My partner (and brother) Jeffrey shared an insight last week while interviewing a prospective client. A senior vice president of marketing and sales, she is overwhelmed with all the data her staff produces. She's also a reader of this column, so she asked me why I never explained it here. Mea culpa! I'll share with you what Jeffrey shared with her.
Many of you know of our fondness for going back to basics, so I'll keep this simple and organize it by objectives, strategy, and tactics.
Getting a handle on your data and distilling lots of data into meaningful and manageable information -- it's really that simple! Promise.
Here's the information he gave to her:
I'm not oversimplifying. I can hear you saying, "What about this report or that metric?" We'll happily take the credit, but it wasn't Future Now that developed the science of management reporting. For a management reporting system to be meaningful, everything must flow into the financial statements. If you can think of a metric that doesn't seem to be a subset of one of these management reports, email me. Even if I can't show you how it is a subset, I probably can show you why it's not worth measuring.
First, let's define the concepts from the management reports:
Why are these are the key metrics you need to manage your business?
Gross and net sales and CGS. If you buy low, say $10 per unit, and sell high, say $15 per unit, $5 is the difference. Voila! Your gross profit. No gross profit, no business. I said it was simple -- and it doesn't get any simpler than that.
SPV. The idea is to increase your SPV (sell high). Factors affecting this include the quality of your traffic and merchandizing. You can improve your SPV by increasing your CCR, average order size, or both.
CPV. Lower your CPV (buy low). Factors affecting this are the effectiveness of your online presence and merchandizing. You can also improve your CPV by increasing your CCR, decreasing your marketing expenses, or both.
CCR. This is the heart of the matter. Put in place a system for increasing your CCR as an ongoing exercise. This exercise, more than anything else, will help you buy low and sell high. Nothing you can do will affect your profit and loss statement as dramatically or increase your return on investment (ROI) as much as improving your CCR.
E-commerce is a numbers game. The trick is to focus on the right numbers so that you can make accurate decisions about how to improve your site and, ultimately, your CCR. We offer a free download on our Web site: an Excel spreadsheet that instantly calculates the key metrics you need to track as you work to increase your conversion rate. My experience has been that few companies are collecting the right data or, like the executive mentioned above, are so overwhelmed with data that they don't know what to do with it. It's up to you: Will you drown in data that's voluminous but useless, or will you reap the benefits of meaningful information?
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Bryan Eisenberg is coauthor of the Wall Street Journal, Amazon, BusinessWeek, and New York Times bestselling books "Call to Action," "Waiting For Your Cat to Bark?," and "Always Be Testing." Bryan is a professional marketing speaker and has keynoted conferences globally such as SES, Shop.org, Direct Marketing Association, MarketingSherpa, Econsultancy, Webcom, SEM Konferansen Norway, the Canadian Marketing Association, and others. In 2010, Bryan was named a winner of the Direct Marketing Educational Foundation's Rising Stars Awards, which recognizes the most talented professionals 40 years of age or younger in the field of direct/interactive marketing. He is also cofounder and chairman emeritus of the Web Analytics Association. Bryan serves as an advisory board member of SES Conference & Expo, the eMetrics Marketing Optimization Summit, and several venture capital backed companies. He works with his coauthor and brother Jeffrey Eisenberg. You can find them at BryanEisenberg.com.
December 12, 2013
1:00pm ET / 10:00am PT