It has been said that “close only counts in horseshoes and hand grenades.” Things have changed. The time has come to update the old adage to “close only counts in horseshoes, hand grenades, and marketing analytics.” The numbers we use to grow companies are rarely 100% accurate because we don’t have access to all of the information.
Marketing analytics are not engineering specifications. When designing a building, an error of one inch at the foundation can cause a three foot variance at the top. When calculating lifetime value (LTV), failing to factor in the future value of money has little effect as long as the calculations are consistent over time.
If you are a marketing analytics superstar, you are probably rolling your eyes right now. Before you get too excited, you should know that this post wasn’t written for you. It was written for people who don’t know how to factor in future value or can’t access all of the data required to calculate exact answers for their marketing questions. In a perfect world, everyone would be able to generate precise analytics. In the real world, it is better to be close than not measure at all.
There’s a reason why close counts in marketing. When analytics are used as benchmarks, consistency in the measurement methodology provides realistic feedback. For example, if every calculation of LTV excludes future valuations, then you are comparing apples to apples. You’ll still be able to measure how your marketing affects customer value by looking at the trends.
Marketing analytics is not an exact science. It is better to embrace that fact and measure what you can than to follow the lead of an estimated 70% of the companies that do not use extensive metrics. Here are five metrics that being close beats nothing every time:
Customer Lifetime Value – If you don’t know how much revenue to expect from your customer, how do you know how much you can spend to acquire one?
Customer Lifespan – Knowing how long customers are expected to purchase keeps you from marketing to them when they’ve entered the R.I.P. stage.
Web Analytics – If you want to torture your accountants, ask them to balance some traffic reports! It is an exercise in futility. Watch for trends, not specific numbers.
Customer Satisfaction and Promoter Scores – These will start trending down long before anything shows on the bottom line.
Fulfillment Costs – This is a first cousin to LTV: If you don’t know how much it costs to fulfill an order, how can you determine your breakeven?
If you can determine precise and accurate numbers for these metrics, do it. If not, don’t fly blind. Consistently measure what you can and compare the results with previous time periods. Over time, your understanding of how the numbers affect your business will improve, your business will grow, and the ability to capture more accurate information will get better.