Advertisements

Key Points To Consider When Developing An International Business Strategy

Let us take a minute to salute the international companies, those that have gone multi-market or are on that path. They deserve our applause and respect. When I led market entry programs , I observed that these international firms tended to outperform the purely domestic firms, but for a reason you might not expect.

Companies that were operating in many markets tended to do better than those that had a presence only in their home market, but this had more to do with the international journey than the additional revenue.

The process of going international forced a company to adapt for each new market. As a result, the international firm became a learning organization which encompassed several different successful models, and the lessons from each new market could be applied in other markets. So the international company tended to develop a feedback mechanism and process improvements more readily than the purely domestic company.

Indeed, if you ask the leadership of that purely domestic firm what they want to do tomorrow, you are more likely to hear that they want to do tomorrow what they did yesterday. In other words, many business people (like all of us) have a bias for the familiar. We all like patterns of behavior and we like to stay in our comfort zone. I see this regularly when I discuss China opportunities. We will have a nice conversation with a lovely mid-size company, but unless it has an international culture it will have an overwhelming focus on building out a successful domestic model. The management philosophy at these firms tends to be:

Today In: Asia

— Reliant on the organic growth that has served them well over the years;

— Highly structured organization, task-driven, with people looking at monthly and quarterly results;

— Heavily product-focused.

These companies tend to dominate their space or be a segment leader. All of this means these companies have a strong incentive not to expand their current set of activities, and not to think about what changes might be in order. The key principle at these firms is MOTS – More of the Same. We do what we did last year, but we do more.

More revenue, more customers, more market share, more net. A pretty common-sense approach. But this is not a strategy. This is a behavior pattern. Let’s do what we have always done, presumably because it has more-or-less worked. This approach makes sense if the world is static. If the world is standing still, if society is standing still, if technology is standing still, and if competitors are standing still– then it is ok if the business stands still as well. But there are moving pieces out there, so you had better move as well. Unless the business incorporates a bit of a change culture, it risks falling behind.

Therefore, some sort of strategy is in order. Strategy can mean the allocation of resources without the normal formula for a return, displaying some capacity for experimentation. Strategy can mean you are doing something different, and the constituency for this change has not yet been established. Strategy can mean clearer costs than benefits.

Strategy can mean a journey into the unknown. You are taking steps that require you to stretch beyond current capabilities. A new product launch could represent a strategy. A new sales channel. Or a new market.

For most companies, the decision to go into a new market is a matter of strategy, because growth is no longer MOTS. The best expression of this might be a decision to go to China. On any given day it might not make sense to have a strategy. It makes sense to do what you did yesterday. But cumulatively, this could lead to a disaster.

On any given day, it might not make sense to go into a new market. But over the long run it could cripple the company to stay only in its home market. I caught up with Jack Ma recently at the Forbes Global CEO Conference. Jack has stepped down as Alibaba ($BABA) chairman, but he is still fiercely passionate about helping companies enter the China market. I had not seen him in almost a year, but we immediately saw this issue eye-to-eye.

Sooner or later, every company needs an international strategy. Sooner or later, every company needs a China strategy. Strategy is possible. Cost-free strategy is not. Those companies that are taking the international journey, we salute you.

Follow me on Twitter or LinkedIn. Check out my website.

Whether in banking, communications, trade negotiations, or e-commerce, my professional life is helping companies enter and succeed in new markets, with a particular focus on China. As Founder and CEO of Export Now, I run the largest international firm in China e-commerce. Export Now provides turn-key services for international brands in China e-commerce, including market strategy and competitive analysis, regulatory approval, store operations and fulfillment, financial settlement and remittance. Previously, I served as Asia Pacific Chair for Edelman Public Affairs and in my last role in government, I served as Undersecretary for International Trade at the U.S. Department of Commerce. Previously, I served as U.S. Ambassador to Singapore. Earlier, I served in Hong Kong and Singapore with Citibank and Bank of America and on the White House and National Security Council staff. New market book: http://amzn.to/2py3kqm WWII history book: http://amzn.to/2qtk0wK

Source: Key Points To Consider When Developing An International Business Strategy

27.9K subscribers
Welcome to the Vodcasts of the IUBH correspondence courses. (http://www.iubh-fernstudium.de). In this video of the course “Managing in a Global Economy”, part of the “Master of Business Administration” program, Jürgen-Mathias Seeler discusses the topic “Strategy Development in International Business”. By the end of this lecture you will be able to understand the meaning of strategy in international business, the potential benefits from global strategies, the most important strategic choices in globalized business operations and how to manage strategy development and strategy adoption successfully. To find out more about the “Master of Business Administration” program, please visit http://www.iubh-fernstudium.de/unsere….

Advertisements

Your Bank Could Be Holding Your Business Back From Growth. Here’s When You Should Consider Breaking Up

The bankers you work with may seem like great men and women, and they probably are truly nice people. They greet you by name, ask about your spouse and kids and appear to take a real interest in how well your enterprise is doing. Their financial products may be meeting your needs to a T.

But how strongly do you feel about your relationship with your bank? How do you think they’ll cooperate with you when the stuff hits the fan — which it most certainly will at some point? That’s the real test.

True colors

Here’s a true-life example: I’ve been working with an entrepreneur who finds himself in a down cycle. The company’s business plan is sound, the management team is experienced, and the product remains viable, so the problem isn’t terminal. But it may be awhile before the company’s prospects brighten.

The company works with a popular bank, which is starting to get nervous about its loans and is considering adding demanding conditions or even calling the loans.

The entrepreneur, however, feels a sense of loyalty to the bank, which has worked with him for several years. I have counseled him to consider other options. The reality is that bankers seven states away that he’s never met, not his local team — are the ones making the decisions.

He’s holding fast– and that’s a big mistake.

The entrepreneur has the opportunity to move to a smaller, regional bank. That bank’s rates may be slightly higher, but they’re more interested in a relationship.

And there’s certainly value in being in the room with the actual decision-makers — for both sides. Yes, your financials are going to be the primary determinant in lending decisions, but the human element can sway an on-the-fence lender to your team. Meantime, you’ll be able to tell a lot about the banker by meeting in person. Sometimes, it’s okay to trust your gut.

Loyalty only takes you so far

I get why entrepreneurs are loyal to bankers that have brought them success, but passing up the opportunity for a better financial situation is a kin to resting on your laurels.

As an entrepreneur, your best chances for success are by finding every possible edge you can. Incremental gains add up nicely over time, you should be taking advantage of them.

As for your spurned banker — they will get over it. Yes, that’s cynical, but that’s the way the business world works, especially with the larger banks. Remember also that your financial needs are a living, changing thing. What worked for you at one point may not be the most appropriate thing for you now.

The most successful entrepreneurs and companies are never satisfied with the status quo. Neither should you.

By: Ami Kassar CEO, MultiFunding.com

Source: Your Bank Could Be Holding Your Business Back From Growth. Here’s When You Should Consider Breaking Up

38K subscribers
Are you struggling in your business? Does each month feel like it’s a mad dash to figure out who’s going to get paid? I want to teach you what I do to turn around businesses to make them profitable again. Are you an entrepreneur? Get free weekly video training here: http://www.danmartell.com/newsletter + Join me on FB: http://FB.com/DanMartell + Connect w/ me live: http://periscope.tv/danmartell + Tweet me: http://twitter.com/danmartell + Instagram awesomeness: http://instagram.com/danmartell I’m the guy that gets the call when a business is in trouble… … when a business is on the verge of bankruptcy. Friends call me. Banks call me. If I’m lucky, the entrepreneur calls me before it’s too late. The truth is, it’s always challenging for me to see another entrepreneur failing… … especially when they have major debt owed, personal guarantees and their biggest dreams hanging in the air as collateral. It’s even more heartbreaking when kids are involved. It crushes me inside. That being said, the game plan to turn things around is ALWAYS the same. The #1 thing it takes is uncomfortable discussions, honest assessments and quick decisions. Hard? You have no idea. However, staring at the light waiting for the train to hit you isn’t the right move either. Recently I was able to take a company losing tens of thousands each month, to profitable in 14 days. In this week’s video I provide a step by step process for getting you off the tracks, and pulling a sharp 180 regardless of the challenges you’re facing. When it comes to the steps and process they go like this: 1) Get clarity on the numbers (scary as hell, but necessary) 2) Test the business model 3) Cut deep but not the bone 4) Focus on the customers 5) Write the rules 6) Build it back up The truth is, this strategy is something most companies should use to evaluate their real success. Too many times I’ve had founders tell me their business is doing “GREAT” only to ask a few questions and have them realize they’re way below the market norm. Stop being romantic about your business and get serious about how you’re measuring your progress. Leave a comment below with your business, industry and top question you have about your business model or challenges and I’ll be sure to provide some insights to help you evaluate your progress! Dan “saving businesses daily” Martell Don’t forget to share this entrepreneurial advice with your friends, so they can learn too: https://youtu.be/JyfE6jzcOGI ===================== ABOUT DAN MARTELL ===================== “You can only keep what you give away.” That’s the mantra that’s shaped Dan Martell from a struggling 20-something business owner in the Canadian Maritimes (which is waaay out east) to a successful startup founder who’s raised more than $3 million in venture funding and exited not one… not two… but three tech businesses: Clarity.fm, Spheric and Flowtown. You can only keep what you give away. That philosophy has led Dan to invest in 33+ early stage startups such as Udemy, Intercom, Unbounce and Foodspotting. It’s also helped him shape the future of Hootsuite as an advisor to the social media tour de force. An activator, a tech geek, an adrenaline junkie and, yes, a romantic (ask his wife Renee), Dan has recently turned his attention to teaching startups a fundamental, little-discussed lesson that directly impacts their growth: how to scale. You’ll find not only incredible insights in every moment of every talk Dan gives – but also highly actionable takeaways that will propel your business forward. Because Dan gives freely of all that he knows. After all, you can only keep what you give away. Get free training videos, invites to private events, and cutting edge business strategies: http://www.danmartell.com/newsletter

10 Small Business Apps, Services And Tech Platforms Every Entrepreneur Should Know About

uncaptioned
GETTY

If you want to know the best place to keep up with technology for your business, follow my weekly tech roundups for entrepreneurs each week. You’ll learn because I’m always learning.

So what have I learned? Businesses that invest in the right technologies are assuring future growth and success.  I’ve also learned that there are a few apps, services and technologies – about ten categories in all – that are critical for small businesses in 2019. So in honor of National Small Business Week, I thought it would be helpful to share.

Customer Relationship Management

Don’t be fooled by CRM. People like to complicate this stuff and it’s not that complicated. It’s just a database of every person and company who you do business with – from prospects and customers to vendors, suppliers and partners. A great CRM system will integrate with your email and calendars and ensure that nothing falls the cracks and everyone in your company is sharing the right information. It will be mobile, include workflows and automation and integrates with tons of other great apps to do marketing and other functions. If implemented the right way (which is easier said than done) it will be an instrumental asset to your organization. There are many great CRMs for small businesses. I recommend looking at Salesforce.comMicrosoft Dynamics and Zoho CRM.

Managed Service Providers

If your inventory, order entry or other business critical application is older or located on your internal server you need to move it out of your office and into the hands of a managed service provider. Well-managed service providers will ensure that your data is secured as best possible and will likely have better security tools that you have internally. Your applications can be accessed by your team from anywhere and on any device. Many of them rely on public cloud services from Amazon, Google and Microsoft and that’s fine. With internet speeds hitting 5G, a well-managed service provider will deliver the performance, reliability and accessibility of your data at a cost that makes sense. Recommended providers include Right NetworksCloudJumper or any number of information technology firms.

Cloud Accounting

If your accounting application is located on your server, it won’t be for long. That’s because most accounting vendors are moving quickly to the cloud. It makes sense for them, and for you. You pay a monthly fee and they get a revenue stream. In return, the software provider can provide faster support, upgrades and technical services. Cloud applications are also much easier to integrate with each other. Today’s cloud accounting apps provide the added benefit of doing invoicing, cash receipts or retrieving reports from any device, anywhere. It’s a crowded field of cloud accounting options so do your due diligence and lean towards good companies with big communities. I see QuickBooks OnlineXero, and FreshBooks being used often by business owners.

Back in the day, there wasn’t much you could do with a scanned invoice or document other than file it away. But with today’s Optical Character Recognition technology there’s a growing crop of applications that can extract data from any scanned document – from vendor invoices to airline receipts – and put it in a format so that someone in your office can easily review and then import into most popular accounting applications. This saves time, improves accuracy and cuts overhead. Recommended applications: Bill.com, EntryLessExpensify.

Human Resources

HR platforms are exploding and, in my opinion, any company with more than five employees should have one. Why? Because they’re affordable and with a good HR platform your employees will be able to – usually through a mobile app – track payroll, update forms, schedule vacation, alert for sick days and even manage their performance reviews. The more your employees use the application, the less administrative time will be needed by your office staff – and that means less overhead and more productivity. Check out: PaychexGusto and BambooHR.

Office Collaboration

Back in the day, there were telephone calls, instant messaging, text messaging, emailing and lots and lots of yelling. Yes, we’re still yelling. But the good news is that today’s office applications have brought all those other things together under one umbrella so that your employees can conduct their communication, document management and collaboration activities – including video calls, file storage and sharing, messaging as well as alerting and reminders – from any device and wherever they are. Not only that, but today’s collaboration and communication systems have powerful searching tools to find old conversations and exchanges. The systems can even be configured for outsiders to access too. Applications that focus on collaboration include Microsoft Office 365Google G-SuiteBox.

Virtual Phones

Our company, like many small businesses, uses contractors and employees who frequently work out of the office. The thought of maintaining an on-premise phone system seems expensive…because it is. That’s why, for the past ten years, we’ve been using a virtual phone service. Our service provides a toll-free number, dial by name directory, voicemail for all users including transcription and archive recordings and…well, you get it: a total phone system (even hardware) that makes my small business look like a big business. I pay by the mailbox (about $12 per month) and love it. Recommended applications: GrasshopperVirtualPBX and Ooma.

E-Commerce and Payment

If you’re in retail then please pay attention to this word: convergence. It means getting a point of sale system that not only works in your store but works online too. That’s because you want to sell your products both from your store and over the web because that’s what successful retailers are doing to thrive. The best point of sale systems not only use tablets (a must for good customer service) and integrate with popular payment services, but they also provide the ability of setting up an ecommerce site that relies on the very same database you’re using in-store. Recommended applications: Paypal, SquareShopify, Magento.

Yeah, yeah, I’m leaving some stuff out. Like email apps (but don’t we all have them by now?) and project management solutions such as Basecamp and Asana.

Cloud Storage

There was once a time when everyone in my company would be saving multiple versions of multiple documents and spreadsheets on their laptops, desktops and our servers. That…was a mess. But not today. Today, we all save to a cloud storage service which synchronizes the files (that we choose) to our respective devices. Everything is updated and I no longer fear what happens if someone leaves their device on the subway. To me, a business without a cloud storage service is a business that’s losing money. Applications that focus on this space: Dropbox, Microsoft OneDriveGoogle Drive.

Security

Ransomware has become a billion-dollar business and that makes sense: it’s finally a way for clever hackers to actually make money with their malware. We read about the stories of hotels, transit systems and city governments brought to their knees by security breaches like this, but we don’t hear of the thousands of small businesses that are also affected. To protect yourself you need to use a good cloud backup service, keep your operating systems updated and use a good security application in your company.  Recommended applications: Carbonite (for backup), Malware Bytes,Barracuda.

What else am I missing? You tell me and maybe I can expand this list in a future column.  In the meantime, take a moment to review the techs, services and apps you’re using in your business. Have you got all the bases covered?

Author’s Note: I have not been compensated by any of the companies listed above to be mentioned in this article. 

 

Gene Marks owns The Marks Group PC, a 10-person technology consulting firm and is also a small business expert, speaker and columnist at other major outlets.

I was a former senior manager at KPMG and since 1994 the owner of the Marks Group PC, a 10-person customer relationship management consulting firm based outside Philadel

 

Source: 10 Small Business Apps, Services And Tech Platforms Every Entrepreneur Should Know About

Which Company Could Be The Next Permian Basin Acquisition Target?

Following the news that Chevron had agreed to pay a nearly 40% premium to acquire Anadarko Petroleum, investors quickly bid up the shares of other potential acquisition targets.

As I argued in the previous article, I believe the Permian was the key to the Anadarko acquisition, but there are plenty of other targets in the region. There are also several companies with the capability of making acquisitions.

In recent years, the few mergers and acquisitions in the oil and gas industry have been largely focused on the Permian Basin. The supermajor integrated oil and gas companies have been increasingly making forays into the Permian.

In addition to Chevron’s new acquisition, in 2017 ExxonMobil paid $6.6 billion to acquire Permian acreage from the Bass family of Fort Worth, Texas. ExxonMobil also spent $41 billion in 2009 to acquire XTO, which has a major presence in the Permian.

Permian Players

Today major acreage holders in the Permian Basin include the supermajors Chevron and ExxonMobil, as well as Occidental, Apache and Concho Resources. Occidental, in fact, reportedly attempted to acquire Anadarko prior to Chevron sealing the deal. But Occidental may now find itself in the crosshairs of a bigger player looking to shore up their Permian portfolio.

But there are many other major producers in the region, including ConocoPhillips, EOG Resources, Pioneer Natural Resources, Noble Energy, Devon Energy, and Diamondback Energy. Smaller producers in the region include WPX Energy, Parsley Energy, Cimarex Energy, Callon Petroleum, Centennial Resource Development, Jagged Peak Energy and Laredo Petroleum.

Let’s first take a look at the largest companies operating in the Permian according to enterprise value. This metric is preferred over market capitalization, because it includes a company’s debt. In the case of a potential acquisition, the acquiring company would be responsible for this debt in addition to the purchase price. Hence, it is a more comprehensive representation of a company’s market value.

I have included the integrated supermajors that could have the ability to make major acquisitions, three of the larger exploration and production companies (which could make an acquisition or be a target themselves), and Anadarko for comparison. All data were retrieved from the S&P Capital IQ database.

Metrics for major oil companies operating in the Permian Basin.

Metrics for major oil companies operating in the Permian Basin.

Robert Rapier

  • EV – Enterprise value at the close on April 12, 2019 in billions of U.S. dollars
  • EBITDA – TTM earnings before interest, tax, depreciation, and amortization in billions of U.S. dollars
  • TTM – Trailing 12 months
  • FCF – Free cash flow in billions of U.S. dollars
  • Debt – Net debt at the end of the previous fiscal quarter
  • 2018 Res – Total proved oil and gas reserves in billion barrels of oil equivalent at year-end 2018
  • EV/Res – The value of the company divided by its proved reserves

Potential Buyers

Based on their size and debt metrics, ExxonMobil and Chevron still appear to be the most capable of pulling off a major deal. Shell has been moving in the direction of becoming a natural gas company, and has already made major capital expenditures in this area in recent years. Further, in 2016 they made their own major acquisition — a $70 billion deal for BG Group.  Meanwhile, Total hasn’t shown much interest in the Permian.

BP may not have an appetite for an acquisition as it continues to be weighed down by its obligations from the 2010 Deepwater Horizon oil spill. As an aside, the continued fallout from that disaster has also resulted in BP having the cheapest reserves on the books by far of any company listed in the table. Also note that the EV/Res metric for integrated supermajors isn’t directly comparable to pure oil producers like Anadarko, as the former also have midstream and refining assets.

ConocoPhillips appears to be the most attractive target for an acquisition from a pure valuation perspective, but as the largest pure oil company it would be a large bite for even ExxonMobil. With respect to making an acquisition, ConocoPhillips CEO Ryan Lance stated earlier this year that the company isn’t feeling any pressure to do so.

Occidental also falls into the category of potentially making an acquisition or of being acquired. On a relative basis, they are more expensive than ConocoPhillips, but on an absolute basis the price would be more manageable.

What about smaller players like Parsley, WPX Energy, or Cimarex Energy? Based on the price movement following the announcement of the Chevron-Anadarko deal, investors are clearly betting that more deals will follow. Below are some of the metrics of potential acquisition targets (with Anadarko for comparison), including some of the large players listed in the previous table:

Metrics for smaller oil companies operating in the Permian Basin.

Metrics for smaller oil companies operating in the Permian Basin.

Robert Rapier

  • 1-Day Change – Change in share price on April 12, 2019, the day the Chevron-Anadarko deal was announced

Note that the double-digit gains of both Pioneer Natural Resources and Parley Energy imply that investors believe they could be next on the acquisition list. Parsley looks attractively priced according to its enterprise value and total reserves. Several other companies stand out, such as Devon Energy and Cimarex, although all of these companies outspent their cash flow in 2018. An acquisition by one of the larger players could give them the efficiencies and economies of scale to rectify that.

Another name on the list that stands out is Diamondback Energy, which has long been one of my favorite Permian Basin oil companies. Diamondback has been an outstanding performer in recent years, but now looks to be the most richly valued according to several metrics following its 2018 acquisition of Energen.

The biggest challenge with the smaller players is that they may not have enough reserves to really move the profit needle for the biggest players. Laredo Petroleum’s 200+ million barrels of oil and gas reserves might not be sufficiently appealing to ExxonMobil, which had 24 billion barrels of reserves at the end of 2018. But it could be appealing to a company like EOG Resources, which closed the year with 2.8 billion barrels of reserves.

Ultimately, price and valuation are only part of the equation. Anadarko wasn’t the cheapest acquisition target for Chevron, but Chevron liked the synergies of Anadarko’s locations. Thus, every major operator in the Permian is more likely to acquire companies whose properties are adjacent to their own. A deeper dive thus becomes an exercise in not only value, but in studying maps of the Permian producers — large and small.

Robert Rapier has over 25 years of experience in the energy industry as an engineer and an investor. Follow him on Twitter @rrapier or at Investing Daily.

Robert Rapier is a chemical engineer in the energy industry. Robert has 25 years of international engineering experience in the chemicals, oil and gas, and renewable ene…

Source: Which Company Could Be The Next Permian Basin Acquisition Target?

Fewer Billionaires, Poorer Billionaires On African Continent In 2019

Buffeted by plunging stock prices and weaker currencies, the number of African billionaires has shrunk to just 20, down from 23 a year ago. Four people fell off Forbes’ annual list of the continent’s richest since last year while one returned to the ranks after a four-year absence. All but four members of the list have smaller fortunes than a year ago.For the eighth year in a row, Aliko Dangote of Nigeria is Africa’s richest person……

Source: Fewer Billionaires, Poorer Billionaires On African Continent In 2019

Reclusive Millionaire Warns: “Get Out of Cash Now”

Something strange is going on in the financial system. And according to The Financial Times, it’s about to send a massive flood of cash into the pockets of the most prepared Americans. What exactly is going on and what does it mean for your money? I recently met up with former hedge fund manager, Dr. Steve Sjuggerud — one of the most widely-followed financial analysts in the world. Today, he shuns the spotlight and lives on a remote island off the Florida coast. And he’s built a new life… and a substantial fortune… by sharing a series of eerie predictions. Many of which have proven correct…….

Source: Investing Outlook

9 Marketing Metrics Every Business Should Use

In the first quarter of 2009, total ad spend in America fell by more 10%. That was the midst of the recession. Those two things are not unrelated.

Marketing and advertising budgets are often the first things cut during tough financial times. During hard financial times, individuals cut costs on things deemed “not necessary,” and it turns out, businesses act the same way.

The reason marketing is often filed under “not necessary” is that it can be incredibly difficult to measure return on marketing spending. If you show an ad during the Super Bowl, where would you even begin when trying to attribute subsequent sales to that ad? And how about all of the non-revenue value it creates, like brand awareness?

It’s not that marketing is not valuable, it’s just incredibly difficult to quantify its value.

The good news is, we’ve been getting better and better at quantifying it. Thanks, in part, to the internet and the increased ease of attribution, but also due to the recognized need for it.

If your marketing team is struggling to quantify its value, there are a number of go-to metrics you should start measuring. It’s worth noting, there are countless metrics you can choose from, so I’ve narrowed it down to 11 that are easily generalizable regardless of your business industry.

Let’s get started.

#1: Return on Marketing Investment (ROMI)

Okay, I’m putting this metric first because if you can calculate it accurately, it’s the most important one. On its face, it’s a very simple metric and is measured by the sales growth during a marketing initiative munis the marketing costs and then divide that number by the marketing costs.

To make this less abstract, here’s an example.

Before a Google AdWords campaign, a used bookstore had sales of $4,000 per month. After the campaign, sales bumped up to $5,000 per month, making the sales growth $1,000 per month. The campaign cost $100. So, the calculation would look like this:

(($1,000 – $100) / $100) = 900%

Here comes the but:

First of all, these returns shouldn’t be expected from an AdWords campaign, this was just an example.
Second of all, this example doesn’t consider the numerous other potential moving parts that could have an effect on sales growth. This would really only work if you did everything the exact same before and during the campaign (except for the campaign, of course), and even then, it wouldn’t account for some external factors.

Changing your hours of operation, hiring a new cashier, changing the sign in the front of the store, or even HBO’s upcoming Fahrenheit 451 movie inspiring the country to start reading more could all impact your sales and throw a wrench in your ROMI calculation.

The point is, you can try to control for as many factors as possible to get an accurate ROMI number, but it’ll never be perfect. This is not to say you shouldn’t track it, but rather just be aware that it has its flaws and should be just a part of your marketing reporting and not the whole thing.

#2 Customer Acquisition Cost (CAC)

Customer acquisition cost is simply the amount of money it costs to acquire a customer. Divide all of the costs spent towards getting new customers—these are largely, though not necessarily exclusively, marketing costs—by the number of customers you’ve acquired.

Voila! You’ve got yourself your CAC.

This is a crucial metric as it tells you how effective your marketing efforts are. Generally speaking, the higher your CAC, the less efficient your marketing is.

This rule of thumb does not apply equally to every company of course. Typically, CAC is going to be higher for companies that sell things that are worth more.

And while CAC is an important metric on its own, its real value is apparent when combined with another crucial marketing metric…

#3 Customer Lifetime Value (CLV)

This is another somewhat self-explanatory one. A customer’s lifetime value is the projected revenue that a customer will generate will generate during their lifetime. You can take the average revenue generated by all of your customers and use that to tell you how much each customer (on average) is worth.

It might be obvious, but the reason this metric and CAC are so useful when combined is it can serve as a guide for how much you should be willing to spend to bring in new customers. Also, the bigger the gap between your CLV and your CAC the better (assuming the CLV is the higher number).

Kissmetrics provides a nice infographic to help explain how to calculate CLV:

++ Click Image to Enlarge ++
How To Calculate Customer Lifetime Value
Source: How To Calculate Lifetime Value

#4 Churn

Churn is as much a customer service metric as it is a marketing metric, but it’s certainly worth mentioning, as the organizations are often intertwined. Churn tracks the number of customers that you are losing and can be viewed from the total customer or total revenue perspective.

This metric isn’t going to be useful for every kind of business. It’s often used in subscription-based businesses and wouldn’t be particularly useful for, say, an e-commerce company (although e-commerce companies could use this metric to measure things like churn as it relates to an email list).

Here’s the formula for calculating customer churn:

    (Customers at beginning of month—customers at end of month*) / customers at beginning of month = customer churn rate

*The customers at the end of the month number should not include any new customers gained during that month.

You can also use different time periods to calculate this—maybe quarterly or annually.

Revenue churn functions differently from customer churn, and in many organizations, it is the more valued number. It’s a tad more complicated. Here’s the formula for calculating revenue churn:

    {[monthly recurring revenue (MRR) beginning of month – (MRR beginning of month – MRR lost during month)] – MRR in expansions} / MRR beginning of month = revenue churn

Let’s clarify this formula with an example.

Your MRR at the beginning of the month is $100,000. You lost $10,000 in MRR from customers leaving or downsizing. However, you had $20,000 in expansion revenue from people upgrading their subscriptions. That leaves you with:

    {[$100,000 – ($100,000 – $10,000)] – $20,000} / $100,000
    [($100,000 – $90,000) – $20,000] / $100,000
    -$10,000 / $100,000 = -10%

As you can see, in this example, we’ve come out with negative churn. This is a good thing. Since expansion revenue outweighed the revenue lost, you’ve got negative churn, signifying a growing business.

If there was only $5,000 in expansion revenue, your churn would be at 5%, which would be an issue.

The reason revenue churn is often more valued than customer churn is it accounts for customer size. You can lose five customers, but if they’re your smallest customers, it may not be all that big a deal.

#5 Take Rate

The take rate is a very simple metric that does an great job of measuring the effectiveness of a particular campaign. Put simply, it is the percentage of people you contacted who accept an offer.

We can look at a practical example of deriving this metric by looking at when auto mechanics leave fliers under windshields.

Let’s say a mechanic printed 1,000 flyers advertising a deal for a discounted oil change and left all of them on cars. 25 people come in with the flier to get the discounted oil change. This means, of the 1,000 people contacted, 25 accepted the offer, making the take rate 2.5%.

You can then use the take rate to measure CAC for a specific campaign. If the fliers cost $.25 each, the cost of the campaign was $250. Since 25 people became customers, you can divide $250 by 25 to get your CAC for this campaign of $10.

#6 The Test-Drive

In Mark Jeffery’s book Data Driven Marketing: The 15 Metrics Everyone in Marketing Should Know, Jeffery outlines the story of a Porsche ad campaign during the peak (or valley) of the recession. In 2009, the luxury car company delivered “more than 241 million online display impressions and 17 million in print” aimed at getting potential customers to take a test-drive.

Given the state of the economy, many met this campaign with pessimism, especially considering the primary call-to-action was to just test-drive the car and had nothing to do with buying it.

Soon, however, dealers changed their tune, as they were making sales they wouldn’t have under ordinary circumstances. They realized how crucial marketing for a test-drive was.

The test-drive metric is simply of the people who take a test drive (or trial whatever your product is), how many make a purchase. If you give 100 test-drives and 20 people make a purchase, your test-drive conversion rate is 20%.

Once you know your test-drive conversion rate, you can more easily predict total conversions when marketing for a test-drive, or free trial.

#7 Transaction Conversion Rate (TCR)

People often look at traffic and clicks when evaluating the success of their website. Nobody would be wrong to use those metrics, but unless it’s for a website that makes the lion’s share of its revenue from advertising, those numbers leave a lot to be desired.

If you’re bringing people to your site with the hopes of selling them something, it doesn’t matter how much traffic you generate if nobody is buying. You could have a million unique visitors per month, but if 0% of those million result in a transactional conversion, you might as well pack up your things and go home.

This is why your transaction conversion rate is so important. It’s easily calculated as the percentage of customers who purchase after clicking through to your website. So if you get 100 visitors, and 10 of those visitors make a purchase, you have a 10% TCR.

It’s hard to say what a good TCR is because it really depends on your industry and what your selling. However, by knowing what your TCR is, it becomes much easier to predict the value of a marketing campaign.

#8 Customer Satisfaction (CSAT)

These last two metrics are a little different from the first seven because they’re much more difficult to measure and sometimes rely on things like surveys.

CSAT is a measure of how likely a customer is likely to become a product evangelist and help you sell by recommending your product to a friend. CSAT is derived from surveying customers and the question behind it is “how likely would you be to recommend [product] to a friend or colleague?” You might also know this metric as the Net Promoter Score.

We all know the value of word-of-mouth, so it’s no surprise that the higher this score, the better. However, obtaining this metric is a little tougher than the others. You can’t just look at a spreadsheet, make a calculation and have your answer.

Getting your CSAT score means actively surveying customers, but if you can do it well, you can get valuable insights about future sales, as well as identify trends. If your CSAT score is trending upward, good news, you’re doing well. If it’s trending down, you need to identify the problem and find a solution.

#9 Brand Equity

I don’t think there are too many people out there who would question the value of a strong brand, but you might find a fair amount of people who are skeptical about measuring the power of a brand.

Their skepticism is not unfounded. Measuring brand equity is very difficult, but not impossible.

To drive home the point that brands matter, Mark Jeffery, in his book, takes a look at water.

“Pure water is an odorless, tasteless liquid made from molecules of two hydrogen atoms and one oxygen atom,” he writes. “So why spend $2 a bottle for the brand and not 25 cents for the generic grocery store brand when the products are identical?”

Right now you might be shouting that Dasani is different from Aquafina. This just demonstrates the power of a brand.

But how do you measure a brand? Well, there are several ways to do it.

One way to do it is to subtract all the tangible assets of a business from the total market valuation of the business. The remaining value is the brand. This is probably the most black and white measurement, but it’s unreliable because it relies on so many approximations and assumptions.

The other approach is to use surveys.

Brand equity surveys are simple but can be laborious. They’re often based on two questions (with several follow-ups meant to refine the answers depending on the product/industry).

  • Question 1: “For [category of product], what is the first [product or company] name you think of?”
  • Question 2: “For [category of product], what other [companies or products] have you heard of?”

Again, these two questions are a great jumping off point, but they are not the finish line. Other questions like “How much more would you be willing to pay for [brand x] than [brand y]?” can help you refine your brand equity.

Conclusion: Using Key Marketing Metrics

Remember, there is no magic bullet when it comes to measuring the success of your marketing campaigns, but that’s no reason not to do it. By using a combination of different metrics, you can get a good view of not only the success of individual tactics but also a holistic view of your overall marketing performance.

By: Kevin Armstrong |  May 17, 2018

%d bloggers like this:
Skip to toolbar