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Why Digital Marketers Need to Know the Statistics Golden Rule

Posted by Jeff Clement on 5/22/15 2:05 PM

Statistics Golden Rule

I frequently see people report results in terms of whole numbers. We had 1,000 phone calls. We had 50 orders. What I often see missed is putting these numbers in the context of a statistical performance. Metrics that allow you to assign a target, report on gaps and create plans to close the gaps.

One thousand phone calls are great if you spent $10,000 in media ($10 cost per call). If you spent $100,000, then it’s not so good ($100 cost per call). Same thing with orders. If you get 50 orders from 100 calls, that’s great (50 percent conversion of calls to sales).  But 1,000 calls is not so great (5 percent conversion).

See how the perspective changes of what’s good, and how you can quickly start to see the gap, allowing you to brainstorm on ways to close the gap?

Seems simple, and something every direct marketer knows. However, I’m amazed at how many times I see people report numbers without applying this type of logic and statistics to their reporting and insight. Even direct marketers. They report conversion statistics on their front-end metrics, but then will state that returns on the backend are 100 units. What? What percentage of customers are returning the product? That’s what you want to know.

My simple but golden rule as a mathematician and marketing analyst has served me well over the years:

Everything has to add up to 100%.

When confronted with numbers, I immediately look for the breakdown in percentages. And if the numbers don’t add up to 100 percent, there is usually a quality problem in the data that you have to fix first.

If they do add up to 100 percent, then what are the interesting ratios and percentages that I want to eliminate or increase? Once I have these benchmarks, I can then start to compare this metric over time. Which is just another way of saying “trend analysis.”

Why the Statistics Golden Rule Makes a Difference

Here’s a recent example that just happened with one of our clients. They took their eye off the power of ratios.

 Marketing Architects analyzed the relationship of sales achieved on Amazon to the sales they achieved on their website. Over time, the ratio was fairly static at 30 percent of sales coming from Amazon, but dynamic in terms of the impact that their offline campaign spending had on both. That means both Amazon sales and their website sales increased and decreased at the same velocity as their offline spend went up and down. 

They used this model to plan inventory needs for both Amazon and their website. However, their marketing strategy changed and with it we saw the ratio change – Amazon increased to 40 percent of sales. But guess what? Their inventory planning side was using whole numbers to plan inventory needs based on the old ratio, and not looking at it on a regular basis. When this ratio increased, they didn’t make the connection and they ran out of inventory at Amazon. 

It took them a while to recover because of the algorithm Amazon uses to promote products, because they were out of inventory.  That’s the second big lesson. If selling on Amazon, don’t run out of inventory!

I encourage everyone, when confronted with numbers, to try and apply this simple rule.  And then remember it, and keep using it!  It allows you to see the data in a new light, and ask the appropriate questions to give you the insight you are seeking from the data. And it is an easy QC process to ensure the data is even accurate in the beginning.

Are you looking to reach a mass audience and dramatically grow sales for your products? We can help you do that, AND analyze your DR marketing campaign’s performance using the Statistics Golden Rule. Give us a call and we’d be happy to schedule a time to learn more about your marketing objectives and see if we’re a good fit to take you to the masses.

Marketing Architects is the only direct response agency that bets on your growth. Our company is all about empowering companies and entrepreneurs itching to tell the world about the Next Big Thing.

We’ve built an entire armory of unbeatable solutions designed to slingshot your company in the right direction. Our proprietary media platforms (TV, radio and web) offer granular targeting and unmatched rates. Combined with an award-winning Creative team and the dollars you need to get it started: We’re ALL IN.

Topics: Marketing Analytics

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