Know your numbers

On-line sales performances evaluations can’t be restricted to global values. Of course they play a vital role in global appreciation, but today’s technology already allows us to make decisions regarding price changes, promotions, content organization and presentation in a more segmented way.

Gone are the days we decisions were made based on global values. If it’s for one, it’s for everyone. No. It stopped being that way a long time ago. It became indispensable for companies to know the composition. Theirs activities and above all their (expected/) value.

It’s crucial for companies to have reports about customer behavior, customer groups/segments, and also products and cyclic events.

Having updated information that we can act up-on in an unpredictable event is really important if we wish to keep our sales platform working and offering the best service possible.

Kowing the market and the customer is therefore crucial.

But how can we do it?

It’s all about discipline. Discipline in data handling. We should be aware the sales platform can’t guess everything, it can predict, but if we can make decisions as close to reality, the better.

That why it’s of extreme importance the company has at his disposal a set of reports, but also be available to supply data to build those same reports as accurate as possible. We can’t know the customer value if we don’t know the company costs associated to that customer sales.

Cost of goods, marketing, shipping, operational, payments, human resources, among others, should be defined so reports can be generated for future analysis. We can’t just assume that if we spend 300$/month in ads, that cost should be distributed equally among all customers. We have to allocate that cost to orders originated from ads. Nowadays, most platforms give you some data regarding this, but no platform can know how much are you spending on advertising. Only you know.

But, what to do with all this detailed information?

Act. Stop managing your customers all the same way and start focusing on smaller groups that have higher value to your company. Please, do not confuse customers with high order amounts with customers with value for your company. Creating an index for your customer is of high importance for a positive differentiated behavior.

Don’t fall into the trap of having first class and second class customers. There is a bare minimum level of attention that should be given to every single customer.

To high value customers, there are a few ways we can improve his loyalty. Price reduction, promotions, free shipping, easier returns, among others.

It’s important to know that there is no magical formula that can be applied to all companies from all sectors. That’s way you need to know your market and your customers to design formulas to calculate their Equity and Lifetime Value. Only then you will be able to make the right decisions.

Keep your information up-to-date. One sale doesn’t necessarily mean always net profit. Don’t do math like: my goods cost is $10,000 and sold them for $20,000, therefore my profit is $10,000. Nothing could be further away from the truth. If you don’t account for all costs, you could be losing money without knowing.

Current Customer Equity tools already have the ability to not allow a new order if it’s not expected to generate net profit to the company. It’s a good idea to implement something like this, so we don’t get caught by surprise at the end of the year/quarter.