The marketing world has led brands down the wrong path with a myopic view on what metrics matter. We’ve been told for years that there are a set of acronyms that dictate the health of our businesses, but businesses are more complex than this.
We’ve spent the last two years researching the impacts of these metrics on a company’s health and performance, and have found that brands, and executives have been led down the wrong path. Changing the way we measure the health of a brand is critical for getting out of this stagnation of healthy growth.
The Measurement Problem
The Measurement Solution
BRANDS HAVE BUILT INCENTIVE STRUCTURES THAT
SABOTAGECUSTOMERLIFETIME VALUE GROWTH
Despite brands making meaningful investments into data and analytics over the past five years, our observation has been that brands still don’t understand what data they should be measuring.
Brands have built incentive structures that sabotage customer lifetime value growth. This is because the brands have the wrong measurement and accounting systems in place. They are unable to tell the relative health of their customer base, how to put this data together to tell a complete story and how to turn this data into meaningful next steps across different functions of the organization.
WHY CURRENT SOLUTIONS FAIL
Business Intelligence tools are built on specific inputs, and assumptions by teams that haven’t developed a full understanding of the problems they intend to solve, or access to the inputs that impact these problems. The talent guiding these brands have had limited experience and overreaching misinterpretations of what the drivers for growth have been. Leading to myopic measurement systems. The consequences of this are that the insights brands are basing their decisions on are incomplete data, and brands end up down the wrong path of outputs they never intended to have.
The brand teams are receiving data points, but unable to turn those data points into meaningful next steps across different functions of the organization.
WRONG INCENTIVE PLANS
Measurement often reflects incentives. Most organizations have misaligned incentive plans which lead to dysfunctional measurement systems.
SOLVE THE PROBLEM
VaynerCommerce looks at all inputs and outputs required vertically and horizontally in a business, and how to tie them together into a complete holistic view of a business’s health. We’ve built a methodology for taking all this information, and translating it into doing the right work, at the right time, with the right resources.
We research and operate in major and emerging marketing distribution channels to understand the dynamics of competition, scale, and consumer behavior.
As brands grow, channel economics become more meaningful to understand. We help brands understand and navigate channel growth and efficiency, attribution models, repeat vs new customer measurements, customer acquisition costs and channel diversity.
We help brands understand the true current, and future health of their business. Traditional accounting hides the value of your customer base.
Customer economics deals with helping you understand the complete health of your customer base, including retention and cohorts, payback periods and subscription or loyalty program health.
Effective margin management requires using the correct measurement systems, and understanding the unit economics of the business to identify what levers to pull and when to pull them.
These systems create flexibility in managing growth, and overtime increases resources (cash) available to invest back into the business. We focus on gross margin, contribution margin and operating margin analysis.
THE END RESULT
By leveraging our framework your company builds an understanding on the past and future health of your customer base. This allows you to allocate resources towards improving productivity, customer value creation and loyalty which translate into lifetime value (net profits) growth.