Marketing Metrics for Start Ups

ROAS? Conversion Rate? Lifetime Customer Value? What Matters?

The Story

Perhaps a poem captures the message I'd like to share here better than any words of my own:

The Centipede's Dilemma by Katherine Craster
A centipede was happy – quite!
Until a toad in fun
Said, "Pray, which leg moves after which?"
This raised her doubts to such a pitch,
She fell exhausted in the ditch
Not knowing how to run.

My father shared that message with me when I was a young college student balancing my 18-credit semester, a business that I had started at age 22, and juggling other life responsibilities. It became so busy, I wondered how I could keep my pace. His lesson - look forward, keep walking, don't stop. The walk is the fun part. He was right.

The Lesson

I am contacted daily by various marketing and business consultants. Each one claims to have reviewed my website, my emails, my ads, my SEO and every other part of my business, they have found a dozen problems and they promise immediate success if I simply follow their program. 

They will improve my ROAS. (Return on Advertising Spend). They will double my conversion rate. (The ratio of visitors to my site that actually become buyers.)  They will increase my traffic with "qualified" customers. They will optimize, refine, rebuild, reconfigure, recalibrate, redesign, recommend and revolutionize all of my errors. 

If I were to build a marketing dashboard of all the metrics laid out by each consultant, I would be much like the centipede in the poem above. I was happy running my business, and now after a detailed review of 1,000 different metrics, I would be overwhelmed in a ditch wondering how I ever walked on my 100 legs before I met the toad. 

As I'm writing this, I am also looking at the dozens of marketing books on my bookshelf that have inspired me over the years. Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Marketing by the Dashboard Light. Taking Sides. Market Based Management. Statistical Thinking. Global Marketing. All of these books have inspired my marketing mind over the course of my career and they are built on principles that work. But are they realistic expectations for every start up? For every small business? No - they are not. 

As I have started and built my own businesses, I find that the important metrics that drive success tend to bubble up from the from the depths of  daily strategies. And the critical metrics for each business that I have run are entirely different. If it was simply a question of duplicating systems already created by someone else, then we would all have successful businesses - including the consultants that are contacting you. 

We want there to be a one-size-fits-all solution to all of our business problems. Wouldn't that be nice? But it doesn't exist - and if anyone is telling you it does, they are selling you something. 

But wait a minute. I'm a consultant too. Why would I tell you not to listen them?

The answer is because I'm also a business owner and I've learned first-hand what happens when true principles of business meet true realities of business owners - and it's a major friction point. Business theory and business reality are two different things. An entrepreneur is both General and Soldier. Sometimes the daily battle is won by the general on the hill, and other times it is won by the soldier in the trenches. 

Small business owners have constraints. The #1 constraint is usually cash and/or time.

Business theory and true-principles-of-business strategy require both cash and time. To a small business owner, the cost of perfection is too high. They don't have the time or money to perfectly execute every true business principle thrown at them. They have to pick and choose what is most important to the life of their business today. A consultant telling a business owner that "in 1 year I can turn your marketing around" might be met with the response, "I don't even know if I'm going to be around for 1 year. What can you do for me today that will work?" 

The System

My success has come from letting the business tell me it's most urgent needs and then creating an ever-evolving dashboard of critical metrics that align with my constraints, my goals and my overall capacity to affect each metric. Think of your car dashboard. It shows your speed, your temperature, your oil level, your tire pressure - all things that you can control. If you're speeding, you can slow down. If your car is overheating you can pull over. If your tire pressure is low you can fill it up. If your oil level is low, you can add quart. Simple metrics - easy solutions. Your business dashboard should be the same. 

Here's how we begin:

1. Identify every one of the reports you look at every day. 
   1. What do they measure?
   2. Over the last 30 days, is that measurement improving or worsening?  
   3. What is your response to the measurement each day? 
   4. What actions can you take to improve the measurement? 
   5. How do you know if your action helped or hurt the next day's result? 

Let me be more specific. Here are 4 reports an e-commerce business owner might look at every single morning before she begins her daily tasks:

1. Total sales yesterday
2. Total margin dollars earned yesterday
3. Total sales from emails yesterday
4. Total website traffic yesterday

A scorecard of each of the 4 items should be created in a spreadsheet that is customized to the store owner so it can be reviewed daily to show movement in each metric from day to day. Are sales trending up or down? Is margin trending up or down? Is email revenue trending up or down? Is website traffic trending up or down? 

Now, none of those 4 items are meaningful unless we can convert what we observe into an action today. Let me be specific:

1. Total sales yesterday are up, and they've been trending up for a week. Great news!
2. Total margin has been flat. Not up or down. So, not good/not bad.
3. Total email sales have been trending up for a week. Great news!
4. Total traffic has been trending down. Not good. 

The successful business owner doesn't stop here. After digesting the data above she must ask the big question, "And therefore....what? What do I do today?" 

So let's dive a little further:

1. Top line sales are up. So something I am doing is getting people to buy more product. 
2. Email revenue is also up. What was yesterday's email? 50% off these products. No wonder email sales are up. We offered a big discount. 
3. That explains why my margin went down yesterday. Most of the people that purchased products yesterday were taking advantage of the 50% off sale so I made a lot less profit on every item I sold. 
4. Traffic is down, so my email revenue likely converted at a very high level, but all of my other marketing like social media posts and ads didn't do much to generate more traffic. 

In short: I sold a lot of discounted product to my existing customers, I didn't sell much of what wasn't discounted, and my social media marketing isn't driving a lot of new traffic. 

And therefore...

Today I'm going to set up the following for tomorrow's marketing efforts:

1. I need to spend time today looking at my products and my margin. What promotions can I create that are exciting to my customers but don't hurt my margin? 
2. I need to spend time today looking at my social media marketing and posts. What kind of marketing or content can I create that will get more new visitors to my website? What has worked in the past that I can duplicate or slightly alter? 
3. I need to spend time looking at my emails today. Why am I only getting discount buyers from my emails? What products or content can I put into my emails to increase clicks and sell a more balanced range of low and high margin product. 
4. I will do all of the 3 items above and then review my results again the day after. 

Do you see how in this example the critical metrics to this e-commerce owner sort of bubbled up organically? If you begin with an arbitrary metric and work backwards, you will get arbitrary results that will lack an associated action to improve each metric. But if you let the business determine what the critical metrics are, you will find yourself looking at metrics that you have the power to do something about. And it's what we do after reading our dashboards that is the most important part. 

If you find that you look at sales every day, then you should have a dashboard with sales by day so you can see movement every single day. If you look at margin every day, then you should have that dashboard. If you look at email revenue, social media, google, etc. then you should have a daily history so you can track the trend up or down of each. And if you don't have the ability to do something about the metric you are tracking - then stop tracking it until you can have some sort of power over it. 

It's the "what we do" in response to each metric that matters. Reporting on the metric is just the first step. Changing our strategy based on the what the metric tells us is where our power to change the trajectory of our businesses lies. 

That which we report on, improves. It's that simple. 

Here are a few critical metrics that you may want to consider tracking. If you need help building your first scorecard, we can help. Let's set up a call and discuss your business needs specifically. 

Track it. Measure it. Change it. Our system ensures that you always focus on what you control. So, like a good Captain, when your ship enters choppy waters, you will be the captain with a plan to sail your ship back to smoother seas. 

Where to begin: 

1. Daily revenue 
2. Daily margin
3. Daily revenue by 3-4 broad product categories
4. Revenue by farmer's market, fair, event that you attend. 
5. Daily email revenue
6. Daily social media revenue
7. Daily search revenue (Google, Bing, etc.)
8. Daily ad revenue
9. Cost/click of each ad
10. Total website visitors by day
11. Total website visitors by email, social and search
12. Daily sales by product
13. Daily Cash flow - 30 day and 60 day cashflow forecast 
14. Etc.

I look at my dashboard at 7am every morning, 7 days a week and nearly 365 days/yr. I don't begin a single work day without measuring performance of the day before and using that knowledge to tweak and adjust my strategy today. It's a never ending, constantly evolving process that has no end. But that's what I love about it - the journey is the destination. 

Start today to build your dashboard. Let it live, breathe and evolve so you find yourself focusing on the critical parts of your business that you can control. And enjoy the journey!!