What's your real goal behind the metrics your company monitors and evaluates? Even if your first response to this is "making money," that's a valuable goal to reiterate. In today’s article, we’ll discuss how metrics may not always align with a core goal of “making money”.
After all, if you own your small business and your goal is "making money (profitably)", know that an employee might have different goals like "increasing traffic by 200%" or "getting X number of hits in a month." Those goals, set either by themselves or by a manager, might be indirectly connected to making money but making money is no longer the focus for that employee. After all, getting traffic is much easier than getting traffic that converts to customers. Goals that are a step removed from results don’t always serve the best interest of your small business.
Different target markets are worth different amounts of money. This is only made more complicated by the sometimes wasted money it takes to get those target markets to become customers.
Imagine you have:
Pretend the keywords and search costs to attract the attention of Client A might be $1, and 90% of the Client As who find your site become subscribers. That means it takes only $1.11 (or $1/90%) to convert them from a stranger to an audience member. But if only 5% of them make a purchase, then the cost of each sale is $22.20 (or $1.11/5%) to convert them from an audience member to a customer.
On the other hand, here are the numbers for the elusive Client B. Assume search costs are still at $1 but with only 50% of them becoming subscribers, it really costs $2 ($1/50%) to gain an audience member. This looks like bad news on the surface of things because that's nearly twice as expensive. However, to convert to a customer with the equivalent cost, only 9% have to make a purchase. If this target market is more willing to purchase, these customers can be significantly more profitable. In addition, keep in mind that Client Type B is more willing to repurchase your products once they trust you, leading to ongoing revenue with minimal promotional costs.
The real lesson here, though, is focusing your employee on traffic numbers won’t give you the above insight. By learning your true goal (in this case – making money) and aligning metrics with that goal, you can better achieve your goal. It’s imperative that everyone in your small business have the same core goal, and secondary goals point back to the core goal.