Many medium size and small business could make much better use and benefit greatly from the use of different measures or metrics of different aspects or processes of a business. Metrics can include customer measures like the levels of trial, repeat purchase and frequent purchase, as well as internal measures of profitability like gross margin, return on marketing spending and economic value added or measures of sales performance in parts of a business such as for specific accounts or groups of accounts, or aspects of operations such as average number of days to collect or how long the cash cycle is.
Some firms have established many or most of these measures and use them effectively. But many other businesses have not.
Commonly missed metrics include trial levels and repeat purchase levels. Many businesses miss out on using these metrics but some do, and have benefited from doing so.
In the case of one business I have consulted for, we worked to establish the levels of repeat purchase as well as frequent purchase through simple interviews of customers at multiple sites without going through a lot of expense. It turned out the levels of repeat purchase were high and in fact were very high. Over 90% of customers for many branches on any given day were people who had bought several times. Then roughly 30% of all customers were very frequent visitors, eg at least once every two weeks with a high proportion buying weekly. This was in
a product category with very many options available to customers.
The firm was already undertaking expansion of its branch network. So there were did comparisons of sales which better established how close new branches could be before cannibalization set in.
But that still left open what to do with older branches.
Due to the nature of the category the catchment area of each branch was small so growth of older branches in the absence of much marketing support was in the low double digits. Growth was coming from word of mouth but because the business had been around for a long time, many people had formed an opinion about it. So people who had decided sometime in the past that they were not interested were no longer paying attention and were a wasted opportunity for the new products the firm had introduced. The brand was not doing enough to cut through the clutter and regain attention.
One action recommended to the client here was to increase the visibility of their new initiatives, doing things differently from the past, so they could grab the attention of people who earlier decided they were not interested. And thus capitalize on their very well situated branch network.
This same business also had run a number of promotions in a number of their branches but somehow the performance of those promotions had not been quantified, because the firm was monitoring performance at a regional level, combining the performance of many branches and obscuring the performance of branches were special events had been done. There was a mismatch between the geographic scope of some marketing activity and the scope of sales performance measurements. So assessments of the effectiveness of promotions were difficult to get, if not impossible.
So the planning of future promotions was not benefiting as much as possible from the investment in previous promotions because learnings were not easily picked up and applied.
These are some simple examples of metrics which are easily used to refine a manager’s understanding of a business.
Some metrics will be common to many businesses, e.g. gross margin.
And others will be highly specific to a product or service category, or even a specific business. Key is to understand the key processes being run by a business and put measures in place to track upticks and declines which can help clarify what should be done to fix problems or maximize opportunities.
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About the Author
Benedicto “Poch” Cid
is the former Chief Brand Adviser of Mansmith and Fielders Inc., the only advocacy-based training and consulting firm focusing on marketing, sales, strategy and innovation. For more information, please email firstname.lastname@example.org.