Managing To Averages Leads To Average Managing

One of my favorite professors at Georgetown's McDonough School of Business had a great quote about averages -- he said that when your feet are in the oven, and your head is in the freezer, the middle of your body is at average room temperature. In other words, "average" is not necessarily a good representation as to what's really going on.

Averages are a great starting point when performing marketing analysis; however, don't rely on averages as your end point. Instead, I recommend focusing on two specific areas -- influences and impacts.

    * Influences -- What media and/or creative elements have the greatest influence on your results? Look for areas where you are spending the most money, have the largest media weights, etc. These areas have a tendency to have major influence on your results (thus the subtitle).
    * Impacts -- What media and/or creative elements have the greatest impact on your results? Impact can be different aspects of your funnel -- upfront response, lead conversion, or ultimately order/sales conversion. Focus on determining performance trends for the areas that drive the most impact on your marketing efforts and what drives your bottom line.

Using averages as the main part of your analysis means you are only scratching the surface. Make sure to dig deeper to determine what really has the most influence and impact on your results. Many times, we are limited by time and money, so make sure both are being spent the most effective and efficient way possible to drive your marketing results.

Comments

[Mark Pilipczuk]

I'd go one step further on your comment that averages are just scratching the surface. And that's to say that unless you're absolutely new to analysis, you're wasting your time on averages.

If you're able to capture enough information to give you averages--CPA, LTV, churn, whatever--that's an excellent start! But it's just a TINY bit more effort to do some basic segmentation of your results.

When somebody asks me "how do I deaverage my data?", I find the quickest way to segment is to go back to the old RFM (recency, frequency, monetary value) method. It'll get you off to a good start, before you dive into another level of complexity.

So, break down your customers by new/1-2 yr old/older or 1x buyer/2x buyer/multiple buyer or $100.

Now that you've done some quick and dirty segmentation and deaveraging, you've deaveraged your managing and decision making!