Browsing Tag

Marketing Metrics

Annual Planning and Budgeting: Operating a business and managing your product with metrics

How-to-Develop-a-Business-Plan-in-Six-Easy-Steps

It’s that time of year again – budget season and annual planning. YEAH!

Understanding the plan, the progress and next years investments require visibility.  The visibility required to understand if you are directionally on track to hit plan and how to justify resources and budget.  As I get the opportunity to teach folks all over the globe, I’m often asked what we should measure to ensure we are making fact based decisions and the answer is always, it depends.  Depends on the market, the management team expectations, company’s point in its lifecycle, product lifecycle and alike.  The most typical way organizations align product teams and operational groups is through annual planning and the business plan for your products.

Your business plan is your path forward. But to create a comprehensive business plan, you first must understand your business and the way your products fit into that business. Simply put, if you don’t know how operations, sales or any other area is performing, how can you make plans to improve?

The great thing about the systems and methods used in modern marketing is that most are measurable. But that doesn’t mean you want to measure everything. It’s important to focus on the analytics that inform the business about where you are relative to corporate-wide goals, as well as your given portfolio mix and its contribution to the business. Reviewing these analytics helps you figure out what’s next.

Of course, it’s one thing to know your numbers; it’s another to understand those numbers in context. You must understand where to invest based not just on analysts’ stories and high-level trends, but also on the effectiveness of products in the market and the historical return on their efforts.

To keep it simple, ask your teams to describe the performance of products and investment opportunities by addressing three items: size, shape and direction.

Size: How large is the opportunity relative to other opportunities?

Let’s say you manage a $4 million product line. How much of the company’s resources should be used to support that? How does that change if it’s a $10 million company or a $10 billion company?

It’s important to understand how big your portfolio or product is relative to other portfolios and products in the business. And while it’s easiest to focus on revenue, it’s also important to know your profit contribution, as the health of your margins can affect both your investment levels and your ability to scale.

Remember, not all product lines or portfolios are created equal. Every product has different revenue and profit contributions. Once you understand yours, you can analyze the overall size of the organization in the portfolio, and your size and contribution to that portfolio (both top line and bottom line).

Shape: How does it target your most profitable and satisfied segments?

When you’ve identified the relative level of influence of your product, it’s time to analyze the shape of the business. Imagine your business as a series of three triangles representing customer count, revenue and profits. Consider your customer base: what does a large customer look like, what does a small customer look like? How many customers do you have?

Next, calculate how much these customers contribute to revenue, and how much they contribute to profits. Some customers may produce a lot of revenue but don’t generate comparable profit because they receive better price points or better service levels. All kinds of drivers might produce the traditional pyramid across customer accounts, revenue and profits.

It’s important to understand this segmentation so you can optimize where to invest. You want to analyze which products solve the problems of your most satisfied and profitable customers to identify projects and opportunities that best benefit your business.

Direction: How will it affect the trajectory of the product and business?

Look at the direction of your company. Is it flat, declining or growing? Assess the direction, not just of the top line, but the bottom line as well. Are you leaking profits? Perhaps you’re growing revenue but every dollar that comes in is eroding incremental profit. Consider how these things affect fixed and variable costs, and ultimately, the way you run your business.

Every product or portfolio also has its own trend. It’s important to know the quarterly and annual financial performance of each, to understand the product trajectory relative to overall business goals and the goals of other products. Then you can decide which opportunities are worth pursuing.

Having access to data is meaningless unless you shape it, customize it and make it relevant to your business. When you understand the size, shape and direction, you understand how your business operates and the context of your products within the business. This allows you to think, decide and act. But this isn’t a one and done exercise. It’s a loop that requires continuous monitoring. Commit to performing at least an annual assessment and start putting your data to work for you.

When Losing 800 Customers Pays Off

I once ran a $32 million business with 10,000 customers. It was primarily subscription and user based with some additional premium features in a mature market.

A small number of customers contributed a large amount of revenue, and a large number of customers contributed a small amount of revenue.

As we started looking at trends and customer segmentations, we created five tiers. The lowest-value tier was the “single office, home office” group. Approximately 3,000 folks were responsible for about $2.3 million; it was just about a break-even business. They could be a slightly annoying subset. Since they were infrequent users who were not proficient, they consumed development and support capacity and dragged on profit. Upon further analysis, we found that there was actually a trend down on this particular segment of our customer base.

Our solution? Triple their pricing. We understood that we would lose a lot of those customers but the results were interesting. While we did lose 800 customers, the revenue actually went up to $3.6 million, $1.3 million of which was pure profit.

By understanding the size, shape and direction of our business, we were able to confidently make this decision resulting in lower costs and increased revenue.

A version of this article originally appeared @ http://pragmaticmarketing.com/resources/analyze-this

Marketing is in the Middle: Chris Cummings

The fourth interview for Marketing is in the Middle is with Chris Cummings.  I’ve been reading his blog for quite a while – Product Management Meets Pop culture.  Not only does he have a cool blog, he’s got an interesting gig as the Director of Product Management of Games and stuff at Lycos’ Gamesville.      Chris provides clarity with every post by trying to look at the product marketing and management delima through a pop culture lens – movies, comics, and other pop culture ephemera.  Not only does it resonate with a gaming, tv watching and comic liking geek – it provides everyday examples which are easily digestible and fun.

I’m glad Chris was willing to share his take with y’all.  So here are his insights:

What marketing roles have you had and in what markets?

My first professional job was working in the marketing communications office of a college database company called CMG, which soon started spinning out different web-based startups. That was back in 1997. I’ve been in online ever since. The majority of my time has been in online games, and I’ve recently branched out into web publishing.

When you look at your career in marketing, what activities have you found most interesting/challenging?

The most interesting and challenging has been defining and explaining what it is, exactly, that I do. Over the years, more than one person (including multiple CEOs) have noted that: a) they’re not entirely sure how I do what I do but b) I always get the job done, and bring real value to the business.

On the one hand, that’s a big compliment. On the other, it made me a little nervous: I never wanted to be a magician or to live in a black box!


Based on your experience what activities do you think get the most return?

I’m really focused on digital, so I’d say making sure your website or app has customer-focused content and interactive features that speak to the needs of your customers or prospective customers is paramount. Part of that “interactivity” should be providing clear, and plentiful, ways for them to reach you. So many businesses still rely on the “Contact Us” or “About” page to drive leads, it’s mind-boggling. But then again, almost half of all small businesses don’t have a digital presence at all so there’s clearly plenty of room for improvement!

What do you feel is the most important component of a successful marketing gig?

Understanding the problems of the market you’re focusing on. If you don’t get that, then you basically just have a really cool tech demo and not a business. That applies to everything, even online games. What problems does Gamesville.com solve? Part of it’s psychological, part of it’s pure advertising. Gamesville provides a place for people to come together, create community, and encourage each other playing games while also pulling together a valuable demographic that advertisers want to reach in an environment uniquely suited to getting their messages across.


How have you seen organizations change in the last 3-5 years to better support the needs of product marketers, product managers and communications teams?

I think we’re seeing more strategic integration on the metrics that drive our businesses, and that’s helping everyone including the roles you mention… providing they’re doing a good job. Not everything is measurable online, but many key things are. Focusing on those key metrics helps everyone understand our joint success and failure, and you’re individual role in it.

If you could design the perfect corporate environment for a marketer to be successful what would that be?

If I was going to design the perfect corporate environment, we’d have a product organization that reports directly into the CEO along with the other C-level functions. The Chief Product Officer would be responsible for leading the product while working with the other members of the senior team to make sure finance tracks key metrics (not just costs!), that our marketing is effective, sales is selling, and engineering is making the magic happen. Team work among the senior team is critical, including productive conflict, but everyone needs to respect and understand who’s driving which parts of the business — and which “key drivers” are really key.

How far is this from reality?

I think we’re getting closer and closer to this every day. Thanks to web analytics, there’s so much information available — and anyone with the right credentials can see it, at any point, including the CEO. Step one was getting everyone to see the same data. Step two is getting everyone to agree on which metrics actually matter!

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I think the Chief Product Officer (CPO) will definitely be an emerging role in the market as Chris suggests.   I also think that Chief Marketing Officers and CPO’s will need a key technology role to support them in the goal of improved processes and metrics.  Organizations are going to not only need to invest in developing products to be successful, but also leverage tools and content to drive efficiencies and increase ROI of marketing programs/investments.

Twitter: chriscumming01
Blog: Product Management Meets Pop Culture (http://christophercummings.com/)