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Are Your Marketing Strategies Profitable?
Moneyball. Have you seen it? Great movie. The basic premise is around Sabermetrics. If you’re not familiar with Sabermetrics here is the basic definition: “the application of statistical analysis to baseball records, especially in order to evaluate and compare the performance of individual players.” The result Sabermetrics is used for in Moneyball is how many times can a player get on base and score runs. Runs are what matters. Runs are what win games.
Moneyball
Everyday, yes, literally everyday I think about Sabermetrics in business. I don’t think of it relating to baseball but as it relates to its emphasis on results. At the end of the day you’re going to sell your business on one of two things; growth or profit. That’s your result. The ability to score runs is the same as the ability to grow your revenue or increase your profits.
I cringe when I watch ESPN and some analyst keeps talking about how many home runs a player is hitting but his team is still at the bottom of the division. Who cares? It’s not helping move the team forward. The same thing is true in business.
I constantly see ads on Facebook from people saying “Look! I spent $25,000 on facebook ads and I received $50,000 in revenue. I doubled my money. Let me show you how to do the same!” RUN when you see these ads.
You fund your marketing budget with profit dollars, not revenue. Let’s say this person has a 50% margin. So on the $50K in revenue you just produced, you netted $25K. Congratulations. You just broke even. You better hope your customers have at least a 2-3 year lifetime or else you’re wasting your money.
Focus on results. Actually, in this case focus on IMPROVING your results. I like the term GMMAC (gee-mac), Gross Margin Minus Ad Cost. This will give you a great picture of how well your marketing is performing. Just as “On Base Percentage” is a great production and efficiency stat that will leads to wins, improving your GMAC can do the same for your business.
In this great game of business never lose sight on what matters. It’s easy to get caught up in the hot new industry jargon and trends. But just like in Moneyball, you can compete and win if you just focus on what really matters.
