September 16, 2020

Goals, Objectives, and Uncertainty

There's a lot of bad analytics that are about to lead to a lot of poor Goals and Objectives for 2021.

Think about it this way. Here's a company, and here is their new customer counts by month in 2020.

  • 14,493 = January.
  • 15,065 = February.
  • 33,772 = March.
  • 40,612 = April.
  • 25,904 = May.
  • 17,653 = June.
  • 12,856 = July.
Curious, you go back to 2019 and look at customer counts by month.

  • 13,895 = January.
  • 15,540 = February.
  • 20,365 = March.
  • 22,779 = April.
  • 19,684 = May.
  • 17,154 = June.
  • 12,950 = July.
Interesting!

What is the lift by month, 2020 vs. 2019?
  • +4% = January.
  • -3% = February.
  • +66% = March.
  • +78% = April.
  • +32% = May.
  • +3% = June.
  • -1% = July.
What is a reasonable Goal for the first half of 2021?

Say you plan on spending 20% more in 2021 than you spent in 2020. Say that thirty percent of your new customers come in without the need for advertising. Well, you now have enough data to create a baseline and to start working your way toward considering the uncertainty of your business next Spring.

I'd likely build a baseline that is +2% to your counts for 2019.

Then I'd split off the 30% of that total that you know you'll acquire no matter what (i.e. organic).

Finally, for the 70% of remaining new customers, I multiply that total by the square root of a 1.20 factor ... accounting for a 20% increase in ad spend.

I'm left with this table.


I'd begin with a baseline forecast of 116,605 new customers in the January - June timeframe. After applying advertising spend differences, I'm left with 119,062 as my forecast for next Spring.

You write your Goal/Objective based on the 119,062 seasonal forecast.

And if your belief is that COVID will cause next year to be a highly unpredictable year, make sure you build cushion into the Exceeds / Meets / Misses framework.
  • Exceeds Objective = 135,000 or more new customers, January - June.
  • Meets Objective = 105,000 to 134,999 new customers.
  • Missed Objective = < 105,000 new customers.
You also write two objectives ... one for the first half of the year, one for the second half of the year. This allows you to mitigate uncertainty. If the first half of the year is 20% worse or 20% better than your expectations due to a COVID vaccine, you deal with that, then you write a fair objective for the second half of the year.

Sound reasonable to you?




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