Metrics are boring, yes I know, however it is important to know your metrics and how they affect your website.
When I meet a lot of people, the first thing everyone wants to talk about are their numbers. Now the numbers, if they are large social media followings or email lists, that’s all lovely, but when it comes down to it, they are not really that important.
You can have 50,000 twitter followers but if no one is listening to you, no one is talking to you, you are not engaging, then those numbers do you no good.
I know people who have 500 twitter followers who get sales from those because they talk to them as if they are their mates and they have been doing it for ages.
So it’s not all about that how many you have, but it is more about the quality that goes on with the numbers you do have.
These are the numbers that I think you should concentrate on in a business.
You need to know first of all your profit margin. Now this, you’re going to think “well duh”, but you will be amazed how many do not accurately know what their profit margin is.
Do you know how to work it out? If you are not sure, if you are not really clued up on math, don’t worry. A lot of people are not.
A lot of people don’t like the numbers, and are worried about them. What if you get it wrong? Ask your accountant, or ask someone else.
If you have staff or a team there is likely to be somebody in your team who can help you, who can give you that information, who can help you work it out.
Unless you work it out properly and accurately you cannot seriously operate your business and I mean that.
What I mean by seriously, is you can play at business, you can treat it like a hobby, that’s fine and when you start losing money, then figure out what to do about it, or you can take it seriously.
Those numbers are going to help you acquire new customers because it is going to cost you money whether you use free tools, whether you use free tactics, or whether you pay to acquire it.
And the reason free ones cost money is because it’s going to take you time. There is nothing you can do that will not take your time, so use your time efficiently.
For example you could be writing articles or writing emails to your potential customers which is fantastic.
It may take you to write an article, it may take you for hours to write an effective one, it may take even longer.
In that four hours, could you have spent your time better visiting a customer and closing a major order?
Is that your strength, is that what you’re better at?
Say for example, that made you a thousand dollars, could you have paid someone less than a hundred dollars to write you an effective article while you were out making a thousand dollars?
So you need to apply everything into the cost.
Cost of Acquisition
This is the cost of getting a customer and it is the second metric you need to know. Of course if you use Google ad words, Facebook, pay per click, then it is very easy.
Then you can say for every one hundred clicks, I get two sales, every hundred clicks cost me 200 dollars, and the cost of acquisition is a hundred dollars.
But what about your time? Are you applying your time, how much do you spend? In my marketing systems, I would point out that much of it is free, once you set up, its automated but it needs fuel.
The system needs fuel to keep it going, it needs gas, you have to keep producing content, so how much time do you spend on it?
This is the cost of acquisition. Now it is very low but it is important that you know what it is. So you should measure the cost of acquisition from your customers and from your blog.
This all comes down to tracking. You need to be able to track where they come from and the cost of acquisition when you pay for it.
If you stick an ad in a magazine and you pay a thousand dollars in a month, do you know how many people come from that?
Have you got some kind of code, some kind of special offer that they can only find in that ad so you can track those?
So you need to think about these things, if you don’t know how much it costs to get a customer, how can you know how much to spend on marketing and advertising?
If you have a certain channel that doesn’t cost a lot, do more of it, if its effective that is. If it’s getting customers you can do more once you know what it cost.
Once you look at your budgets, once you know what your profit margin is you can figure out how much you can actually spend on acquiring customers.
It may be that you’re spending half the amount that you could and you need to test everything.
Customer Lifetime Value
The other one is customer lifetime value, because I think there are three main things you need to know. So for example, in my fire safety business, if someone comes along and buys a smoke alarm for their home, then it’s possible that they may want something else later.
If they are a building contractor, a construction company that is buying it for a construction site they are just setting up, it’s very likely that they will want more equipment for their next site and their next one because it’s something that they will probably buy regularly so we need to know.
We need to know what that customer is likely to spend on their first visit and then how often they are going to spend again and how long they are going to be a customer for.
Now it depends on your product, your customer life cycle but if you take a customer that can buy every year forever, just apply a couple of years at it and if you think they are going to buy every six months and their average spent is $200, then in two years that’s $800.
If you know that’s likely and you know your profit margin, you know how much you can spend to acquire that customer for the long term and still make a profit.
That’s when these things come together, knowing how long a customer will be around for, so yes that means you need to know how many of your customers are repeat buyers then you can figure out how to make more of them repeat buyers.
When someone is a repeat buyer, how often do they repeat buy, how much do they spend etc.? All of these metrics becomes far more important than twitter followers and Facebook likes and email lists.
Trust me. In a business you’re going to have to make money and you’re going to have to track the figures that will help. Just think about it.
Monday Book Recommendation
I actually read this quite a while ago, it is a very good book. What it means is that the one thing you can do that by doing it everything else will be easier or unnecessary.
Now honestly this is a fabulous book, seriously good. If you know of Pat Flynn, this is his favorite all time book, it’s that good.
If you can just nail down that one thing you should be doing and concentrating on that makes everything else easier, imagine your life afterwards.
I recommend strongly that you buy and read this book. I’ll have some more good stuff for you tomorrow and be sure to tune into Wednesday’s Interview as I spent some time talking to Vinay Pantaker of Process Street.