Since the movie came out, most of us are aware by now that Billy Beane was the general manager of a baseball team who decided to start bringing hard numbers into player hiring. Focusing on analyzing player stats versus subjective quirks, Beane brought his team to greater success, and maybe this logic can apply to business as well. Matt Ehrlichman writes this for Inc.:
Like baseball, building a winning business is a game of numbers, and it's not always the ones you might expect. There are plenty of widely used vanity metrics that are poor representations of the actual performance of a website or company. Not clearly understanding the math of a growing business or paying too much attention to the wrong details can lead to missed opportunities, wasted dollars, and eventual strikeouts.
Three Tips for Sabermetrics Business
The odds of qualifying a lead are 21 times higher if the initial contact attempt is under five minutes as opposed to after 30 minutes. Thus, if you want the business, you should develop lightning-quick lead time responses. A cohort analysis meanwhile can be used to see which of your customers are most active and most valuable. More generally, it can be used to learn how specific customer groups behave.
Lastly, you need to take a look at retention rate. It costs 6-7 times more to acquire new customers than to retain current ones, and a significant part of strategy is knowing when to expand and when to cultivate what you already have. As a general rule though, you should make sure you have retention before you aim for growth, lest you start bleeding out the side while you start chasing your new target. To learn more about getting in the moneyball business, and to get a basic equation for determining retention rate, you can read Ehrlichman’s full article here: http://www.inc.com/matt-ehrlichman/moneyball-metrics-for-building-a-better-business.html