A Margin of Importance

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A Margin of Importance

Overwhelming Detail

Making sales is one thing, making money is another.

Making sales is one thing, making money is another.

In working with so many people over the year, it is wonderful to be a part of amazing discussions and learn insights into so many businesses. Typically, I am meeting with the online marketing teams and spending time troubleshooting issues that range from technical problems, analytics tracking or copywriting.  I’ve often compared online marketing to a very wide, very specialized approach to marketing.  There is so much to do, it is a vast array of skills, abilities, tactics and analysis that need to work together to accomplish a strategy.  The details can get us bogged down in elements that prove to be troublesome, problematic and sometimes, just simply distracting.

Attention to KPI’s

You see, in the complex world of online marketing there are so many details that demand attention.  One of the most obvious ones concerns getting your website to have great visibility in the search engines.  I am constantly asked about tactics and how they will play well with Google.  The problem is that we can get so sidetracked on things like Google’s response to minute changes on our website, that we miss the bigger picture: making money.

What Measures Success?

Conversion rates, sales, rankings, and A/B testing are all things that we keep a pulse on to ensure that the business is healthy.  However, it is more than possible to go bankrupt by watching these things and being pleased with the increase in each category.  Simply because your conversion rates and sales are increasing does not automatically mean that your business is profitable.

I was in a meeting this week where the online manager was concerned about low inventory in a number of categories and fulfilling future orders.  However, by not talking to the retail manager, they did not realize that the products being discussed were all extremely low-margin products. Just by calling a meeting to discuss the issue cost more in time and money than the company would make by having a full inventory of each item and ongoing sales of each product.  One manager was looking at rankings and online success, the other manager was looking at business success and how much the efforts cost more than the profit margin provided.

Sales are Good, Profitability is Better

By working together, the retail manager and the marketing manager could develop a clear strategy that maximized the efforts on the highest margin products, thereby growing the profitability of the business.  Low margin products, while easy to move, needed to be approached with the guidance of ROI from the company’s perspective.

An Object Lesson to Create a Profit-based Culture

A good visual lesson that helped to create a culture of profit was to show the online marketing team the combination of products that would cover their salary for the year – by the profit margin, not by the sales.  This opened the eyes of those working in the details of the marketing to the realities of their priorities.  Immediately, they understood the best use of their time in terms of the profitability of the company, and their own security within the company.

The Bottom Line is the Bottom Line

Always be aware of the margins.  Nothing wastes your time more than being distracted on details, especially unprofitable details.  Measurement of your process is critical to finding those areas in your business that distract your attention to low-priority issues or those that can be maximized for profitability.

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About the Author:

Matt has taught Google employees how to understand and use Google Analytics, consulted with Experian on how to present data, developed online marketing training for both Proctor and Gamble and Johnson & Johnson and presented analytics methodologies to Disney, ABC & ESPN. As founder of SiteLogic, Matt teaches marketers how to create measurable and profitable strategic marketing plans.

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