Data-driven marketing has become an increasingly popular topic in the marketing industry. But it’s as easy to be overwhelmed by data as it is to utilize it to drive your marketing.
In Episode 2 of The Marketer as Philosopher: Become a Force for the Good, Flint McGlaughlin teaches how you can transform your data into wisdom. The CEO and Managing Director of MECLABS Institute (parent organization of MarketingExperiments) teaches viewers how to
→ Use a simple but powerful spreadsheet tool that will help you tame your metrics (click here to download your free Data Pattern Analysis tool)
→ Simplify your marketing goals with just three ratios that any marketer can understand
→ Treat these ratios as dials you can turn in the right combination and order to unlock transformational results
McGlaughlin uses real-world data from TenbyThree© — a unique nonprofit that sells products — to illustrate these points with a specific example. Since the organization is a nonprofit, it has allowed transparent sharing of its journey to increase sales. While engaging with the show, any insights you add that help to increase sales for Ten by Three will also do good by helping to reduce poverty for artisans throughout the world.
Here are some key points in the video:
3:47 An explanation of the math equation that powers the DPA tool
8:34 Four ways to tame your data
15:23 Maximize your ROI with this heuristic. Notice the importance of the ORDER of activities.
16:47 How to extract the predictive power of your data
20:04 Real-world Example: MECLABS analysts determined where revenue is being lost in TenbyThree’s nonprofit business using the DPA tool. Hint: We detected a problem in the psychology of the messaging on the product tags.
20:59 Now that the location of a major funnel leak has been identified, in the next episode we invite you to participate with us in optimizing the product tag to help plug the leak.
23:55 Three ways you can help…
Data Pattern Analysis Tool — Free spreadsheet tool to help you tame your metrics
How to Model Your Customer’s Mind: 60 pages of essential tools and charts – Download this free tool to see how you can leverage data to better understand and serve your customer so you can achieve better results.
MECLABS Conversion Sequence Heuristic – Review the conversion heuristic to prepare for Episode 3
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This transcript provided by GoTranscript:
Flint McGlaughlin: How would you translate this data into a step-by-step plan to grow the business? Do you see any clues in this column? Where is the most significant conversion opportunity? Can you detect any intriguing patterns? What about this product tag? If the goal is to get you to visit the website how would you improve its performance? How do these three numbers connect?
Flint: That number is absurdly low.
Dani: You and I both.
Flint: The answer to how is why.
Flint: We would achieve a triple win; high traffic, higher conversion, higher average customer spend. Marketer how can you transform your data into wisdom? How do we keep from being overwhelmed by the deluge of information flowing into our analytics program? Could there be powerful practical insights hiding in the undetected patterns of our silos reports. My name is Flint. This is episode two of our new series The Marketer as Philosopher, Become a force for the good.
In episode two we’re going to learn how to discover hidden opportunity within our data. First, we’re going to give you, at no cost, a simple but powerful spreadsheet tool that will help you tame your metrics. Next, you’re going to learn to simplify your marketing with just three ratios. We call them the three data dials. By the way, you don’t have to be a mathematician to understand or use it. Three, you’re going to learn how to turn these dials in the right combination and in the right order to unlock transformation results.
This requires us to reflect on three powerful insights. Let’s begin with insight one. In data analysis, the way forward is back. It is 4:00 PM on a Monday afternoon. The world is in crisis and so like many others, our meetings are being conducted via video conference. It’s important to get to that simplicity on the other side of complexity.
Dani: You and I both. [laughs] …
Theresa: All of the orders backed up. All of these just came in …
Flint: You’re muted Dani. You’re muted. Analysts from the MECLABS team are meeting with Theresa Carrington, the founder of Ten by Three. We are discussing the first in a series of tools that will be applied to Theresa’s challenge. This is the data pattern analysis, the DPA. It consists of at least a dozen tabs derived from data within Theresa’s metrics platform. All of this data was automatically imported from Google Analytics. There are a number of tabs but the two most important are the Funnel Analysis and the Three Data Dials. Marketer to help Theresa you’re going to learn how to think about your craft like a philosopher beneath your assumptions in reverse order from your revenue target back through your customer data then even further back into the heart of your message.
Speaker 3: We engage past purchasers and get people to return to the site.
Dani: These are initially some of the pages that we’ll look at for initial testing.
Flint: If we can turn these dials we can turn up your sales. We must capture the clarity of the three data dials. Before we show you the dials in action we need to show you a very simple math equation that powers their insights. You’ll notice RV=SU x CR x AOV. RV is revenue. SU is select users, that’s the number of people who encounter the opportunity. That definition is important when we test. CR is the conversion rate, that’s the number of people who say yes. Average order value that is the average customer spend.
The best way to learn the raw power of this simple equation is to push it to extremes. Here’s a very simple example. If our revenue target is $50,000 then one person visits our site and they purchase a product for $50,000. You can see that our conversion rate’s 100%. Our SU is 1 and our AOV is $50,000. Now we all know that this scenario is unlikely so let’s take it further. By the way, if you’re a mathematician and you say, “I’m bored with this. I know about this,” stay with me. Before this episode is over we’re going to be delving the data deeply for patterns.
Here is another example. If you had two people visit and your average order value remained at $50,000. What would you need for a conversion rate? If both people who visit and said yes you would have $100,000. That’s two times your goal. It would only take one of those two people to buy. Only one of those two people to say yes. The answer is 50%.
Here’s one more scenario. What if you had an average order value of $50 and a conversion rate of 10%. How many visits would you need? We’re solving for SU. To get to $50,000 total with an average order value of 50 you would need 1,000 yeses. That’s 1,000 times 50. If 1 out of 10 people who encounter the opportunity say yes, that’s 10% then you would need 10,000 users.
By the way, the three data dial does all of this calculation for you and it helps you chart a critical path. Keep in mind that while we’ve used this tool in very simple situations with startups we’ve used it with Fortune 10 companies. I’ve used it with one organization whose revenue was $138 billion. We prioritized and exceeded our budget goals by carefully following the logic that’s implied, that’s built-in to the simplicity of this tool. Stay with me.
Here is how it works. There are three dials. You should already be familiar with the SU, the CR, and the AOV. Select users, conversion rate, and average order. However, any change here is reflected in the incremental revenue gains that you see at the top both annually and monthly. This is powerful because it allows you to move those three ratios in combination to achieve the most likely and most profitable way forward.
There is a basic calculation here for overall conversion and then for more advanced work, there’s a calculation for step by step conversion. That is improvements in each stage of the funnel. We’ve seen how the DPA works but how can we use it to solve the financial challenges of Ten by Three? What does it look like in practical application? How can we use it to prioritize our work over the next several episodes?
These questions bring us to the next insight. Insight two: opportunity is discovered through limitations. What am I saying? This statement seems counterintuitive. What does it mean? The answer will become clear in the next five minutes. Let’s look at this DPA with the actual Ten by Three numbers. We know our goal is $100,000 but we’ve left that blank. We’re going to exceed that by spinning the dials. We know that the current monthly traffic is 1,351, that’s SU. We know that conversion rate is 1.27%. We know the average order value is $112. Now, we understand these basic numbers, our task is to find the optimal path forward. This task demands relentless prioritization. This prioritization requires perspicuous clarity. This clarity requires a four-step analysis.
Throughout this series, we’re going to be helping Theresa and then teaching you transferable principles. Here are four that you should be applying right now to your own data. First of all, define the practical range of your dials, that is, separate the improbable from the possible. Number three, adjust your goals to the optimal settings. You’re going to see that power very soon. It’s remarkable. Number four, sequence your improvements for the highest impact. Now let’s apply principles one and two. What is the practical range of the three dials? How can we separate the improbable from the possible?
Average order value is $112. We have tested more than 20,000 treatments. From that experience, I’m going to suggest that it’s not likely that this number could increase by more than 50% without changing the business model. Achieving that gain would be difficult but what is the impact if we did? This is where the DPA becomes so valuable. We plug in an increase. The range is from $112 to $168 but we can see the maximum impact is only $11,000. We need $100,000.
Let’s look at conversion. Conversion is 1.27%. Once again, experience suggests that for an e-commerce site one would rarely see this number increase by more than 100% and that would be a remarkable success. What is the impact if we did? Again, in the DPA, we can see our range is from 1.27% to 2.54% but the total impact, that’s if we maximize the dial is only $23,216. It’s not enough. SU is 1,351. That’s 1,351 visits per month. Very low. This number could grow exponentially. It could grow a hundredfold. It could grow more. It would be hard but it would be possible.
Let’s follow the impact with the tool. We turn that dial. Our range is 1,351 to 14,858. What is the impact? $232,000 plus. Marketer, something should start to emerge in your mind. What can we learn from this? Which of the three ratios is holding us back? Which dial do we turn the most? If you answered select users, traffic, then you are correct. You have separated the improbable from the possible. With a big enough budget, you could buy a tenfold traffic increase, and we don’t have that budget. Yet all the money in the world might not be able to buy a tenfold conversion increase. Does this mean conversion is important? It is incredibly important. We’re going to see. It does suggest that we need to be realistic about how we turn the dials, how we set them for the right combination. We need to be realistic so that we can chart the best path forward. I’m going to share with you that optimal setting but before I do, I want to take a break from the math.
It’s important to me that every marketer, whether you specialize in the creative or you specialize in the analysis, that every marketer who wants to make a difference can follow along and see how their talent can be applied. Right now, I can tell you that before this episode is over, we’re going to discover why the question I’m asking next could make all the difference for thousands of families. There is.
I’m holding up a basket in my hand. Attached to is a product tag, a label. Let’s assume the goal of this tag is to get people to visit the website and connect with the artists. Marketer, what would you do to improve the performance of this tag? Would you change the photograph? Would you change the color? Would you change something about the call to action? Let’s go back to three dials. How should we adjust our goals in view of the optimal settings? Now, this is where we establish a framework to guide all of your marketing activities. I’m going to take a very conserved approach. I’m going to suggest that we only improve Average Order Value by 20% and Conversion by 25%. I believe that number can be higher. Traffic is set for 500%. If that seems high, remember the traffic is very low, so it doesn’t take very much to create a boost there.
In the right combination, we can see the impact on the financial picture. Look at it. This puts us on track to exceed our goal of $100,000 by $85,000. That is a healthy margin of error and more, if we fall short we can spin one of the other dials to make up for it. For example, if we couldn’t increase Average Order Value but we could increase Conversion, you might see this. We hit the same number by simply adjusting the mix of the dials. As simple as this might be for those of you that are experienced marketers in big organizations, its clarity can guide every aspect of your resource planning.
We have to do it now so that we can guide our resources and plan the next several weeks together so that we can help Theresa rescue these 3,500 small businesses. Watch us do it and help us do it. Not only will you learn, but you’ll be making a major difference all over the world. In this way, you adjust your ratios to dialing your marketing performance despite the inevitable surprises that are sell any plan. It brings us to the fourth principle.
This fourth principle I can only touch lightly but it’s very important. We learned it after doing an 18-month study. Sequence your improvements for the highest impact. Now there’s a difference between the urgent and the important. We have identified what’s important using steps one through three but step four is about urgency, doing what must be done now. To do that, we can discipline our activity to produce the highest return if we keep in mind the following heuristic. Optimize the product in the presentation and in the channel.
Ultimately, you will make more money if you begin by optimizing the value proposition of the offer, then optimizing the message in your marketing collateral, and finally, optimizing the spend in your channels. If you do it in a different order, you’re going to leave a great deal of money on the table. We’re going to teach you much more about this in upcoming episodes. For now, let’s admit that while approaching your data with these dials can produce a central clarity, it does not produce actual sales. How can we translate this clarity into rewarding results? Are there any hidden patterns in the Ten by Three data that we could leverage immediately to sell more baskets?
These questions bring us to our final insight in today’s episode. Insight three, the value of data is limited to its predictive power. It’s now time to think about how to use other tabs within the DPA to produce impact. While there are many ways we can achieve an increase in visits and some ways to achieve an increase in Conversion, there may be a powerful solution for both just hiding in the data. Challenge yourself with a riddle. Take a look at this table. Where is the greatest opportunity and why?
Let me give you three principles that will help you extract the predictive power of the data. Number one, do not seek to optimize webpages; seek to optimize the sequence of thought. Number two, do not think of data as digital bits; think of data as behavioral traces, as mind tracks. Number three, do not look for numbers; look for dissonance in patterns. Please, marketer, don’t let your attention fade just yet. We’re on the edge of a discovery that could help rescue 3,500 small businesses. The families that depend upon them are depending upon us. This is the moment where your powers, your craft can truly make a difference. We’re about to be surprised. Carefully study the next clip from Ten by Three. Think about the table we just reviewed and try to find the connection to elements in this short video.
Theresa: When you watch the exchanges, they’re quite powerful. To see that human-to-human connection, it’s getting to know one another on a human level. It’s how the world change us.
African Woman 1: I was filled with so much love and beauty. [foreign language] I had to purchase it.
Theresa: Oh, you have a beautiful smile.
African Woman 2: [chuckles]
Theresa: When the women get their picture taken, it is also a very remarkable and very moving moment because, in many cases, it is the first time their picture has ever been taken. It’s the first time that they’ve ever seen a digital image of themselves.
Flint: Now, consider these numbers from the DPA. Remember, we’re looking for dissonance. For the 15-month period analyzed in the DPA, total website traffic is 20,261. Total number of units sold through all channels is 59,817. Hold on a moment. Something should already be puzzling you. Pay close attention, we’re close to breakthrough insights. Total number of units sold on the website is just 1,280. It is when you look on the top pages tab of the DPA that we can start to detect dissonance in the patterns. In just two minutes of math, we’re going to find something that could transform this entire operation. Stay close now. Pay close attention.
The total number of visits to the artisan-lookup is 1,059. Can you detect the dissonance? The answer to how is why? How can we drive more traffic? How can we improve Conversion? How can we improve Average Customer Spend? Let’s start with the why. Why is that number so low? Why are people behaving in that way? Think about it. Here’s a simple subtraction problem to help clarify. 59,817, that’s total baskets sold, minus 1,280, that’s total basket sold on the website. The answer is 58,537. Wait a second. Ten by Three sold 58,537 units through their network of stores. That is 58,537 product tags that could be used to get people to visit the website to look up the artists and who created the product and interact and connect. Yet, wait for it, here’s the hidden opportunity. Only 1,059 people visited the artisan-lookup page. That number is absurdly low. Why is this so important? Because it’s also an absurdly rich opportunity for you and I to make a difference.
If we start with this pattern dissonance and follow the mind tracks back to the customer, we can detect the problem in the psychology of the message. That can be fixed. Our lab has developed specific heuristics for discerning the underlying psychology of a message. We’re going to teach those to you in the next episode. We’re going to help you analyze this message, but if we could optimize these labels to achieve a higher conversion rate we could find a major source of free traffic and we could increase average customer value because some of these people would place additional orders. Moreover, Ten by Three would win a direct relationship with the customer something they don’t have when the product’s purchased in a store. We would achieve a triple win. High traffic, higher conversion, higher average customer spend.
This single insight could help us achieve our goal for Ten by Three. In fact, you can see the power in these last two or three numbers we need to review. If we could optimize the product tags so that 20% of the in-store buyers came to the website and ordered again, we would drive $1,311,329 in new sales. That’s a lot more than our goal of $100,000. But you say, “I don’t know if 20% is practical. Let’s cut the number in half.” If we could optimize the product tag so that 10% of the in-store buyers came to the website and ordered again, we would drive $656,000 in new sales. You say, “That seems pretty high,” it doesn’t to me. I’ve done this before, and I’ve achieved much higher numbers. Let’s go to 5%. If we could optimize the product tags so that 5% came back and purchased, we would still drive an additional $327,000 in new sales. In one powerful move, we could solve the Ten by Three financial challenge. We would achieve a triple lift; conversion, traffic, average customer spend, and all without investing $1 more in marketing or advertising.
This is powerful. Marketer, this is where you can truly help. If we stand together, we can win this revenue for Ten by Three. This is a way for you to do something meaningful with your special skills. You have more power than you realize. As we learn together through this series, your power to help others only grows. As I have said from the beginning, you can learn and you can help. Here’s what you can do now. We need to optimize this product tag. The best way to do that is with the MECLABS Conversion Heuristic.
In the next episode, we will teach you step-by-step how to use this tool, then we’re going to host a live YouTube session where you can share with us your best thinking. In the meantime, three ways to help. One, we need to reach critical mass with this program. With that, we’ll have enough people to solve larger and larger problems, not just for Ten by Three but for other groups. Please invite at least 10 like-minded marketers to watch the first two episodes and join this new community. Two, visit this link to learn how to apply the MECLABS Conversion Heuristic. This will help prepare you to make a significant contribution during the next episode. It is, of course, free. Three, visit Ten by Three. Purchase an authentic handcrafted product. Some of you are already doing so. Theresa called me and said she noticed a small spike in sales. Let’s give her a big spike in sales. The money will help us meet our goal and the experience will help you make useful recommendations for improving the checkout proceeds.
Remember, we are open to any of your ideas on how to drive traffic for improved performance. Feel free to contact me at my personal email, I read every one. firstname.lastname@example.org. Here’s what you can learn from this episode. Download the simplified MECLABS data pattern analysis so that you can use it to grow your own organization. It is free. It’s distributed under a Creative Commons Licence. In addition, we have built a large infographic poster that summarises everything I taught today. You can download it and use it to keep these principles at the forefront of your thinking.
My name is Flint. Thank you for your trust. We’ll be back with more.