Data is a lot like teenage sex-
Everyone talks about it, but nobody really knows how to do it. Everyone thinks that everybody else is doing it though, so they pretend that they are doing it too.
– Dan Ariely
Now that we have your attention, we can get into the meat of the content. This lecture was initially presented to a group of financial marketers, but it’s applicable to businesses in any sector.
Why do I need to know the lifetime value of my customers?
Lifetime Value (LTV) may be one of the most important metrics that a business can measure. Everything from cash-flow to ad spend relies almost exclusively on this number. If you know the lifetime value of your customers by source, and you know the amount of margin that you need to make off that customer, then finding the maximum acceptable Cost per Acquisition (CPA) is a simple equation. Likewise, with cash-flow calculations. If you know when customers who purchase item A will likely return to purchase item B, then you can forecast your revenues pretty accurately.
Our client Danette May has the perfect example of these pieces coming together. They had a funnel that wasn’t converting to the level that they needed it to, and they were about to cut it. They came to Praxis Metrics to find out what their average LTV was for customers who came through the funnel. We supplied them with that data, and armed with that new information, they found that they could afford to spend more on acquiring those customers than they previously thought.
By increasing their acceptable CPA by just $5, they increased from 15 sales per day to 350 sales per day within two weeks. The trend continued upward to hit 615 units per day off this single funnel. With an average value per order of roughly $97, they now make more than $30,000 per day in sales. Across the year this funnel alone accounts for more than $10,000,000. If you would like to hear more about their story, you can see more of what they have to say here: https://praxismetrics.com/success-stories/danette-may/
How can you get a leg up in your business?
There is more noise and competition for clients than ever before. Anyone with a laptop and an internet connection can now start a business and possibly disrupt entire industries. How do you compete in a landscape like this? Information.
Information is at the heart of most of the problems faced by businesses today. Either you wander around blindly because you have too little information; or you have too much information stored in information silos. These silos may contain valuable insights, but since they don’t communicate with the other systems, you have to rely on humans to extract the valuable information and make it usable.
Taking action from data is the new competitive advantage.
The only difference between a successful online marketer and a failure is that the successful marketer knows why they were successful and can replicate that success.
Data does not solve problems.
Data is never the solution to a problem. Data merely guides you to information. Information leads to knowledge. Knowledge transforms into wisdom, and wisdom when applied to your actions, creates Praxis.
The major dividing line in this system is the transition from knowledge to wisdom. Everything that comes before wisdom is based off past observations, and makes no statements on the future. Wisdom allows you to make predictions about things to come. Praxis requires taking those predictions and then doing something about it to better your life.
Not taking action from data is like owning a race car, but then never putting fuel into it.
Data contains the what. Information tells you the when or the where. Knowledge teaches you how. Wisdom guides you to why. Praxis is the actions that you take based off the data, information, knowledge, and wisdom that you gain.
Where do I begin?
Your outputs are only as good as your inputs.
Therefore, you need to begin by tracking your data. This forms the base of everything that you build later, so you need to make sure that your tracking is in order.
Meaghan and AJ provide a personal example of taking data all the way through Praxis beginning at 19:10 if you are interested in hearing more about that.
The initial phase of your journey is all about getting clean, accurate data. The number one mistake that small to medium businesses make is that they are not using UTM’s in all of their marketing efforts, and they don’t have their Google Analytics set up properly.
What the devil is a UTM, and why does it matter?
You can track your marketing campaigns uniformly across most analytics tools utilizing UTM parameters. UTMs work with Google Analytics and many other tracking tools.
UTM is an abbreviation for “Urchin Tracking Module”. “Urchin” came from one of the very best website analytics tools that used on-page scripts to collect visitor data.
Like a lot of great web software, Google eventually acquired Urchin.
A UTM has five variants of URL parameters used by marketers to track the effectiveness of online marketing campaigns across traffic sources and publishing media. UTMs contain an encoded suffix that you append to a URL (A URL being a website link). The suffix is generally quite long and is made up of various ‘parameters.’
Each parameter provides specific information about the link in question. And by stringing parameters together, you can track your online marketing campaigns with a tremendous amount of detail and granularity.
UTM’s are one of the most powerful tools that you have in your analytics arsenal, but they can also be very daunting to get started with. We have written several blog posts on the subject matter, which can help you understand them much better. You can read more of those here: How to increase revenue with one simple tweak, and here: Why UTM’s are so important, and we even set up a course that will teach you from start to finish how to create UTM’s and even has a spreadsheet that will automatically create them for you here: https://datarich.thinkific.com/
After UTM’s, what’s next?
Once you have control of your UTM parameters, you need to start a process called Metrics Mapping. Metrics Mapping allows you to gain clarity on what metrics you should track, and what those metrics do for your business.
Metrics Mapping starts with your business goals. You need to know where you want to go before you can create a map to get there.
From there, you need to figure out what questions you have to answer in order to accomplish that goal. You could ask questions like, “Where do my sales come from?”, or “How many sales have I averaged over the last 30 days?”.
Once you have the questions that you need to answer, you need to find the metrics that answer those questions for you. You need to hunt down where the most accurate information on the topic lives, and then work to connect all of the most accurate data sources together.
Once we have pulled all of the data together, you have to validate the data to make sure that it is accurate.
After you have all of your accurate data in one place, you can apply formulas and filters to make sure that it’s showing you just what you’re looking for, and then it’s time to plug that data into a data-visualization tool.
OK, I am done with tracking, everything looks good. What now?
Congratulations on making it through the tracking stage! You’re now ready to move into the fun stage: automation.
What compound interest is to your money, automation is to your time.
Automation takes your business to the next level, it allows you to scale your business in ways that most people don’t even imagine. By removing manual reporting and human errors, you not only save your company money, but time. Automation allows you to free up some of the smartest people in your organization to do what they do best rather than fetching data and compiling reports.
The automation stage allows your team to no longer have to look at raw data, but now they can look at actionable KPI’s that they can easily glean insights from. The automation stage rapidly progresses people out of the information and knowledge stages and allows you to begin to focus on the wisdom and Praxis stages exclusively. That is one of the primary reasons that companies who get to this point are able to rapidly scale and expand their business.
Businesses that reach automation can focus on what they do best and let machines do the rest.
That covers the first two steps of data maturity.
The action steps that you need to take in order to get past these stages are:
- Start tracking now
- Organize your tracking
- Map out your most valuable KPI’s
- Begin to track those KPI’s
- Automate as much as possible.
If you would like to see more of the path of data maturity, be sure to check out our presentation of the entire process of data maturity here: https://praxismetrics.com/blog/data-rich/how-to-scale-in-the-modern-business-landscape/