September 11, 2014

Cutting Through Nonsense

Any good marketing/analytics system cuts through the nonsense, and in short order.

When I'm called in to analyze a business, there is usually a problem, and there are differing opinions about the problem. Most often, sales are in decline, or sales are not growing at a rate that meets corporate expectations. So I'm asked "why"? Why aren't sales meeting expectations?

Remember the forecasting tool I discussed? The forecasting tool is an awful lot more than just a forecasting tool. It is part of a system designed to highlight weaknesses. I can quickly see if customer acquisition is a problem (it often is). I can quickly observe if customer loyalty is suffering (it sometimes is). I can easily understand if spend per customer is an issue (it often increases, masking other issues).

In other words, the forecasting tool is part of a much bigger and more important system. The forecasting tool also identifies business struggles.

And when a business is struggling, the business is usually struggling because of merchandise performance.

Look at the table above. This table represents what I call "comp segment performance". I take customers with exactly two purchases in the past year, and then measure the spend for these customers in the next "x" months. Because I am only analyzing customers with exactly two purchases in the past year, I omit most customer acquisition issues, and I omit the problems observed in catalog marketing with highly productive customers who receive an ever-increasing number of catalogs. The changes in productivity are merchandise-centric, or they are channel-centric.

The comp segment analysis is maybe the most important part of my "system". It allows me to quickly diagnose the problems that plague a business.

Profit per New Customer

It's common for folks to measure cost per new customer. Total Marketing Cost = $10,000. Total New Customers = 130. Cost per New C...