Insight #12 - Critical Marketing Math

The old saying “what can’t be measured can’t be improved” holds true, especially for improving the performance and profits of your business. Your most basic performance business math comes from the financial goals in your 1, 3 and 5 year business plans. These should be translated into clear, quantifiable targets so that both sales and profit goals that can be appropriately tracked on a monthly, quarterly, and annual basis.

Your next level of business math involves doing a micro analysis of other business metrics such as campaign, advertising, and promotional results; new customer acquisition and customer attrition and sales growth with existing clients. Additional key calculations you should know are things like: the lifetime value of your clients, average sale per transaction, average sales per customer per month, quarter and year, as well as normal frequency of sales, sales by product and service, and sales by client category.

The real fun begins when you start looking at ratios, exceptions, top percentiles and bottom percentiles of clients and products, all of which is relatively simple to do in a basic spreadsheet. These types of numbers will give you interesting and valuable information not just the bottom line trends compared to your goals, but also deeper insights into opportunities to improve the critical ABC’s of growing your profits (Insight #9).

Once you’ve done the business math, you’ll want to use this information to segment clients, products and services by their relative value to your business. Pay special attention to identifying your most valuable clients and those that appear to have the potential to become more valuable clients. Focus your energies on creating innovative new ideas for campaigns and promotions to maintain and grow your most profitable clients and business segments, and those that exhibit the most potential to become top tier clients.  (We’ll talk more about this in Insight #13 and #14)

Tip #12: Run your business by the numbers. Set up appropriate tracking of key business metrics and statistics that are relevant to achieve your goals, and then monitor them diligently. Do additional research to confirm why the results are as they are, and use this information to discover and act upon the hidden marketing opportunities they reveal with special promotions and targeted campaigns.

If your business math reveals you’re ahead of your goals – fantastic, figure out how to sustain that and even further improve what you’re doing. If you’re behind your goals don’t wait; figure out immediately how you’re going to turn that trend around.