The Mother of All Marketing Metrics
By Richard Fouts | December 10, 2013 | 5 Comments
Jack says, “Hey, how are things in marketing?”
Jill responds, “YOY revenue up 6%. Listen to the earnings call.”
Jack walks away, secure that marketing is having an impact on revenue. Sure it is; but revenue as the ultimate marketing metric
- Is a rear view metric. It analyzes what occured in the past
- Can lead to marketing myopia (meaning, you’re so focused on today’s revenue with today’s solutions, you miss out on patterns that reveal what customers are starting to value right now … or what they will value in the future).
- Is popular in sales-driven cultures versus market-driven cultures
You know the story …
… the company that experienced rapid YOY growth (maybe 30%) then one year started on downward spiral and failed? Everyone starts asking, “What happened?” and it’s a sincere, authentic question. How could SwissAir (so financially stable, it was once dubbed the “flying bank”) end up in bankruptcy court? Circuit City, Digital Equipment, Betamax … so many others from the annals of history that tell similar stories.
Show me a failed company and I’ll show you a sales driven organization that valued revenue as the mother of all metrics. The one thing failed organizations overwhelmingly share: an obsession with analysis of the past at the expense of seeing the future.
What are indicators of future value?
It’s important to look in the rear view mirror. You need to understand past results. But make sure you analyze things that signal how customers are shifting what they value. For example:
- Which webinars are attracting the largest audiences, and why?
- Which pages on the web site are generating the most traffic?
- Are you getting more inbound inquires? If less, connect the dots. If more, what are they asking for? Which inbound inquires were you unable to fulfil? Which inbound inquires didn’t make it into the pipeline due to lack of an offering?
- Which of your thought leadership efforts is generating the most conversation? In both the blogsphere and the Twitterverse?
- How are people responding to your comments on other blogs?
- What are your primary rivals doing to better compete?
- What are non-traditional rivals doing to better compete?
- What is the business press saying about your sector’s future?
- How is Wall Street rewarding or punishing your competitors?
Appoint a futurist
This type of work won’t get done without an owner. Hence, I am starting to see many marketing organizations assign the role of Futurist (can be a part time role you even rotate; doesn’t have to be full time). Have this individual produce a quarterly report that connects the dots among the various items you’ve identified as indicators of the future.
Predicting the Future is Hot
One can conclude that understanding the future – is one of marketing’s hottest trends right now, based on the success of firms such as KXEN, Opera Solutions, IBM Predictive, SAS and a score of other providers that market predictive analytics. Books on predictive analytics are also flying off the shelves.
Customer Lifetime Value (CLTV)
This metric embodies both past and future. Past, in that it helps you identify what your highest value customers bought previously. And, analyzing the buying patterns of your highest value customers provides insight into how they are changing.
For example, Harrah’s (the Las Vegas hotel/casino) compared the “take rate” of a Challenger offer given to high value customers versus a control group. The control group got the existing offer (which bundled a hotel room discount, two free dinners, and $30 in free chips). The Challenger offered no bundle; rather $60 in free chips.
Customers preferred the Challenger because it was “easiest to fulfill” even though the alternate offer was the better deal. This insight was used to update other offers as well as construct new ones. The big bonus to marketing: the offer that was cheapest to implement turned out to be the highest generator of positive return.
Harrah experiment underscores a trend we’re seeing eveywhere. Convenience rules.
Ask marketers how they’re evaluated, and the most common response is pure and simple: Revenue. In fact, most marketers will equate revenue as the mother of all metrics. Mind you, revenue is the lifeblood of any organization. But, be aware of its limitations.