Williams: Foundational ‘North Star metrics’ to consider for your digital sales and revenue operations

By Jed Williams
Chief Innovation Officer, LMA
jed.williams@localmedia.org

“If you can’t measure it, you can’t manage it.
— Peter Drucker

Sounds simple, at least in theory. However, as local media companies become increasingly data-driven organizations, it’s striking how little data they have about themselves and their own performance.

We have reams of first party data about our audience, can pair it with seemingly limitless third party data, and can combine these data sets to build complex segment analysis for advertisers and marketing programs for circulation/audience development departments. And yet we don’t know our sales teams’ daily activities, our customer churn, or which products are most profitable. What is wrong with this picture?

Until this data is collected, synthesized, analyzed and used as a barometer, then organizations are making key revenue decisions without a compass. It’s time to come out of the dark and let data illuminate strategy.

A great place to start is with just a couple of “North Star metrics.” It’s easy to be awash in data, and for that data to lose meaning. So, as a first step, consider the benchmarks that are most essential to the success of your company and elevate them above all others.

Create universal understanding and alignment with these metrics across all parts of the company. Every single person should be able to recite and define your “North Star metrics,” and those in leadership roles should be able to report out on how the company is performing against these KPIs at all times. Post these on every wall and every billboard. Leave no doubt!

Here are some foundational “North Star metrics” to consider for your digital sales and revenue operations. Some may seem obvious, but you’d be surprised how few local media companies are tracking these in a structured way.

Some may not be for you. And some may not be present here. That’s okay! This is just a sampler, not a comprehensive list. The goal is to motivate local media to become more metrics-centric organizations. Each company may have unique data points that are most important to them.

TOTAL MARKET PENETRATION
• Definition: Of all the local businesses in your market, how many are buying something – anything! – digital? Could be a single product or a bundle of them, could be owned & operated advertising or digital marketing services. What’s most important is: do you have a paying relationship with them that can be built upon?
• Utility: Do you know how much of the market you’re working with? Are there unrealized or underserved opportunities with specific business categories that should be pursued? Total market penetration shines a light on these questions.

EXISTING ACCOUNT PENETRATION
• Definition: The percentage of your total customer base that buys digital products/services from you.
• Utility: This is often your best leads list! After all, these are your existing customers, so the upsell/cross sell opportunity is right in front of you. It’s also a reminder how much more cost-efficient it is to service an existing customer than to prospect a new one. Your best customer is typically the one you already have!

ARPA
• Definition: In non-acronym speak, “average revenue per advertiser.” Typically a monthly measure, ARPA gives you a read on how invested your customers are with you. This can vary widely by the business segment and product mix.
• Utility: Of course ARPA that’s too low has a direct impact on top-line revenues. It’s also a reflection of customer commitment: what are they buying from you? Is there an opportunity to win greater share of wallet by solving more of their problems?

BASKET SIZE
• Definition: The number of products/services that a customer buys from you. Similar to ARPA, a reflection of customer “depth.”
• Utility: There’s plenty of research that suggests the greater the basket size, the more embedded your customer is with you. Ultimately, growing revenue is just as much about preserving revenue and cultivating upsell opportunities. In that sense, basket size is an important leading indicator to retention.

REVENUE CONTRIBUTION, PER PRODUCT
• Definition: Of the diverse digital products and services that you offer, which drive the greatest top-line revenue for your organization? It’s also important to understand this at a client and business category level. For 3rd party advertising products, it’s suggested that you remove pass-through campaign costs and measure only management fees. In other words, dollars that ultimately go to Facebook and Google aren’t yours!
• Utility: This is the simplest way to distill winners from losers in your product suite. Granted, different products can have wildly different price points. But double down on those that are propelling your top-line growth.

OPERATING PROFIT MARGIN, PER PRODUCT
• Definition: Similar to revenue contribution, except focused on bottom-line instead of top-line. It’s important to understand this by customer set as well.
• Utility: If you’re selling lots of low-margin products, then you’re not making progress toward sustainability. Healthy digital marketing services units put as much or more focus on EBITDA as income.

Jed Williams is the Chief Innovation Officer for the Local Media Association.