August 04, 2016

Please Tell Which 3-4 Metrics I Can Use To Turbocharge My Business!!!

FYI - head to the bottom of the post if you want to know what metrics you should be keeping track of ... read the commentary below if you want to know what happens when I tell you what metrics to keep track of.

I'm not sure what happened, but in the past six months, there's a ton of requests that sound a lot like this:

  • "I read an article that suggested there are three or four key performance indicators that can turbocharge my business. Could you please tell me what those indicators are? And make the metrics easy for anybody to understand, ok? Thanks, Craig Paperman."
Tip #1: You cannot "turbocharge" your business by stumbling upon a metric.
  • This is a lie sold to you by companies that provide software or consulting services that focus on "key performance indicators". Metrics and key performance indicators, or "KPI's" as the vendor community calls them, reflect what has happened. It isn't like there is some magical metric lying in the weeds that, if you only could discover it, would cause your business to increase by 40%. If that were true, then there would be a throng of consultants running around authoring the metrics and getting rich off of selling the metrics to you. Those people don't exist.
Tip #2: If I tell you the metrics you should use, you will disagree with me and argue that you are right and my metrics are wrong.
  • One of the great sadnesses of the past two years is a shift in how people deal with consultants. Ten years ago when I visited a company, folks argued about what to do ... how to spend money ... the channels to explore ... tactical stuff. Today, you visit a company, and everybody wants to argue about trivia. It's exhausting. It's pointless. And it's a distraction ... a distraction away from the real issues causing businesses to succeed or fail.
  • Example: I recently visited a company and shared dozens of customer acquisition tactics ... this business was struggling to acquire new customers. Those in the meeting repeatedly discussed how every idea "wouldn't work for them" because they were "unique and special". Then, the attendees argued that customer acquisition wasn't important, because it is more important to get more demand out of existing buyers. Finally, the audience wanted to understand if maybe everybody was just "measuring things the wrong way?" See what I mean? This is exhausting trivia, and has nothing to do with growing a business. It sounds strategic, but it is not. It is a distraction away from the core issues that are hurting business performance.
Tip #3: You already have the metrics you need, you just don't have the strategy or energy or corporate culture to capitalize on your metrics.
  • This is when the audience gets angry with me. You already know that sales/profit are not where they need to be. You already have a count of new customers. You already have some sort of loyalty metric. You already know website traffic and conversion rates. You already know catalog response rates, by segment. You already have an embarrassment of analytical riches. If you are stuck, then the issue isn't metrics ... it's you ... you don't know what to do next, and that is frustrating.
  • I hosted a session about customer acquisition ... I asked the audience "How many of you are ready to work hard to acquire new customers?" Can you guess the response? Of course you can! Almost nobody wanted to work hard. So even if you had a metric that opened the company up to a world of possibility, if nobody wants to work hard, game over, right?
  • Corporate culture is a huge deal. Few companies have the culture necessary to push ideas across departments. If you had a metric that opened your company to a world of possibility, would you be willing to risk your career on the metric by pushing your strategy through the merchandising team, the creative team, the website ops team, your IT team, and your Executive Team? No? Then culture is your problem. Or you are the problem.
Tip #4: You don't need to configure metrics perfectly to make a difference.
  • Here's what I run into. I use the Comp Segment framework to determine if Merchandise Productivity is an issue or not. By running this framework across channels, merchandise categories, new/existing products, and price points, I can quickly diagnose what is wrong with a business. But when I share the framework and properly diagnose the issue, there's a fraction of the audience that pushes back ... "But are you truly measuring Merchandise Productivity?" ... "Wouldn't it be better if you measured it this way?" ... "Why don't you use our existing framework, then you'll see that everything is just fine?" This tactic is used by professionals to divert attention away from real issues. If the professional can get the consultant to argue and can discredit the consultant, then the professional doesn't have to implement a strategy, but can still look good internally because the professional hired a consultant and actually tried to fix a problem. You don't need to configure metrics perfectly to make a difference. You just need to DO SOMETHING ... MEASURE SOMETHING ... and then TAKE ACTION!
Here's the framework I use when diagnosing what is wrong with a business. If you find yourself disagreeing with the framework or find yourself hopeful that somebody else can identify a key metric for you to look at so you don't have to go through the steps below, I invite you to re-read Tips 1-4 above.

Step 1 = Rolling Twelve Month Graphs For The Following, Past Five Years. This analysis quickly points out dates when "things changed", and shows whether the business is headed down a proper trajectory or not.
  • Total Demand.
  • Total 12-Month Buyers.
  • Total 12 Month New Buyers.
  • Annual Repurchase Rate, Measured On A Rolling 12 Month Basis.
  • Orders per Buyer, Annual.
  • Items per Order.
  • Price per Item Purchased.
  • Average Order Value.
  • Annual Demand per Buyer.
  • Annual Demand by Price Point Bands ($0 - $10, $10 - $20 etc).
  • Annual Demand by Attributed Marketing Channel.
  • Annual Demand by Physical Marketing Channel.
  • Annual Demand by Merchandise Category.
  • Annual Demand for New Items (Past Year).
  • Annual Demand for Existing Items (> 12 Months Since Introduction Date).
  • Annual Demand for Orders with No Discount, No Promotion, Paid-For Shipping.
  • Annual Demand for Orders Using Some Sort Of Discount/Promo.
Step 2 = Comp Segment Analysis, Past Four Years, On A Monthly Basis, Buyers With Exactly 2 Purchases In The Past Year, Measuring What These Buyers Spent In The Next 30 Days.
  • Average Next 30 Day Demand.
  • Repurchase Rate For Next Month.
  • Comp Segment Spend per Repurchaser.
  • Comp Segment Spend For The Next Month ... By Merchandise Category, By Price Point Bracket, By Attributed Marketing Channel, By Physical Marketing Channel, For New Items, For Existing Items, For Non-Promotional Business, For Discounts/Promos.
The comp segment analysis quickly determines when problems happened and where they are located ... hint - problems are usually caused by changes in merchandising strategy or reductions in customer acquisition spend.

Step 3 = Comp Segment Analysis of New + Reactivated Buyers, On A Monthly Basis, Past Four Years. If Step 2 shows stable business and Step 3 shows a problem, then we know the problem is new + reactivated customer strategy. If Step 2 shows a problem and Step 3 shows a problem, then we know the problem is (most likely) merchandising strategy.

Step 4 = Calculation of Winners / Contenders for Existing Items and New Items for each Merchandise Category, Annually, Past Five Years. Immediately, issues will surface, issues that cause reductions in catalog response rates, online conversion rates, and email productivity. Simple counts will illustrate the merchandising missteps that are haunting your business.

Step 5 = Measurement of future value (what some call lifetime value).

Step 6 = Five year business simulation that shows how your business evolves as you make improvements to new customer acquisition strategies.

Once you complete Step 1, Step 2, Step 3, Step 4, Step 5, and Step 6, you will know what is causing your business to not perform at a healthy level.

This is where it gets interesting.

At this point, you have to get your organization to change course.

Nobody in your organization wants to change course. They'll want you to go back and create metrics that validate that their course is "right" and you are "wrong".

But you have the metrics. You are right. So if you cannot get your organization to change, then the issue isn't metrics ... the issue is your company culture, or your inability to sell ideas, or both.

Are you willing to perform Step 1, Step 2, Step 3, Step 4 Step 5, and Step 6? The six steps give you all of the metrics you need to run your business effectively?

If you don't have the time to perform Steps 1-6, contact me (, and I'll do it for you.

If you are able to run Steps 1-6 at your company, you will identify why business is not meeting expectations. Then the hard work begins ... trying to encourage your company to change. Because most corporate cultures do not want to change, we instead look for magical "KPI's" that turbocharge a business.


P.S.: I know, you don't want to do any of the Steps above. You want to know the 3-4 metrics that will turbocharge your business. Fine. Keep track of these four things.
  1. Merchandise Productivity, +/- vs. Last Year and 2 Years Ago.
  2. New + Reactivated Customer Counts, +/- vs. Last Year and 2 Years Ago.
  3. Long-Term Value by Source ... or in Total ... almost nobody calculates either.
  4. Your Organic Percentage ... the fraction of your business that happens even if all advertising is stopped. The healthiest businesses generate 90% or more of their volume without any advertising whatsoever (think Nordstrom) ... the worst catalogers generate almost none of their business without advertising via catalogs (vendors love this scenario).
P.P.S.: I know, I know, you saw a TV commercial where IBM's Watson helps famous people learn stuff ... like teaching Serena Williams that her second serve percentage is far higher than anybody else. The gimmick is that if you knew those tidbits, you could turn your business around as well. Think about this one for a moment. IBM actually HAS Watson, right? They own Watson. Here's IBM's sales over the past five years:
  • 2011 = $106.9 Billion.
  • 2012 = $104.5 Billion.
  • 2013 = $98.4 Billion.
  • 2014 = $92.8 Billion.
  • 2015 = $81.7 Billion.
Now, there's one of three things happening here.
  1. The insights Watson provides are garbage.
  2. Nobody can properly interpret what Watson suggests.
  3. Folks can interpret and understand what Watson suggests, but refuse to act upon what Watson tells them, or cannot act upon what Watson tells them because of fear or inertia or internal politics.
What do you think?

Metrics and insights are not the key, my friends. Doing something about what your metrics and insights tell you, that's what matters.

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