December 22, 2009

Change In Metrics: Open Your Spreadsheets!

Online Marketing Simulations are designed to illustrate to the marketer the long-term impact of short-term decisions.

So, let's open up our spreadsheets (e-mail me for your own copy).

Take a look at cells G10 - G25. This is the forecast for the business in Year 5, given current projections. Let's look at a few key cells.
  • G16, Orders per Buyer = 1.615.
  • G17, Items per Order = 2.424.
  • G18, Price per Item = $65.80.
  • G21, Customers With Grade Of 'A' = 58,417.

Now, let's make one small change. Let's assume that for just one year, in Year 1, customer retention improves by 20%. Enter the number 1.20 into cell C5. Now look at how all of the metrics change, in Year 5.

  • G16, Orders per Buyer = 1.629.
  • G17, Items per Order = 2.424.
  • G18, Price per Item = $66.58.
  • G21, Customers With Grade Of 'A' = 60,480.

Four years after the improvement, key metrics are, in many cases, changed.

Now, what do you think will happen to your business, long-term, when you give away the farm with free shipping and 25% off of every order?

Run your own Online Marketing Simulation to find out. Buy the book at Amazon.com!

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