In sports, teams rise (or slump) to the level of their competition. What is your company’s single most essential challenge that your team can rise to?
In sports, a good coach has a clear strategy, that is, clear directions for HOW the team should play to win. A focused company strategy is not commonly part of dashboard and reporting discussions.
But you’ve seen in part 3 that metrics can be crafted to motivate behaviors that advance the company’s strategy.
Pivot Point works with a B2C manufacturer / distributor with progressive products and a respected brand. Customer acquisition costs were a large % of revenue. B2CM’s leaders knew it was expensive to grow. Their digital agency analyzed the situation and recommended becoming more efficient with that spend, and B2CM had other initiatives to trim costs.
B2CM leadership was wiser. They sensed that the problem was not the cost of acquiring. They asked the right question: what is the lifetime value of a customer, that is, the value of the asset (the customer) they were acquiring?
So we analyzed what distinguished the “best” customers from the “rest”. At every company, we find predictable, substantial differences in lifetime value behavior before the first order and within the first few orders. Commonly we see differences in:
How they were acquired. Not all marketing sources are equal.
What products they buy in the first order or two
Purchase cycles and habits
Levels of discount
Customer service contacts
Sometimes demographics / business characteristics
At B2CM we uncovered that a high percentage of customers - far higher than they hoped - were single order “one-and-done.” And - a nugget almost literally of gold - after a second order, customer value accelerated: quicker order cycle, rising order value.
The “grow with cost control” strategy might get them 2 or 3% lower cost, and only for new customers. Getting a second order from a customer would increase profit for that customer by 250% or more, and probably at a lower cost than acquiring new customers.
The strategy, then, was to turn from acquisition marketing to relationship marketing. That meant immediately to cultivate new customers so they wouldn’t end up as single-order customers. The rallying cry that everyone from the warehouse to engineering to customer service could get behind: “MISSION #1 IS ORDER #2.”
How? The “best vs rest” analysis gave clear directions.
One, their loyalty platform was working, so they could double down on that messaging.
Two, certain acquisition sources tended to attract more “best” customers, as did certain products, so they could shift marketing spend and content.
Three, we now knew the categories and timing of 2nd order (45 days - far shorter than they had assumed) which were necessary to cultivate a good customer, giving the marketing team a sharp focus.
With that, they could craft metrics to oblige the team to pursue these customer behaviors, and they had a clear and simply rallying cry.