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Saturday, May 24, 2008

Which numbers really matter?

"Drew's Marketing Minute." Here's my 'give' for today -- a link to Drew McClellan's blog, Drew's Marketing Minute. This is his book, 99.3 Random Acts of Marketing. I haven't read it (yet) but you don't need to pay anything to read his blog.

Our sales deadline for June has just passed, and the tentative final numbers are in. We've broken even, just. On one level this is good -- the business isn't sinking -- but on another, it is disturbing, because the final results are significantly below projections set and reported by our team in the weeks before deadline.

"So what do we need to change here?" I ask. Logically, and commonly, businesses set sales quotas and sales reps make projections on request -- and they give numbers either through wishful thinking, hope ("If I say it will be, it will.") or, if the sales representative wants to prove exceptional talent, lower than reality. ("Now, I've gone ahead of projections, again.") So while the final numbers have some meaning -- we need as a business to know if we have sold enough to make a profit -- the numbers we are hearing on the way to the goal don't do us much good.

One 'solution' is to discount or enhance the numbers based on subjective credibility perspectives. "OK, salesperson A always under-projects so we can add something to the calculations; and salesperson B over projects, so lets discount." But again, does this really help the business -- or trust -- between the manager and the sales team.

Maybe the solution is to break the final number into components, based on our understanding of the business and previous experience. If X number of calls leads to Y number of appointments and Z number of sales, we could ask the sales people for call reports. But again does this measure anything useful. I fear the possibility of wasted calls to people who don't really matter -- or pestering and irritating calls to those who do -- so the sales rep can meet the number or quota.

"We could do nothing, just trust the sales team to do their work?" might be an answer -- and it could be -- but here, the problem is blind faith often results in blind results.

Then something dawned on me as I woke up this morning. Why not try measuring something unconventional, somewhat fun, and maybe habit forming. Maybe it won't work, but maybe it will provide something useful. It is this. "What good (business) deed did you do today?

The argument goes that sales come from sharing, from respecting, from giving, rather than hoping people will purchase something -- so the steps we take to provide a little extra value, some worthy assistance and support, and some contribution to others within our market community really matter far more than how many people we call, how many appointments we set, and how many orders we write (though the latter is the final number we need to achieve).

Will this strategy work? I don't know. It is a morning thought and needs to be tested in the crucible of real work and real relationships. And maybe I am trying to force quantification of something that cannot be so easily structured. But at least it is measurable, tangible, and real. And it can be reported daily, in a brief huddle meeting or email (I tend to like the huddle idea). Could this be our Key Performance Indicator (KPI)?


Daniel Smith said...

I am going to try and leave this comment again, and hopefully this time it doesn't get lost in cyber-limbo!

As I wrote before, I like the idea of measuring our "gives" in some way, because in the long run they ought to correlate pretty closely to our "takes."

This, however, doesn't address the short-term need for you to be able to project cash-flow on a month by month basis. I had an idea around this kicking around in my head earlier this month, so I will try and verbalize it here.

I think the primary problem is a conflict between wanting to be aspirational and needing to be realistic, and somehow supposing to capture both requirements in one metric- monthly projections.

But what if we had two separate-but-similar metrics called Target and Projection?

The first, Target (or Goal if you prefer), would be that nice round number to which we aspire from day one of the month, but that we may not necessarily have the concrete foundation to justify at that point. In other words, it's what we should get to if all goes as planned, and what we expect to get to given past effort/results.

The second, projection, would be much more accurate and defined by a formula. Ie, for us something like:

Number of features with lists in house X $3000 + Contract Sales Base + Approved Paid Features = Projection

Using this two-pronged model, the two metrics will be disparate at the beginning of the month, but should become closer as the days go by. If they don't, we know something is wrong, sooner.

I think I will post a response on my blog later (since I clearly have much to say on the subject!)


(crosses fingers that it posts properly this time...)


Construction Marketing Ideas said...

Daniel: I agree, though the target and realistic numbers should, as the month of publication approaches be nearly the same. If they are not close, we can decide on remedies -- but if wishful thinking prevails, and we don't see the problem until it is too late, we cannot work on solutions.