate ineffective marketing, which then can be remedied through more effective market research and analysis, better projections, and improved messaging and advertising strategies.
Even issues that seem more personal and less likely to be remedied by statistics often can be addressed through creative use of statistical analysis for business. For example, if employee efficiency or even morale seems low, statistics can help identify inefficient business practices or trends unnecessarily burdening the staff. Addressing these issues not only helps improve business performance but also communicates concern and value to a company’s primary resource: its people.
Enhanced understanding and utilization of business statistics also equip senior company leadership. Many businesses find early success because of the entrepreneurial instincts of an individual or group but eventually struggle in new seasons and when facing new challenges. Early methodologies and decision-making processes don’t always translate as a business enters new stages. Often the application of statistical techniques in business and economics under the guidance of statisticians can help leaders overcome these barriers and make better decisions for the company’s present and future.
Identifying Trends And Improving Forecasting
While nurturing internal health and efficiency is essential for any business, identifying and understanding external trends is also key. What was effective and relevant in a given industry last month may no longer be effective and relevant in six months. Statistical techniques in business and economics can help a company track and analyze trends. This has numerous benefits, such as:
- Remaining Current
- Knowing What to Expect Next
- Generating Better Business Ideas
- Creating Opportunities to Lead Rather Than Follow
- Improving a Company’s Forecasting Capacities
- Offering Early Warning Signs for Potential Problem Areas
- Identifying Areas for Needed Improvement
Statisticians can help businesses make sense of industry trends and create solutions to adapt and thrive in changing environments. This includes using statistics to make better projections about how those environments are likely to continue to change. Improved forecasting in areas like sales, expenses, profit margins, production capacities, and product quality can determine whether a business’s best days are behind it or ahead of it.
Improving Market Research, Market Analytics, and Marketing
Market research is another area in which companies find their needs expanding as the business grows. An initial successful idea rarely sustains a business long term, so market research and analytics become the most important areas of statistical analysis for businesses.
In essence, this means using statistics to better understand potential product demand and to maximize return on product investment. This is a challenge for most businesses. In fact, a survey of senior marketing executives by the Harvard Business Review found that "more than 80% of respondents were dissatisfied with their ability to measure marketing ROI." This creates enormous opportunities for statisticians who can work with executives to solve that problem.
Ultimately, statistical techniques in business and economics are also a cornerstone for effective marketing campaigns. This is especially true in the era of Big Data, when businesses are inundated with internet-driven information. This influx of data can either overwhelm companies or offer unprecedented opportunities for targeted, data-informed marketing strategies. Trained statisticians are the difference-makers who can provide the tools and insights needed to maximize marketing efforts.
Job Opportunities And Earning Potential For Statisticians In Business
If you are interested in a career applying statistical techniques in business and economics or working on statistical analysis for business, there are many exciting opportunities available. In fact, U.S. News and World Report named the Statistician #1 in its list of Best Business Jobs, and #6 in both its overall list of 100 Best Jobs and its list of Best Science, Technology, Engineering, and Math (STEM) Jobs.
Job Outlook for Statisticians
One of the reasons the field of business statistics is rated so highly is the obvious understanding of its increasing importance in years to come. In fact, job opportunities for statisticians are growing at more than six times the rate for all jobs in the United States. Demand for trained statisticians is expected to increase by 31 percent by the year 2028.
This reality extends into other fields where trained statisticians are likely to thrive. Data science is an emerging field interrelated with statistics where many statisticians find work. Glassdoor lists Data Scientist #3 on its “50 Best Jobs for America in 2020.”
Salary Expectations for Statisticians
Another attractive dynamic of a career in business statistics is its high earnings potential. The Bureau of Labor Statistics lists the median salary for statisticians as $91,160 and indicates that the top ten percent of statisticians earn more than $146,770 (source).
With salaries near and well above six figures and an ever-expanding job market, trained statisticians are positioned to thrive for many years to come.
Are You Interested In A Career In Business Statistics?
As businesses and executives continue to realize their need to effectively engage business statistics, the need for trained statisticians also continues to grow. Capable statisticians are increasingly at the center of business strategy, helping make sense of a never-ending stream of data and positioning companies for future growth.
Many of the best and most promising business opportunities for statisticians require a master’s degree. This level of education does far more than answer the question: “What is business statistics?” It equips future statisticians well beyond foundational understandings. Students receive training in industry-standard statistical and data analysis software, study datasets, learn data science, and gain experience solving real problems.
One of the best ways to create these kinds of opportunities for yourself is with an online Master’s in Applied Statistics from Michigan Tech.
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