Creating Value With Metrics

Geoff Wolf, EVP, J.Schmid & AssociatesJude Hoffner, Principle, Hoffner Marketing

Agenda• Why data metrics are the building blocks for creating value

• What data metrics create value • How to create value with data metrics

• When are data metrics most effective in creating value

• Case Study• Q & A

Why Metrics Are The Building BlocksMetrics are a Measurement Process

Measure Getting From Here to There

Building Blocks What are they?

Rules for Building Blocks - This is KEY ! We must have consistency

Here

Start With Awareness of What You Will Be Measuring With Metrics

There

12

34

Brand KPI’s•Merchandise / Services •Sales representatives •Retail store traffic•Web Visits

KPI’s & Value•Dollars•Number of Leads•Quotes

Value Today•Stake in ground today

Value Tomorrow•Goal for tomorrowBuilding Blocks

BRAND FIRSTWhat key performance indicators drive YOUR brand?

WHAT VALUE DO KPI’S DRIVE Specifically where is value created?

MEASURING VALUE1. Where are you today?2. Tomorrow?

BRANDING

Advertising and Promotion

Strategic Planning

Market Research

Look & Feel

Why It Matters

Differentiation

Social Factors

Brand Statement

BRANDING

KPI’s Driving Value

Stake In The Ground

Objective is to be able to repeat value1

Archive rules over time2

Details, details, details3

✓

Get everyone to sign off on these4

RULES

Take-Aways

Not Seen BeforeWhat KPI’S Matter to YOUR Brand

Monday AMDefine Value for YOU

ValueToday? Tomorrow?

What Data Metrics Are Important1. Mostly Driven by Attribution2. Segmentation3. Scale4. Chasing Purchasing Behavior

AttributionMedia Channels

CODE DESCRIPTION Order Allocation Table # DaysAMAZON AMAZON Y 56Catalog Catalog 180Email Email Y 1SEMBRND PAID SEARCH BRANDED Y 56SEMNOBR PAID SEARCH NON BRAND Y 3SEOBRND NATURAL SEARCH BRANDED Y 56SEONOBR NATURAL SEARCH NON BRAND Y 3WEB WEB

Allocation Rules

Pre-Attribution

Catalog, Phone, Fax & Mail

858004138.5%

Direct to Site2178405

9.8%

Email3136570

14.1%

Misc Other1296597

5.8%

Organic Search4126504

18.5%

Paid Search2144953

9.6%

Referral332490

1.5%

Unknown516376

2.3%

Demand by Channel Pre-Match FY '13 Total Demand = $22,311,936

Post-Attribution

Catalog18546650

83.1%

Direct to Site468535

2.1%

Email124912

0.6%

Misc Other294800

1.3%

Organic Search1030047

4.6%

Paid Search572125

2.6%

Referral125237

0.6%Unk

11495125.2%

Post-Match Demand FY'13Total Demand = $22,311,936

Value

Total Demand = $22,311,936

Total Demand = $22,311,936

Pre-MatchPost-Match

Changed Email Rule

Total Sales 1/1/10-1/13/11 4,531,809$ Omit -$ % ofInput to Matchback 4,531,809$ Total Sales

Matches to 2011 Mail Files 64,846$ 1%Matches to 2010 Mail Files 2,879,853$ 64%Matches to 2009 Mail Files 122,099$ 3%Misc/Old Catalog 280,253$ 6%Total Catalog 3,347,052$ 74%

SEO 198,300$ 4%SEM 112,762$ 2%AMAZON 47,844$ 1%EMAIL 588,632$ 13%UNKNOWN WEB 237,220$ 5%Total Non Catalog 1,184,757$ 26%

TOTAL 4,531,809$

Total Sales 1/1/10-11/12/10 2,672,470$ Omit -$ % ofInput to Matchback 2,672,470$ Total Sales

Matches to 2010 Mail Files 1,725,137$ 65%Matches to 2009 Mail Files 120,969$ 5%Misc/Old Catalog 183,536$ 7%Total Catalog 2,029,642$ 76%

SEO 117,869$ 4%SEM 64,707$ 2%AMAZON 35,698$ 1%EMAIL 281,017$ 11%UNKNOWN WEB 143,537$ 5%Total Non Catalog 642,828$ 24%

TOTAL 2,672,470$

Two Days One Day

Attribution is Challenging

SegmentationPost-Match Demand FY'13

House File Segments

Group 1 - New-to-FileBuyersLeads

Group 2 - Buyers Assigned to Outside Sales Representative

EngagedNot Engaged

Assigned to Inside Sales RepresentativeEngaged

Not EngagedLocated Within Drive GEO to Retail Store

EngagedNot Engaged

All Other

Group 3 - Leads Assigned to Outside Sales Representative Assigned to Inside Sales RepresentativeLocated Within Drive GEO to Retail Store

Note:"Engagement" will need to be defined and then flagged on each customer record

Scalable = Somewhere to Go

Purchase BehaviorInside Sales

Retail Stores

Direct Mail

Web Site

Sales Reps

Take-Aways

Not Seen BeforeScope of Attribution Process

Monday AMDefine Segmentation for YOU What drives YOUR value

ValueThink Customer Behavior

How To Create Value• Define Value• Testing• Part II Today = Testing

DEFINING VALUE WITH DATA METRICS ?

CAUSEMarketing Strategies & Tactics

PREDICTING RESULTSReturn On Investment

ROI VALUE

Quick Breakeven Analysis Organic Affiliate Paid Search

Shopping Engines Direct Mail

Average Order $ 267.00 $ 267.00 $ 267.00 $ 267.00 $ 267.00 Gross Margin 158.60 158.60 158.60 158.60 158.60 Total Variable Fulfillmt Cost (9.43) (9.43) (9.43) (9.43) (9.43)Contribution Margin $ 149.17 $ 149.17 $ 149.17 $ 149.17 $ 149.17 Variable Marketing Expense $ 0.005 $ 0.867 $ 0.503 $ 0.039 $ 1.254

Breakeven Values$/Contact $ 0.01 $ 1.55 $ 0.90 $ 0.07 $ 2.24 RR% 0.00% 0.58% 0.34% 0.03% 0.84%

1Observed Response 0.05% 0.55% 0.30% 0.03% 0.80% 0

Contribution (Cost) $ 139.91 $ (8.56) $ (18.65) $ (6.87) $ (7.58)

ROI VALUE@ 1.0% Resp 1st Yr 2nd Yr 3rd Yr

Customers 2,820 Retention Rate Orders per Year Avg Order Size Total Revenue $200,000 $90,000 $47,000 COGS (%) 27% 27% 27%Cost of Sales $53,400 $24,030 $12,549 Marketing Costs $186,000 $12,650 $8,800 Total Costs $239,400 $36,680 $21,349 Gross Profit ($39,400) $53,320 $25,651 Discount Rate 1 1 1Net Present Value ($39,400) $53,320 $25,651 Cume Gross Profit ($39,400) $13,920 $39,571 Cume Customer LTV ($14) $5 $14

Contribution (Cost) $ 139.91 $ (8.56) $ (18.65) $ (6.87) $ (7.58)

Classic Testing

Communication

TEXT

Answers

Testing

Creating Value

A NEW VIEW OF TESTING

Take-Aways

Not Seen BeforePredicting – How Long Can You Count On It?

Monday AMDefine a Value for an Ongoing Project

ValueHow Will You Communicate Value

When Is Data Most Effective?

As an ONGOING process !

1

2 4 6 8

3 5 7

Capture & Normalize Data

Query Environment DISCOVERY ACTION

PROCESS IN

“Fish out answers to important business questions” Harvard Business Review

The Future Value of Analytics is Discovery

Take-Aways

Not Seen BeforeValue = Discovery

Monday AMChange Your Perspective

ValueProcess rather than static reporting

Predictions?

"640K ought to be enough for anybody.”

"640K ought to be enough for anybody.” -- Bill Gates (1955-), in 1981

WHAT DOES ON PREDICTION PROCESS LOOK LIKE TODAY ?

•Business case•Testing •When•Where•What Value

Planningmeeting

RegularCycle

•Daily •Monthly•Quartely

REVIEW

Statistical Confidence

Retest

QUERY

ANSWERSA PROCESS

HOW OFTEN

Daily, monthly, quarterly, annually?

Date increment

HOW LONG DO ANSWERS LAST?

Retest, what things changed, new variables now necessary……..

Case Study - What Process

Should Look Like

Query

Summary• Why - Data metrics are the building blocks for creating value

• What - Data metrics create value • How - To create value with data metrics

• When - Are data metrics most effective in creating value

• Case Study

Q & A