Like a journey to get from A to B, your Business has a plan and within that plan is a Marketing Plan. Does that describe your business? In theory all businesses work to a plan, yet with the many hats a business owner wears, the plan can be a constant nagging thought that you know is important yet the daily bustle makes it hard to focus on it.
To manage a business you at least need some basic metrics. This may be as simple as total Revenue less costs and a resulting profit. Hopefully costs have been broken out into a clean divide between the Cost of Goods Sold which shows your Gross Profit, less Overheads which results in Net Profit. What about Marketing metrics? Number of visitors to your website? Bounce Rate? Number of Facebook likes or email opens?
Most basic business metrics are rear-window numbers; managing the journey by looking out the back window and counting the fuel used and the miles travelled. Are you on track to your destination? Is the plan working and when will you reach your objectives?
You can’t manage what you can’t measure, so which metrics matter and which are the rear-window variety versus those that switch your headlamps to high beam and lead you to the journey’s objective.
Let’s focus on the Marketing Numbers for a moment. Rear window numbers will count “what has happened” and let’s face it, it’s very hard to count something that has not happened yet. So how do we differentiate between a rear-window metric and one that looks forward and shows we are on the path to our destination? Corporations call these Leading Indicators as opposed to Lagging Indicators. For Small Business let’s keep it simple and this is where strategy comes in.
Strategy before Tactics
Most rear window metrics will be counting tactical activity. Each activity fairly disconnected from the bigger picture. A competitor can generally see your tactics but not your strategy (see “Art of War” by Sun Tzu).
A Strategy defines your destination and the plan to reach it, from which your tactical actions will follow. A forward looking metric will focus on the strategic elements in the plan, the ‘leading indicators’ of activity, which if executed well should result in tactical results that take you where you want to be.
For example: If you know that each new customer will on average generate X dollars in revenue, then count the number of new customers. How much does it cost to acquire a new customer? Count that. What is the Lifetime value of a happy customer? Count that.
Less is more when it comes to metrics, otherwise the data becomes overwhelming, so Keep It Simple.
Two forward-facing Marketing Metrics:
A focus on leading metrics rises above the noise to keep the focus on what matters most. The two marketing numbers which matter most when looking out the front window, are:
- Cost to acquire a new customer
- Lifetime Value of a customer
How are you doing on these two numbers in your business. Your accountant may easily tell you at the end of the year your revenue and your profits, but how does this translate to your being on target to your destination, and do past rear-window number reflect the future.
Here is a challenge for 2016. Start tracking these two vital marketing metrics of the cost to acquire a new customer and the lifetime value of a customer and see how it drives you forward on the journey, even if your plan is not written down and as a busy business owner you just don’t have time.
Even better, if you can divide out the cost of acquiring a new customer, into the separate campaigns you run such as A=Google Adwords, Leaflets, Radio Ads, also the encouragement of new referrals, whichever marketing channels you use, then you can best judge which are more cost effective and focus on those. This addresses that old saying “I know that half my marketing budget is wasted, I just don’t know which half”
Keep it simple, prioritise your metrics to those few which look out the front window rather than the rear. Know your cost to acquire a new customer and their lifetime value, stay on the road and enjoy the ride :)
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