The start of a new year is an excellent time to assess our prior year's performance, so that we can set the appropriate course for the year ahead. Success is built on a variety of factors; therefore, it makes sense to measure the business in a variety of ways (for one excellent tool, see my post on Balanced Scorecard).

A significant portion of our evaluation will be financial; however, looking other areas will provide context and insight into the reasons for our financial results, as well as opportunities for improvement. We will look at these factors overall and additionally may want to measure individual areas of the business, e.g. marketing, product lines, etc.

• Financial: Take a look at the final numbers on the balance sheet. What were our revenues, profits, and/or financial growth? How did we fare against any targets we had set? (This is also an excellent opportunity to pull together any financial records that will be required for upcoming tax purposes.) Finally, look at the return on business investments for the prior year.
• Customer: Did we grow our base? Were our customers satisfied and are they coming back? Where did we deliver to our customers, and where did you fail to deliver? This will uncover opportunities for the year ahead in addition to providing context for financial results.
• Process: Did we improve efficiency or effectiveness, or are there areas where we have lost efficiency or effectiveness? Did we meet any goals we had set in terms of quality control, delivery times, or other process-based improvements? Have our processes kept pace with changes in the business (e.g. growth, new products, changes in strategy)
• Innovation: Did we move the business forward in terms of new products or services? Did we meet any goals we had set around education or skills development? Have we kept pace with changes in the industry over the past year, or are their gaps that need to be addressed going forward?

To make the assessment as concrete as possible, consider creating a yardstick to measure success against. Measure business performance on a scale of 1 to 5, with 1 being "We did not achieve that goal" and 5 being "We exceeded that goal". This is a simple but objective way to determine how well we did at achieving our goals.

Ideally, we measure our 2011 performance against goals set at the beginning of the year; however, even if we did not have defined goals, we can use a similar yardstick to measure performance against anticipated results (although this is not as objective a measure, it is still a step in the right direction. Then, we can set goals based on our current position, for the year ahead.

In my next post, we'll look at how to set up a measurement focused year.

Happy New Year from the Tingley Advantage!

Do you have any New Year's resolutions? What about for your business? Here are six resolutions to consider making for 2012:

1. Get to know your customers better.
2. Make the most of your business' social media strategy.
3. Implement a Balanced Scorecard to ensure every level of your organization supports your strategic goals.
4. Get a handle on your business processes, so you can make them better.
5. Find new ways to tell your company's success stories.
6. Measure, measure, measure!

Whatever your resolutions may be, wishing you and your business all the best for a successful 2012!

Regular readers of my blog will know that I am passionate about measurement as a critical component of managing and maximizing your marketing efforts. A solid measurement strategy ensures that you KNOW what works - rather than guessing. And a solid measurement strategy will generally incorporate the principles of testing and control.

Testing is a process whereby we create an objective for our campaign or initiative and then measure whether the objective is being reached based on the initiative's success against a control group. Testing enables us to confidently answer questions such as:

• Is our initiative or program working? Is it worth the investment we are making in it?
• Could it be working better than it is? Or could a different approach be more effective?
• What specifically is driving its success or failure?

How do you answer these questions? By implementing a continuous process of defining a question, creating a test, measuring the results, learning from the results, and then refining your initiative (including a new test).

Let's look at a simple example:

A translation company is considering mailing a follow-up package to prospects who contact their firm for a quote. The goal of the package is to convert prospects into customers. The package will be somewhat costly and time-consuming to create and mail, and the firm wants to be sure their investment will pay off.

Question: Is our initiative or program working?

Test: A random sample of prospects are excluded from the next mailing. The conversion rate of this group will be compared to the conversion rate of the contacted group.

Measurement: The conversion rate of the contacted group is higher than that of the excluded group.

Learning: The return of the marketing investment is sufficient to justify its continuation.

Refined Initiative: The welcome package is mailed to all prospects.

Having completed this test, the translation firm should also refine their test variables with each mailing, so that they can continuously improve their initiative. Examples of tests to consider could include:

• A lower cost package versus the current high-cost one
• An e-mail versus a mailed package
• The timing of the mailing (sooner vs. later)
• One customer segment's response versus another's

Each test will either reveal a more effective (in terms of cost, effort, etc.) way of executing initiative, or will serve to objectively prove the current initiative's effectiveness.

Most of us intuitively know that customer satisfaction and loyalty are important. We know that a happy customer is more likely to buy from us again - or tell a friend about us - than an unhappy one. However, it's not always easy to measure and manage this concept in practice, and this is where business tools can help. One such tool I've recently re-discovered is the Net Promoter score.

The Net Promoter concept asks the question "How likely is it that you would recommend our company to a friend or colleague?", and breaks out customer responses (which are given on a scale of zero to ten, zero meaning they would not recommend you) into three groups:

• Promoters (9 and 10) are those customers who are loyal to you and will recommend you to friends.
• Passives (7 and 8) are those customers who are satisfied but neutral to your company - a competitor can easily scoop up these customers.
• Detractors (0 - 6) are those customers who are unhappy with your organization and will say so - they can impact you through negative word-of-mouth.

Your Net Promoter score is simply the percentage of your customers who are Promoters, minus the percentage of your customers who are Detractors.

While customer satisfaction and loyalty have always been important, they are arguably more so now than ever before. Whereas in the past, a loyal (or angry) customer might discuss your product or service with a few colleagues, friends, or neighbours, now, with social media, that same customer might tweet or post about you to hundreds of people. The impact - for better or for worse - has the potential to be significant to your organization.

The strength of a concept such as the Net Promoter score is its simplicity - any employee can understand the concept of trying to please customers so that they will want to promote the company rather than be passive or detract from it. It's tangible and meaningful on the front line as well as in the management offices.

Of course, knowing your Net Promoter score is just the beginning - it's what you do with that knowledge that will ultimately increase your success. Knowing your score gives you a starting point to discover where you are at and what you need to do to move your customers towards becoming Promoters.

To learn more about Net Promoter, you can visit their website.

In the last post, we looked at what a Balanced Scorecard (BSC) is, who uses it, and why. In this post, we'll take a look at the implementation of a BSC. Although the specifics of an implementation will differ between a large corporation (which, for example, might need software to support its BSC initiative) and a small business (which might rely on a short documented list), the following high-level steps will be a part of any implementation:

• Define the company's strategy - As always, if you are not clear on where you are trying to go, it's impossible to create a useful map to help you get there. Make sure you are clear on your strategy so you can break down how to achieve it.
• Define objectives which support your company's strategy - Objectives should be measurable and should reflect the four areas of the Balanced Scorecard - Financial, Customer, Process, and Learning and Development.
• Define your measures - Figure out in specific terms how you will know whether you've met your objectives.
• Define and pursue your initiatives - Now that you know what you are trying to do and how success will be measured, define and pursue activities to drive those objectives.
• Evaluate your success - Measure what you've achieved against your objectives and measurements, and refine the process based on what you learn.

One of the most powerful things about the Balanced Scorecard is that it can be cascaded from the very top on the organization right down to the front lines, ensuring that each and every company resource is aligned behind a clear and common set of objectives. Here is a simplified example demonstrating how objectives can be broken down and made relevant to every level of the organization:

In this example, we can see that, although there are some differences in the specifics of each level's goals, they are ultimately linked to one another and all serve to further the organization's strategic goals.

The Balanced Scorecard is a powerful management tool that can be scaled to benefit businesses of all sizes. It ensures you are making the most of your resources by aligning efforts to support your ultimate goals.

The Balanced Scorecard is a management tool that translates a company's strategy into specific, actionable and measurable goals and activities. By cascading these goals and activities down through the organization, level by level to the individual employee, it ensures that each and every individual effort is driving the company's strategic goals forward.

The scorecard is called "balanced" because it defines goals in four different areas: financial, customer, process, and learning and development (including innovation and employee development). This ensures that financial and non-financial goals are balanced against each other, leading to stronger success for the company.

Any business can benefit from some version of a scorecard (the complexity of which will vary depending on the size and diversity of the organization). Bain reports that the Balanced Scorecard was one of the top ten management tools used in 2010.

What are the advantages of using a Balanced Scorecard?

• Business activities are linked to the company's strategy; extraneous activities can be de-emphasized or eliminated.


• Success is measured in a balanced way by identifying and providing equal emphasis on financial and non-financial drivers.


• Each and every member of the organization understands how and why their contribution matters to the company.


• Employees are rewarded for activities that really drive the company's success

In a future post, we will take a more detailed look at the implementation of a Balanced Scorecard.

No matter how cutting-edge your business might be, business basics such as well-designed metrics will always be fundamental to your success. Lara Veltkamp of Watershed Marketing shares her thoughts in today's guest blog:

I recently had the opportunity to attend an all-day, multi-speaker conference in York Region called "Business Innovation for Changing Times." The event was geared toward small and micro businesses, highlighting Arlene Dickinson as keynote. Likely, she was the reason many of the 200+ folks attended. She was, most definitely, worth hearing. Earlier in the day, though, and long before her appearance, I sat in the audience, mind occasionally wandering (between speakers of course!) to this guest blog article, and what I might write to engage you - Katie's tribe.

The decision was made for me as speaker after speaker took the stage. While the common theme was innovation, not surprisingly the common support for each presentation was in the metrics.

For example, during his presentation, Ian Proudfoot (V.P. & Regional Publisher, York Region, for MetrolandMedia) had statistic after statistic in support of the company's marketshare, audience support, and rationale for the organization's recent name change from Metroland Publishing to MetrolandMedia.

Douglas Heintzman, Director of Strategy for IBM's Collaboration Solutions, presented a highly informative piece, "Lessons learned from an early adopter," where Collecting Metrics was highlighted in virtually every area of social business success he discussed.

Lisa Kember, Regional Development Director - Southern Ontario, for Constant Contact, spoke on the difference in customer engagement through Paid Media versus Owned Media versus Earned Media, and cited a number of metrics to monitor when differentiating between these levels.

As you know if you've been following Katie's blog for any length of time, metrics is not restricted to operations and process management; it's imperative for other areas of business, especially for every marketing campaign you initiate. The basics for any business, as I'm sure Katie would tell you, include:

• Monitor your website and/or web page visitors by date, regional location, browser type, referring source and tied-in marketing initiatives (such as an advertised special offer or a specific blog article launch that point back to a specific web page). You'll see a trend in use, and you'll have a better idea of how and why people are visiting your site. Tools like Google Analytics - when set up properly and reviewed often - are very good for collecting and presenting the data you need, and it's a free tool.
• Track engagement through your social media tools (Blog, Twitter, LinkedIn, Facebook, YouTube, etc.). You need only simple metrics to start - baseline and then trend: readers, followers, connections, profile views, likes, subscribers, etc. When you have a handle on these metrics, you can begin to go deeper on engagement. Ask Katie about her Tingley Solutions product for small businesses that will help you track what you need to track.
• Calculate your average revenue per customer (total revenue $/total # clients), you'll know what each customer is worth to you, and if you measure further, you'll be able to identify how many prospects you need to gain one customer. This is something you easily can do by reviewing your revenue numbers and client list. Going deeper may require some support from your marketing and sales team, and your accounting software.


Without these numbers, your marketing can be a waste of time and money... because you just don't know for sure. However, if you want to grow your business, you need to know how and why people are engaging with you, and what they value from you -- so you can give them more of what they want and need.

And that's what being in business is all about, isn't it?


Lara Veltkamp delivers practical, achievable marketing strategies, planning and initiatives, most recently as principle of her own company, Watershed Marketing Group Inc. Lara founded Watershed in 1998 after a successful career leading marketing and sales strategies inside both large and privately-held companies. Under her leadership, Watershed continues to grow, with over 100 clients and 1,000 plus attendees at marketing and business workshops delivered to clients across Ontario.

Determining the ROI of your social media efforts can feel like a challenge. Today's guest blogger, Andrew Jenkins of Volterra Consulting discusses how to tackle it.

Social Media ROI is not so hard to measure if you know what you are measuring. When the subject of social media comes up in conversation, so does the question of ROI. Often companies want to see a business case to justify incorporating social media, but one of the more snarky responses might be, "What is the business case for your phone or email?" I am not going to go there -- but I will offer a more constructive explanation instead.I think a business case can be made for social media and that ROI can be proven.

The key is to design it into your strategy from the outset. What I mean by that is to create a situation where you can determine the direct correlation between an activity within social media and a positive result regarding your company like increased website visits, customer inquiries, newsletter registrations, or online transactions. Whether it is a direct mail piece, a microsite, your website, a tweet, a Facebook post, or a blog post, you can distribute content or links that will generate actions with associated analytics. You can test different content or links with different channels to see which platforms or channels produce the best results and refer the most traffic. Google Analytics, Bit.ly, and Facebook Insights are just a few examples of tools that provide those analytics and insights necessary for you to determine ROI.To be fair, determining the ROI requires a certain level of understanding of social media and how content gets shared. Once you understand how social media works, you will feel more confident and comfortable about how to measure ROI.

Social media is meant to complement your existing marketing activities and objectives rather than operate independently. Assuming you properly measure the ROI of your current marketing efforts, it will not be a stretch for you to determine the ROI of your social media efforts.

Andrew Jenkins is principal and founder of Volterra Consulting, a management consultancy helping clients with strategy and strategic planning. Areas of focus include social media, mobile/wireless, e-business, and Internet technologies.

"The technologies available in the marketplace today are equipped to deliver highly targeted personalized services which can impact revenue and strengthen customer loyalty, without jeopardizing customers' privacy. Eighty-eight percent (88%) of Best-in-Class companies agree that they will recognize a Return on their Investment in personalization technologies." (Aberdeen Group)

Customers today are bombarded with marketing messages from different companies, in different media, every single day. It's increasingly difficult to ensure that your marketing message is not lost in the crowd. The Personal URL (PURL) is an excellent tool to help your company stand out.

PURLs represent the next step in a marketing world increasingly driven by personalization and customization. And, they make unique use of something that most customers love to see and hear - their names. Rather than a direct mail piece directing a customer to a generic website, PURLs provide a website tailored uniquely to them. The customer might type in a PURL something like this: www.yourcompanyname.com/katie.tingley. Once on their personalized page, they can see offers and content tailored and updated to their specific wants and needs.

Like any marketing tool, PURLs can only be as effective as the integrated campaign they are part of. A sample campaign might look like this:

1. A direct mail letter might ask customers to register on a website to receive exclusive offers.
2. Upon registration, the customer is sent an e-mail with their PURL to access their offers.
3. The customer visits their PURL, which is kept up-to-date with offers relevant to that customer's wants and needs.

While the offers will be key to the success of the campaign, the personalization of the URL on the direct mail piece will both entice the customer's initial interest, and reinforce their sense that you are addressing their unique wants and needs.

An added benefit to PURLs is the additional layer of tracking and measurement they provide. With PURLs, rather than just overall click-through numbers, you can determine exactly who didn't respond (visit the URL) at all, who visited their PURL but went no further, and who went on to make a purchase.

Customers expect things to be tailored to them and their unique needs. A Personal URL is a great way to demonstrate your commitment to treating your customers as unique individuals - right from the first click.

Special thanks to the PURL experts at www.oneimaginginc.com for their research contribution to this article.

We've looked at the cost of bad data . But how do you know what data to collect?

Customer data enables you to understand your customers and connect with them in meaningful, mutually-beneficial ways. However, when it comes to data, "more" is not always "better". Asking for reams of data can be off-putting for customers, tricky and expensive to manage, and confusing to use. So, what data do you really need?

The answer will be different for every business. Ask yourself the following questions to help you determine what data you need to collect:

• Does it help you contact your customers in a meaningful way? Many companies either need or want to contact their customers by mail, e-mail, or telephone. Which methods does your company use? Collect, in a consistent way, the data that supports your methods.
• Do you have a place for option information? Not only are their privacy laws, such as PIPEDA to be considered when contacting customers, but your relationship with your customers can be weakened by disrespectful or excessive contact that they don't want. Give your customers an opportunity to tell you how to use their data, and ensure you have a means to track and use their preferences.
• Have you met all your business, legal and ethical obligations? If you offer warranties, have you made it easy for your customers to provide you with the data you need to administer them? If you have a legal obligations to meet (e.g. age restrictions, medical information, etc.), have you made every effort to keep customer data complete and up-to-date?
• Does it support your strategic goals? Data can be used both to support your goals, and to track your progress. If you are attempting to build sales in a certain geography, a certain amount of geographical data will be necessary to measure your success. If you plan on tailoring your messages based on age or gender, then collect this data (again, consistency will enable you to use it efficiently).
• Does it fall into the "maybe someday" trap? Maybe someday we'll contact clients by e-mail ... maybe someday we'll do psychographic analysis ... It makes sense to be forward-thinking, but collecting any and everything because it might be useful someday is sure to overwhelm your customers and your business. Collect data you will use or have concrete plans to use. If you build a healthy relationship with your customers and use what you collect in a mutually-beneficial way, you can always ask for additional data in the future.
• Is there data you can glean without the customer's input? Things like customer anniversary dates (when they first purchased your product or service) can be leveraged for relationship-building and is readily available to you - providing you are ready to capture it.


By thinking through your data requirements in advance, you can ensure that you are well-positioned to meet your business', and customers', needs.

All data (like all customers) is not created equal. While good quality data is crucial to the successful management of your business, bad data can have negative effects ranging from inefficiency to uselessness to detriment. What comprises good quality data? At the most elementary level, it needs to meet the following three criteria:

• It should be complete.


• It should be accurate.


• It should be collected in a consistent manner.

When any of these quality factors are compromised, your business is at risk of having data that is inefficient to use, misleading, and/or unusable - and the impact of these risks can range in severity depending on what the data is used for.

Let's look at a hypothetical example of KidCo, a company which manufactures children's car seats. The company's customers register with KidCo using their addresses for the purpose of marketing, warranty administration, and in case of a safety recall.

If the addresses they collect are incomplete, inaccurate, on inconsistent, they run the risk of:

• Inefficiencies such as: high returned mail rates on DM campaigns; manual research and additional data entry to complete addresses; manual corrections to inconsistencies in formatting in order to enable automation such as mail merges.
• Misleading information such as: faulty geographically-based analysis of customer base; inability to de-dupe customer lists leading to duplicate information.
• Unusable information such as: inability to confirm warranty coverage, resulting in lost customer goodwill; customers who are uncontactable.

Based on the above list, the impact on KidCo's customer relationships and reputation could be negative in the case of a marketing campaign or warranty administration. In the case of a safety recall? The inability to contact customers due to poor data quality could be downright disastrous.

Data is only as useful as its quality allows . Ensuring the data your business collects is complete, accurate, and consistent ensures that your business has the foundation it needs to make sound decisions.

Measurement is a bit like exercise - we all know it's good for us, but it can be tough to find time to do it.

We know the importance of measurement to our businesses - it enables us to understand where we stand and where we are going in terms of our strategic goals. The challenge is that it requires a significant unfront investment of time and energy, while the pay-off tends to increase slowly over time, as you build your reservoir of data. So, how can we find the time, and the motivation, to start - and stick with - our measurement plan? Here are a few ideas:

1. Be clear about what you are measuring, and why: Your measurement plan should be driven by your business' strategic goals. If it is, the information you will get will be relevant and provide a clear pay-off to your business. If it is not, you will find yourself awash in data that you can't use - and regretting the waste of time and effort.
2. Stay focused: There are myriad pieces of data you can collect, even once you've focused in on your strategic goals. You can look at products, customers, and finances in so many different ways that it can be easy to get off-track, or bogged down in details that create a lot of work for a diminishing return in value. Instead, chose a few key metrics with a clear value or purpose to them, and focus on those. They payoff will motivate, and perhaps give direction to, more in depth investigation using different metrics. Or perhaps those "big 3" metrics (or whatever your magic number happens to be) will give you all the information you need.
3. Find extra time: Sometimes finding the time to measure is a matter of re-prioritizing. For example, take a look at your day's activities - is there anything you are doing that is less valuable than taking the time to measure your business' progress? If the answer is yes, you have an opportunity to re-prioritize your schedule so that less important activities, not measurement, are the ones allowed to fall to the back burner from time to time.
4. Start small: Voltaire said: "Don't let the perfect be the enemy of the good". So it is with your measurement plan. It may be ideal to track your sales in ten different ways, but if that's not realistic, start with three. You don't necessarily need to invest in a full-blown CRM system - you can create some great tracking tools with a spreadsheet tool such as Excel. If you've followed the advice to be clear about what you are measuring, and why, you can probably figure out the most useful first step to take. And with measurement - as with exercise - every step counts!

There are many challenges when measuring what's happening in your business, several of which we've discussed. You need to determine what to measure and how, not to mention finding the right data and measuring it consistently to get a good picture of what's happening in your business.

There is another challenge, one that often falls to the back burner but that is equally important to consider: how to communicate and display your results.

If a picture is worth a thousand words, so is an effective visual data display. Done well, it can allow you to both see and communicate, clearly and succinctly, the insights all your measurement work has provided. Done without care, it can cause an audience to misinterpret data or jump to erroneous conclusions. And while a client, colleague or executive is unlikely to be moved by pages of numbers, an effective graph or chart can tell an influential story.

There are a number of ways to display results visually; however, even the most creative ways have at their core the tried and true basics. In terms of data display, most needs are covered by four options, each of which is best used for specific objectives.

1. Pie Charts: These are effective when you are trying to show the proportion that one or more items represents out of a whole. For example, you may have five products in a category and would like to display what percentage of total sales each category represents. The pie would be divided into five pieces, one for each product, and the varying size of each piece would visually represent the percentage of sales for that product. When all the pieces are added up, they should always equal 1 (or 100% - in other words, the whole).
2. Line Graphs: Line graphs are particularly useful to understand trends. For example, if you show weekly sales over a period of months in a line graph, you can easily identify both the overall trend (up or down), as well as any peaks or valleys that you may wish to investigate further. By layering multiple lines on your graph, you can also compare trends
3. Bar Charts:.Bar charts are commonly used the make comparisons; for example between regions, product lines, or brands. Each category is assigned bars of a different color, creating a quick and easy comparative view.




4. Tables: Tables can be used to display multiple pieces of information in a consistent fashion. Perhaps the least visually appealing (because, in fact, they represent a way of organizing written data rather than truly making it visual), they should be used sparingly and should be limited when possible to three or four columns and rows. Any more than that can become confusing or overwhelming for the audience and fall into the trap of "too much information".

By paying attention to the way you display your data, whether it be for yourself, your clients, or any other audience that you need to communicate with, you can ensure that your measurement and metrics efforts deliver maximum impact and value.

You've designed your Facebook page, updated your LinkedIn profile, and are tweeting your every move. Now that you've entered the world of social media, you may be wondering ... what next?

The use of social media is growing and businesses know they need to be a part of it. But is it working? Is it benefiting your business? Social media may be new, but in many ways, it can and should be measured and managed like any other business activity. This way, it becomes a powerful tool you can add to your business tool belt, rather than taking on a life of its own.

Regardless of which social media tool you are using, there are five key steps that can be taken to ensure you are using it effectively:

Know Your Purpose: Or, as Steven Covey says, "begin with the end in mind". By defining your purpose upfront, you can prevent your social media activity from being pulled in all directions and make it easier to determine what activities to pursue, and what metrics to measure. There are many goals social media can support, including: generating sales, generating leads, generating brand awareness, proving your brand, creating buzz, or providing thought leadership. What do you want social media to do for you? Decide on your goals, focus on them, and measure them.

Define Activities That Support Your Goals: If your goal is sales, consider offering coupons to fans or using social media to drive potential customers to your online shopping site. If you are aiming to increase brand awareness, encourage fans and followers to share or re-tweet content by making it valuable or entertaining. Whatever activity you choose, be sure it supports your goals to maximize its value, and build in some measurement capability so you can track your success.

Define Your Metrics, and Measure Them: If you are going to manage your social media activity, you have to be able to measure it. There are many metrics that can be used to measure social media, including more traditional measures such as number of sales or leads, and social media-specific ones such as number of fans or re-tweets. Figure out what metrics will allow you to understand your progress towards your goals, and measure those. We'll look further at social media metrics and measurement in a future post.

Refine Your Activities Based On Results: Your measurement efforts are only effective if they guide your future activites. Based on the data you get from your metrics, determine which activities are working and which are not, and change or improve your activity based on that knowledge.

By combining new social media tools with tried-and-true business principles and measurement techniques, you can understand and maximize your social media success.

In my last post, we looked at scoring and then segmenting customers based on the categories they shop. Not only can this information be used to gain insight into your customers' value to your business, but it can also be used to identify opportunities to grow your business by targeting your customers with products or services that complement what they have already bought.

To do this, group the categories you've identified into complementary product or service grouping. For example, an electronics retailer might group the category "PC" with "printers" and "wireless PC accessories". An interior design firm might group the service category "design consultation" with "personal shopping" and "re-design project management".

Having created these complementary groupings, you can begin to leverage the information in several ways, including:

• Increase the value of the customer: For example, if a customer has purchased a PC and a printer, they could be targeted with an offer for PC accessories; if customers tend to buy design consultations but not other services, they could be offered a discount on other services with the purchase of their consultation. This enables you to maximize the value of high-value customers, or increase the value of mid- to low-value customers.

• Increase product sales : If the electronics retailer wants to boost accessory sales because it is a high-value category, they could look at all customers who have purchased a PC or printer (or both) and target them with an accessory offer. The design firm could boost personal shopping sales by targeting all customers who have purchased a consultation.


• Follow the data : Sometimes the data might provide an unexpected insight. Perhaps a large number of printer purchasers do not purchase the complementary products, but do also purchase cell phones. What is the correlation - why do these two unrelated group "complement" one another? Perhaps these are the two categories in which you are the most price-competitive or you carry the most cutting-edge products, and that is what the customers buying them are focused on. By remaining alert and open to the data leading you down an unexpected path, you can uncover valuable targeting information that otherwise may have remained hidden.



Looking at your product categories in terms of complementary groupings enables you to gain insight and maximize your sales success.

There are many different ways to segment your customers. You can group them based on the value they bring to your business, how long they've been with your firm, or what they buy.

Let's look at segmenting customers based on the categories they buy. The term "category" can be used in the traditional sense - a grouping of similar products - or, it can be used to describe a specific service offering. How you choose to define it depends on your business. What is important is that your categories are used consistently to define specific service or products groups within your business, and that no product or service fits into more than one category.

Now that your categories are defined, determine how important each is to your business. Some categories may be more important than others for various reasons; for example, some may be more profitable, contain products or services you would like to expand, etc. Assign each category a score based on its relative importance to your overall business. A range of 1 - 5, with 1 being less important and 5 being most important, should do the trick.

By creating a table like the one below, you can begin to track the categories purchased by each customer and see which purchasing segment your customers fall into. You can use the attached template to get started: Customer Segmentation - Categories Shopped.xls

Once you have determined the categories shopped by each customer, simply add up the scores to obtain a total score. The total score will help you understand how important the customer is to your business in terms of their product/service category involvement. You can create segments by breaking down the potential total score - in this case, 12 points for a customer who purchases in every category - into ranges, each of which is assigned a segment. In this example, we have assigned customers with a score of 9 - 12 to Segment A, a score of 5 - 8 to Segment B, and a score of 1 - 4 to Segment C.

The table can also be adapted and used in other ways, a few of which I'll look at in future posts.

I was introduced to a fabulous new tool the other day and just had to share it with you. It is a wonderful way to display and measure the strength and diversity of your network. And, it's all generated using your LinkedIn account.

The tool, called InMaps, visually represents your LinkedIn network by clustering it based on the interconnections between your contacts (you must have a minimum of 50 contacts). The clusters will tend to have a strong overarching connection; for example, a place of employment, a university, your family and friends, or other groups you are involved in. The clusters are unlabeled, giving you the opportunity to classify them in a way that is most appropriate for your needs, and to determine their meaning and relevance to you and your business.
Here's what mine looks like:

The blue group represents former colleagues from a company I used to work for.

The dark orange is a very strong networking group I work with.

The burgundy is a women's advisory group that I co-founded.

The green, lavendar, and light blue clusters are a number of smaller groups including alumni, social, and other ties.

Each dot represents a person, and when you scroll in and out, you can see who that person is connected to and how connected they are. The size of the dot varies depending on how many connections that person has (bigger dot = more connections).

This is a great way to understand where your strong connections lie, where your can build your network, and who knows who. This might benefit you by showing what networks your customers are coming from, providing a clear understanding of key network-building contacts, or providing insight into how you interact with your network (For example, do the clusters overlap or are they very distinct? Are they many smaller groups, or a few large ones?)

If you take a snapshot every quarter and review them every year, you will see how your networking is growing and changing over time.

The tool was created by LinkedIn Labs, a group of LinkedIn employees who innovate and experiment with new LinkedIn applications. As such, InMaps is dynamic in nature and will change and evolve depending on how users interact with it and what their feedback is.

I would like to thank Kate Erickson of Organization Design Consulting for showing me this great tool.

I hope you enjoy it as much as I did!

Do you know when to reward your customers, when to provide them with incentives, and when to just let the chips fall where they may? It can be a really tough question.

The first step in developing any customer offer is to be clear about your objective. What are you trying to get your customers to do? Starting an untargeted reward program is not the best strategy. Some customers are not repeat customers and probably never will be. Some customers will do business with you because it's convenient or a good value but would just as easily give their business to your competitor. Then, there are those loyal customers who will buy from you over and over again, as long as you are meeting their need. These three groups of customers are very different and thus should be treated differently.

Let's take the first customer. Since they don't plan on coming back to you, why give them a discount or reward with their initial purchase? Rather, provide them with a reward that can only be used if they do return. That way, your margin isn't reduced un-necessarily, and you are providing them with a reason to come back.

The second customer, the one who would happily switch providers for a better deal is the one to give an incentive to. He is looking for a reason to come back to you. If you give it to him, you will continue to win his business (just be sure that the reward you offer does not eat too heavily into your profits). One of the best incentives for this type of customer is the offer of a small discount based on how much business they give you. This can be either in the form of a one-time discount, or a reward that can be accumulated and put towards a larger purchase that the customer wouldn't otherwise make.

Finally, the third customer is consistent and will continue to shop with you (provided you meet their needs). Her loyalty should be acknowledged, but you don't need to provide her with heavy discounts. Rather, give her a reason to help you grow your business. Create a referral program where she is rewarded when one of her referrals shops with you. This way, her loyalty is solidifed as she is incented to spread the word, and you benefit from the new customers her referrals generate.

Customers are different. By understanding the differences, you can provide the right incentive to the right customer at the right time, mutually benefitting both them, and your business.

Business is changing at an ever-increasing pace, and customers have more and more options for purchasing the goods and services they need and want. So, how can you keep your customers coming back?

One way is to understand what their needs are, and how to best meet those needs. Customer advisory groups or panels can be an effective way to do just that. And, they can be easy to establish and monitor by following these steps:

1. Approach a set of customers, asking them to occasionally provide feedback so that you can ensure you are meeting their needs. Some businesses provide incentives to these customers in exchange for this invaluable information (These don't necessarily have to be discounts - they can also be relatively cost-free benefits such as sneak peeks at new offerings.)
2. Establish a process for sending out short surveys to gain feedback on planned changes to your product lines, new services you may offer, or other issues that would impact your customer base. Keep these surveys short - five to seven questions should be enough to get the answers you need. You may choose to build survey capabilities into your company's website; alternatively, tools such as Survey Monkey can be used to create quick, easy surveys and track the results.
3. Make sure you ask questions that can be easily analyzed. For example, multiple choice or questions with a 1 to 5 preference scale are much easier to quantify and analyze than open-ended questions. You will get a better and more consistent understanding of a group's preferences by taking the time to set up your questions in this way.
4. Track the feedback you receive over time to make connections between different needs and issues. This will enable you to understand emerging trends in customer needs. For example, a number of different questions around organic products, local services, and packaging options may not appear related, but taken together, they may point to an increased interest in ecologically friendly options - something you would want to be aware of for your business.
5. Don't forget to capture base demographics and customer information when panel members sign up. This information enables you to understand how different customer segments respond to your questions. For example, women between the ages of 25-34 may require a service that does not appeal to older women. If you don't capture the age range of your panel members from the start, you may not understand this distinction and may chose not to move forward on a potentially lucrative idea.

Take the time to find out what your customers are really looking for, and create standard templates to track the responses that come back so that you can turn the information they provide into usable business intelligence.

In the last few posts, we've discussed the importance of processes to your business, as well as the basics of process documentation. One of the key benefits of having standard, documented processes is that it enables you to gain efficiencies for your business. But how do you leverage the process work you've done in order to achieve this?

To become more efficient, you first must understand where you currently stand. For example, how long does it take you to complete a given process? How much does it cost?

Which variable (time or cost) to focus on will depend on your business: service companies often find that measuring delivery time is effective, because time saved usually becomes profit as it can be re-invested into other billable activities; product companies, on the other hand, might prefer to look at a combination of time and cost, as both have a clear impact on their bottom line. Either way, the principles of measurement are the same: figure out how things are getting done today, in terms of time and/or cost (create a baseline), so that you can measure the impact of the improvements you make upon them tomorrow.

Here's how you do it. (In this example, we will look at measuring time; however, you can use cost if that is more appropriate to your business).

1. Select a single activity, and determine the start and end boundaries for it. Your process documentation should provide this information for you. We previously used the coffee shop example, in which our process map shows us the activity starts with greeting the customer and ends with delivery of the beverage order to the customer.
2. Track the time it takes to complete each task within the activity (Recall that each step in the process map represents a task within the overall activity). You can use the Process Baseline Calculator Jan 2011.xls to complete this step. Track the activity at least three to five times, in order to get a representative view of the time for the activity.
3. Review each task and identify those that take the longest to complete or that include the longest wait times. In the coffee shop example, perhaps making the beverage is the longest task in the process. This would be the task to focus on to improve your efficiency.
4. Identify improvement opportunities. Are there ways to re-organize how the work is done, how work flows from one person to the next, or the order tasks are completed in, to gain efficiency?
5. Implement your improvements and re-measure. Any gain in efficiency can be attributed to the changes you have implemented.

By using this process, you can make improvements to each individual activity that drives your business. In the next post, we'll look at how to identify which process to focus on first, to deliver the greatest benefit to your business overall.

We've talked a lot about ways to improve your business - through process improvements, metrics, increasing customer value, and more. No matter how successful your business may be, there are always opportunities to do things a little faster, a little more profitably - in short, a little better. But when faced with so many competing opportunities, how do you know where to start?

An easy way to determine where to focus first is to score each improvement opportunity across a consistent set of key variables which would drive the value of the improvement. For example, you may have several processes in need of improvement. Relevant variables might include:

• Potential for cost savings
• Potential for time savings
• Potential to positively impact customer satisfaction
• Potential to minimize staff frustration
• Ease/feasibility of implementation

Score each competing process on a scale from one to five, for each factor. Total the scores for each opportunity, and the one with the highest score represents the process with the greatest potential "bang for your buck".

I've referred to processes in the example above, but this methodology can be used any time you need to choose between competing priorities. Other applications may include: determining which customer requests to incorporate into a product first, choosing which employee recommendations to implement, deciding which customer satisfaction issues to tackle, or prioritizing between infrastructure investments. Using an objective scoring methodology might reveal that the "obvious" first priority actually has a relatively low potential for impact or success, while a simpler or less obvious one might represent a quick or high-impact win for your business.

Here is a Project Scoring Template Jan 2011.xls which you can be modified to suit your purposes - I'd love to hear how you use it to improve your business.

In my last post, The Importance of Processes, we looked at why it is critically important for your business to have standardized processes. By clearly defining those tasks which make up key business activities, we can become more competitive by improving our delivery, make it easier to grow the business by creating consistency, and increase profitability by highighting opportunities to increase efficiency . But how do you go about creating and implementing processes?

1. Identify the activities that you perform on a regular basis. Consider your favorite local coffee shop: a key activity might be "Fulfilling beverage orders". You can see a process diagram for this activity below.
2. Describe each task within that activity. Include what is done and who does it, and reference any existing models or templates that are used. In the case of the coffee shop, tasks such as taking the customer's order are performed by the cashier, ordering the coffee is performed by the customer, and making the beverage is performed by the barista. Each of these tasks (among others) must be completed in order to complete the activity "fulfill beverage orders".
3. Number each of the tasks in sequence. A visual representation of the activity's process can be achieved by creating a box for each task and connecting them with arrows to indicate the flow of tasks.
4. For tasks where templates or models currently exist, reference the template and, if possible, create a link to it for quick reference. In our coffee shop example, a template may be as simple as the order form printed on each cup, which is completed by the cashier to tell the barista the specifics of the drink order.
5. Determine who performs each task. Rows, or "swimlanes", can be created, one for each role responsible for tasks in the process (it is best to identify the role rather than the individual responsible for the task. In practice, a single individual might be fulfilling multiple roles, or multiple individuals might be sharing a single tasks - valuable information to be aware of). Task boxes are placed in the appropriate swimlane to show which role is responsible for each task.

In the coffee shop example, the completed process map might look like this:

Now that the process has been defined and documented, make it accessible to your employees, so that everyone understands how things should be done (better yet, solicit employees' input when defining the process - they may provide insights and ideas only possible through their front-line viewpoint). Processes that have been defined in this way can be evaluated and improved, and improvements communicated consistently to all stakeholders.

Investing time in process documentation will save you time and money and help you improve your business' chance of success.

"Better to be consistently good than occasionally great".
-Mark Sanborn

What is the difference between a business that achieves consistent goodness, versus just managing occasional greatness? Well-defined, consistently executed and evaluated, and continuously improved processes.

What is a process? Put simply, a process is a set of defined tasks needed to complete a given business activity, including who is responsible for completing each step, when, and how they do so. Though processes can seem mundane, their importance to your successful business cannot be overstated. As Michael Gerber explains:

We believe that your systems [process] strategy is your business strategy, and the business systems you put in place are your business. This goes back to the idea of the franchise prototype or turn-key business idea -- that if you do it right, your business will run itself, systematically and predictably.

Processes benefit a business in several ways:

• Processes make a business competitive: Companies with defined processes are better able to evaluate their strengths and weaknesses and identify opportunities for improvement. They can improve the quality of their products and services and deliver more consistently to their customers, increasing customer satisfaction and loyalty. They are better able to cope with the unknown and react swiftly to changes in the competitive landscape. In short, process companies know when they are doing things right, and can more quickly course-correct when they are not.




• Processes enable growth: By leveraging defined processes, it becomes easier to deliver new products and services quickly and efficiently, without 're-inventing the wheel' every time. Processes provide a blueprint for new employees, and enable cross-training to minimize business interruption in cases or illness or employee turnover. They enable your company to understand what roles to hire for and identify those skill gaps that are hindering success. (The importance of process to growth was discussed in more detail in my previous post Take Your Business to the Next Level.)
• Processes drive profitability: A company with defined processes can find opportunities to improve efficiency without sacrificing quality and consistency. They can identify duplication of effort and spot areas that are being overlooked. They maximize the value of everything they do by ensuring it can be leveraged elsewhere, ultimately saving time - and money. (For an example of how documenting processes can be used to save time, take a look at Need Another Hour in the Day?)

Having gained an understanding of the critical importance of business processes, the next step is to begin documenting them. In my next post, we'll look at Process Documentation Basics.

Having determined the Key Performance Indicators (KPIs) which will best support your strategic goals, the next step is to develop your monitoring process. As mentioned in my previous post, Measuring Your Success Using KPIs, they are only as good as the data that is collected and acted upon.

There are three key methods for tracking your KPI data. For the purpose of demonstration, we will look at the strategic goal "Increase sales by 10%". A key behavior supporting this goal is "Increase # of new leads in the pipeline". We can look at this KPI three ways:

1. Trend - This method looks at the data at regular intervals over a given period of time, and seeks to understand improvement. For example, you might track the number of new leads each month, to determine whether you are increasing or decreasing the number of new leads over the course of a year. By tracking trends, you gain an understanding of your overall direction or improvement for that KPI.

2. Change - This method compares data from one time period against another. For example, you might look at the number of new leads in October over September. A significant variation in time period over time period indicates some key variable coming into play. For example, a jump in leads in the month following a marketing campaign, when compared to the previous month, suggests the marketing campaign is working.
3. Benchmarks - This method compares data from a specific timeframe or subset against a more stable variable, such as an average or accepted best practice. For example, if your benchmark for new leads per month is 10 (the average), and a particular rep or division generates 15 per month, you can then look into what is happening to create that increase over the benchmark, and leverage it to improve your overall performance.


Which method is used will be driven by the specifics of the KPI and what it is trying to measure. However, no matter what method is used, buy-in from key stakeholders - especially those who will ultimately drive the data - is critical to success. Your KPIs must be relevant and realistic to track, and the purpose, value and method must be clearly communicated to your key stakeholders.

Whether your business needs to invest in a specialized tracking system, or create a simple Excel spreadsheet, by clearly defining the purpose and method of monitoring your KPIs, you will maximize your business' chances for improving success.

Many businesses spend weeks or months creating their strategic plans. Unfortunately, few actually measure their performance to ensure they are on track. Measurement is integral to the success of your business because as Peter Drucker famously summarized: "If you can measure it, you can manage it."

Measuring enables you to assess your progress and make necessary adjustments along the way to ensure you reach the goals you have spent so much time defining.

In order to measure, your business needs to start by defining an effective set of Key Performance Indicators (KPIs).

What are KPIs?

Key performance indicators (KPIs) as defined by the business dictionary are "key business statistics ... which measure a firm's performance in critical areas. KPIs show the progress (or lack of it) toward realizing the firm's objectives or strategic plans".

What makes an effective KPI?

First, KPIs should be strategically relevant. What you need to measure is directly related to your company's strategic goals, and provides clear insight into what drives your success. Quality is more important than quantity - a few strategically-relevant metrics measured well will provide significantly greater value than a long list of metrics that do little to show you how your business is doing.

To determine the metrics that are relevant to your strategic goal, define the specific behaviors needed to achieve the goal. For example, if you wish to increase sales by 10%, key behaviors might include identifying more leads, converting more leads into sales, and increasing the dollar amount per sale. Measure these.

Second, KPIs should be practical to measure. The most strategically-defined KPI is still only as useful as the data that is collected and acted upon. A key component of this is to gain buy-in on both the KPIs themselves, and the process for tracking and monitoring them, not just from your executives but from those individuals who drive the collection of information and implement the activities needed to reach the company's goals. The sales KPIs in the example above are worthless if your sales team does not track them consistently. If your team understands and believes in the value of the information, they are more likely to put in the effort needed to collect it. Additionally, the front line may be able to provide insight into more relevant KPIs, or more efficient ways to track them. I'll explore the monitoring process in more detail in the next post.

Finally, KPIs should include a combination of lagging and leading indicators. Lagging indicators, such as number of sales closed in the previous month, show where you stand. Leading indicators, such as number of qualified leads in the sales pipeline, show where you are headed. A combination of the two allows you to understand your current situation, and course-correct in the present to influence future success.

Each business is different and requires KPIs that relate to its specific goals. A great resource to find appropriate KPIs is the KPI Library. The library includes KPIs submitted by other business users, explains what they are used for and how each one is calculated.

Finding out how much more business you might get from your customers can be tricky. But, it doesn't have to be.

As I discussed in Getting More from Your Customers, the potential value of a given customer is based on two factors: First, unmet needs or needs that are currently being met by one of your competitors and second, needs that change over time as people or businesses move through different life stages. I discussed how to quantify needs & wants in Getting More from Your Customers Part II.

In this post, I'm going to explain how you can quantify the other half of potential value, the needs that change over time as your customers move through various life stages.

If your business targets consumers then you can start with general stages like infancy, childhood, adolescence, adulthood and finally the golden years. If you target other businesses, you can use stages like start-up, growth, established, expanding and decline. Your products or services may not apply to all stages so you should determine which phase(s) do apply and then refine your groupings to be more reflective of your business.

For example, if you sell insurance products, infancy, childhood and adolescence probably don't apply. However, you most likely have many different stages of adulthood; early adulthood, marriage, young families, families with university aged children, etc... And, you probably have products that are suitable to the different life stages. If you create a table like the one below, listing the different life stages and products, you can plot which life stages are associated with each of the products.

Once you've done that, you can calculate the revenue and profit of each product within each life stage based on the amount an average customer spends on that product during a given life stage.

Once you have the life stage value of each product, you have the basis for estimating the potential value of each customer. The next step is to determine which life stage each of your customers is in and then sum the average product value of the products associated with the subsequent life stages. This will give you the life stage potential value for that customer.

Here's an example: Let's say that you've calculated the average product value for each of the life stages as displayed in the chart below:

If the customer is currently in life stage 3 then their potential value is $1,800.

Calculating potential value based on life stage helps you to understand how much more business you have the ability to claim from a given customer over that customer's remaining lifetime.

If you like this article, you may also be interested in Who are your Top 20 Revenue Generators? and Finding Your Highest Value Customers

All of your customers have a need or a want that has to be met. They buy from you because your product or service meets their needs. But, that doesn't mean that you are the only company they buy from or that all of their needs are being met. That's where potential value comes in.

The amount of a customer's want or need that isn't being fulfilled by you is considered that customer's potential value. And, it can be quantified by asking some very specific questions.

Let's say you sell cereal - Really Healthy Cereal, a whole grain cereal targeted at health conscious customers.

The answers to the following questions give you the information you need to quantify each customer's potential value.

Once you know the answers to these questions, you can do a few calculations to determine how much a customer is willing to buy, how much she buys from you, how much she buys from your competitors, and how price sensitive she is (as long as you ask about generic substitutes).

Here's how you would do it using the attached Quantify Potential Value Template.xls

Step 1. Multiply the answer to question A. by 4 to determine how much cereal the customer could be eating in a month and divide by the number of servings per box (in this case 5 servings per box) to establish the number of boxes that person would have to buy to satisfy her need.

Step 2. Subtract the answer to question B. from the result you calculated in Step 1 to determine how much need is currently unmet by the customer's purchases.

Step 3. Subtract the total number of boxes bought from your company, answer to questions C., from the answer to question B. to find out how many of the total boxes purchased come from competitors.

Step 4. Add the results from Step 2 and Step 3 to quantify the potential value of each customer based on unmet needs and needs being met by competitors.

Now that you know so much about your customers, you can make more informed decisions on how to spend your marketing dollars.

As always, feel free to email me if you have any questions or would like some help better understanding your customers.

Different customers drive different value for your business. In Finding Your Highest Value Customers, I described how to classify customers based on the revenue and profit they generate for your business. Using that methodology, you will gain deeper insight into the value each customer currently brings to your business.

Once you understand current value, it's time to take a look at your customer's potential value. Potential Value is the next step in understanding your customers because it enables you to gauge how much more you could earn from them.

Potential Value comes from two sources:

- Unmet needs or needs that are currently being met by one of your competitors

- Needs that change over time as people or businesses move through different life stages

Understanding either or both of these will help you better serve your customers and therefore grow your business.

There are different ways to determine each type of potential value depending upon how much customer information you have.

The first, unmet needs and needs met by your competitors, are identified through a deeper understanding of your customers. This can be accomplished through market research and closer relationships with your customers.

Market Research will enable you to ask about customers' wants and needs, how much those customers need, and if and how the needs are being met. Closer relationships with your customers will build trust and, over time, will provide a basis for in-depth conversations about additional needs, future needs, and their relationship with other suppliers. In both cases, the answers to specific questions about requirements and usage will enable you to quantify your customer's potential.

The second, changes to needs due to life stage, can be quantified if you have purchase data and customer demographics like date of birth, number of people in the family, etc...(known as tombstone data) that help you identify current life stage and then calculate future needs. However, if this information isn't readily available it can be obtained through market research and/or by using other data as a proxy.

For example, if you sell books and a customer has recently started purchasing titles for expecting parents and books on newborns, you can assume that a child is on the way in the next three to nine months. From that information you can begin calculating life stage potential value based on additional purchases of children's books over the lifetime of that child.

In the next few posts, I will discuss how to quantify both types of potential value in greater detail.

In the last post, Who are your Top 20 Revenue Generators, I talked about the 80/20 rule and identifying the top 20% of customers (based on revenue). Revenue is a good starting point and it can help you understand who your biggest customers are. However, it's not the whole story. Profits are equally important, and a lot of people would argue that they are more important. You actually have to look at both to understand which of your customers deliver the highest value.

I was recently working with a client who was quite concerned about losing a high revenue customer. It was keeping him up at night. But, as we started to take a look at the profit generated by that customer, it became very clear that it actually wouldn't be that bad if the customer left. Sure, there would be an emotional loss and it would be tough on the team, but it would be better for the company in the long-run because that customer was costing more to service than they were giving the company in revenue. This happens much more often than people realize and/or acknowledge.

You really need to look at how much a customer brings in (Revenue) and how much of that you can keep (Profit) to understand their true value. Neither alone will do the trick.

The easiest way to get a really good understanding of which customers deliver the highest value and which deliver the least is to plot all of your customers on a 2 x 2 matrix like the one shown here. Each dot represents a customer and the ones in the top right hand quadrant are delivering the highest value (both highest revenue and highest profit).

You can easily create a chart like this once you know how much revenue each customer generates and how much profit you keep from each of those customers. Then, do the following.

Step 1: Use the Top Customer Identifier spreadsheet to track the revenue of each customer. Top Customer Identification.xls

Step 2: Add two additional columns. The first should list the profits generated by each customer and the second should be the % profit for each of those customers. Percent profit is the proportion of the revenue you get to keep after taking into consideration all of the costs needed to get that revenue (% profit = profit/revenue).

Step 3: Plot each customer on the Customer Revenue and Profit Matrix based on the revenue and profit they each represent. Best Customer Matrix.pdf

The customers who end up in the top right hand quadrant deliver the highest value while those in the bottom left hand quadrant deliver the least. Now that you know where each of your customers fits, you can make informed decisions about what to do with the customers in each quadrant.

I'm sure many of you have heard of the 80/20 rule (aka the Pareto Principle) but I think it's worth reviewing.

The 80/20 rule means that 80% of the result comes from 20% of the input.

The rule was developed by an Italian industrialist and economist named Vilfredo Pareto. He was a pretty smart guy and in the late 1800s observed that the majority of the wealth in Italy was owned by a minority of the people. Once he'd recognized this, he started to observe other phenomena and realized that the rule held true across a number of different cases.

And, it's still a good rule of thumb today. Microsoft has reported that they've eliminated 80% of errors and crashes by fixing the top 20% of reported bugs.

So, what does this mean to you?

Well, in most cases the majority of your revenue comes from a few customers. A lot of us spend a significant amount of time on the wrong activities and/or the wrong clients. By figuring out which 20% of your customers deliver 80% of your revenue, you can save a lot of time and effort by focusing on those customers.

Finding your Top 20

To identify your top 20% of customers who generate the most revenue, make a list of all of them and the total amount of sales you've received from each over the past year. You can use the Top Customer Identification sheet to track them (see template below). The sheet will also calculate the proportion of your company's total sales delivered by each customer.

Once you've entered all of your customers, sort the sheet in descending order by the % of Total Sales column. This will put the customers who deliver the greatest amount of revenue at the top of the list.

Finally, add the percentages together from top to bottom until you reach 80% - these are your Top 20.

By focusing on those customers, you will get the biggest return on your effort.

One thing to note: It's not always an 80/20 split. It could be that 10% of your clients deliver 95% of your business. The split is not the important part. The important part is that a small portion of your customers deliver the great majority of your income and you need to know who they are.

Top Customer Identification.xls

Growing a business takes focus, hard work and lots of staying power. The to-do list grows every day. But have you ever stopped to think about how all those things get done and if there is a better way to do them so you can handle more business?

No matter how small, each of the tasks that you and your staff work on has a process associated with it. The process is made up of all of the various steps that are needed to complete the task including who does what, when, and how the steps get done.

All too often, many of these processes go undocumented. Worse still, there is only one person on the whole team that knows how to do that job. Since the day-to-day work is getting done, business owners don't often see the benefit in taking the time to document how it gets done. It may just seem like a waste of time.

The opposite is actually true. Taking the time to document your business' work processes is a sound investment that will pay you back many times over.

Here are some of the ways it will help your business:

Protect your business from unforeseen events. If one of your employees is the only person who knows how to use a piece of equipment and that person suddenly wins the lotto, you will be faced with a big gap in your business. Documenting your processes ensures that others can help get the work done when the unexpected happens.

Create consistency in your offering. By standardizing and documenting the way tasks are completed, you end up with consistent results that customers can rely on. Each time an employee answers the phone, completes an order, or delivers a product the customer receives the same service and gains confidence in your company.

Create the foundation needed for expansion. As you start to grow, you will need to hire new staff to cover the extra work. Documented processes help in training new employees on the right way to get things done. Getting them on track means they can start taking some of the work off of your plate so you can concentrate on growing the business.

Find better ways to get the things done. Documenting processes is the first step in understanding how tasks can be made easier. Once processes are documented, you can start assessing how work is being done and looking for ways to save time and money. Improving the processes then comes naturally.

Start documenting how your business gets things done - you'll reap the rewards in no time.

Who doesn't? Well, there is a straightforward, easy way to find more time. You just need to measure how long it takes to get things done. I'm not talking about walking around with a stop-watch around your wrist. It's actually a lot easier than that.

You can save time on virtually any activity your business performs by setting up a quick system to understand how long it takes to complete and then cutting out the clutter.

Here's what you need to do:

1. Decide which activity you want to improve.

2. Use a Time Tracker to figure out how much time you or your team spend completing that activity. Print and attach the Time Tracker (see template below) to a clipboard and tell your team that you are going to track how long it takes to get things done. Remind them that it's not a race and cutting corners defeats the purpose.

3. As your team works through the activity, the Time Tracker moves along with the tasks. The time it takes to finish each task is recorded as the clipboard moves from person to person until the activity is done.

4. Track your activity for at least 2 weeks. That way you should have enough information to get a true view of what is happening regardless of illness, vacation, etc...After the two weeks, create an average of the time spent on each task (column G for each row) and then sort them from the longest to the slowest.

5. The tasks that take the longest are the ones that will make the biggest impact and should be tackled first. Anything you can do to improve that time will cut back on the total time it takes to complete the activity.

A little investment in the short-term will save you a lot of time down the road. Let me know what you choose to do with you extra time.

Here's the Time Tracker: Time Tracker.pdf

If you are only tracking your own time, check out the iGoogle Activity Tracker Plus

Thanks for visiting my blog and, Welcome. I've started the blog to help get the word out about how easy it is to make small improvements in the way we work that lead to big pay-offs. For some of you the reward is more money and higher profits and for others it means being able to spend more time with your family or doing more of the fun things you love.

Regardless of your motivation, my intent it to help you do your job better. By better, I mean more easily and more efficiently, with less stress and less rework. To that end, my entries will focus on ways to help you save time, rethink how you get your work done, and inspire you to make changes that will give you some of your time and energy back.

This post will probably be a little short given that it's my first one. However, I'm sure I'll get better at it over time. By the way, that's the very first tip. If you do something on a regular basis and pay attention, you will get better. The more aware you are of how you get a task done, the easier and more efficient you can make it. Pay attention, create a template when you can, and reduce the amount of time and effort it takes to do anything you do on a regular basis. After a few more posts, I'll share my blog posting 'system' with you.

Here's to the journey....