Fed
up with just drifting on the tide?....
If you look on the bridge of any modern ship, you
will find a whole array of instruments designed to produce metrics that are
critical to the safe navigation of the vessel. Would you get onto a ship if
these instruments were not working and the crew was unable to get this vital
information?
I’m going to guess that you said no because it would
be almost impossible to reach your intended destination without this
information. You would be just drifting along at the mercy of the tides, winds
and the surrounding environment.
Yet companies invest vast amounts of money into
sales and marketing strategies with no clear metrics in place to give an
indicator of how that investment is working or, indeed, not working.
Most companies recognise the need for metrics, yet
they tend to be “one of those things we will get round to one day” because the
busyness of business takes over. This is a little like being the Captain of
your ship; down in the engine room, shovelling coal “got to keep the ship
moving,” but never getting up onto the bridge to actually see in what direction
you are moving!
What
metrics can tell us and why there are so important?
Take a trip to the doctors when you’re feeling
unwell and three things that he might take a look at are; temperature, blood
pressure, and pulse. If your temperature is 98.6 its normal, blood pressure is
120/80 that’s normal and a pulse of 65 would be considered normal. Differences
in these numbers would indicate areas that might need further investigation.
On our ship the captain will be able to tell he is
heading in the right direction, by the readings from his rudder angle
indicator, gyrocompass, he can also make sure he is moving at the correct speed
by checking his GPS system or a Doppler measurement.
There are numerous indicators we could look at in
marketing including; return on investment (ROI), customer retention, Average
pound spend, leads generated, conversion rate, frequency of transactions….
What
can you do with the information?
Let’s say for instance your business is measuring
customer retention, and you discover that your retention rate is 65%. This means
that to maintain your customer base you will have to generate 35% new customers
every year. It has been estimated that to acquire a new customer can be between
5 and 10 times more expensive than retaining a current customer. Armed with
this information you now have choices: you can spend more money on generating
35% new customers, you can look at implementing strategies (at a lower cost)
aimed at keeping the customers you already have or you could have a combination
of the two.
It is quite frightening to think that because most
businesses do not track customer retention; they will normally revert to
spending money on generating new customers never realising the effect that has
on profits.
What
should you be measuring?
I would suggest that you use your intuition and
focus on implementing marketing metrics that are specific to your business
operations. As a starting point, you might want to look at profitability
metrics; after all, you are in business to make a profit. Once these metrics
are up and running smoothly you can move onto some more complex measurements
which will reveal even more profit building opportunities for your business.
It is worth pointing out that it is not the number
of marketing metrics that you use, but the effectiveness of those you do choose
to apply across your business.
Want
to learn more about marketing metrics click here
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