Ask the Right Questions to Get Your Metrics Positioned
Q4. If you pay to secure new customers, is the cost per customer justified economically by the profits of the customer in the first 18 months after acquisition? Is the lifetime value model used for this calculation up to speed (based on your actual latest profit and loss percentages, line by line)?
Q5. Concerning the character of your proven prospect universe (i.e., the quantity of outside names you can prospect to with at least breakeven or an acceptable cost per customer level) for your biggest catalog drop of the year, is there an extra quantity of names you’re not mailing that’ll perform and give you incremental growth? Are these names already in your circ plan?
Q6. In terms of your Web site and search performance success, of all the new customers you develop each year, as fellow Catalog Success columnist George Mollo believes — as do I — an approximate 10 percent to 13 percent should’ve come to you without a prior direct response (or Web) contact, after all your matchback procedures. These names represent strength in brand and Internet marketing. Are you at this 10 percent to 13 percent level? If not, why?
The goal of all these questions is to generate a consistent 8 percent to 10 percent (or greater) EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) level in your annual P&L statement. So, you’ll want to keep these questions and metric performance norms in mind. Share all of them with key managers and measure management performance against these metrics and questions. Use these metrics to do the following:
● Help prepare your yearly mail plan and individual segment circ levels;
● Set and meet the EBITDA objectives of your strategic plan; and
● Ensure that when the timing is right, you’re positioned to raise capital, sell equity or cash out.