Marketing….is really a Numbers game… Short-term pain…. eliminates Opportunity Cost?

College students perceive marketing to be a glamorous and exciting role in an organization, between shooting TV commercials, photo shoots with aspiring models and launching New Products, it is the most sought-after role coming out of school.

The reality is that nothing could be further from the truth. In the early stages in CPG companies, marketing is one of the grungiest roles. But if done well and thoroughly,prepares you to become a General Manager because you are learning everything from the ground up.

The best and most effective marketers have these 3 key traits.

They love playing the game
They have an insatiable drive to search for answers
They are good at simple, fast, basic math

The key role of any Marketer/General Manager is looking at and grinding out the numbers. Essentially you are constantly digging for buried treasure. We are not talking about Calculus numbers. It totally escapes me why university Business Schools mandate this course? What is really needed to succeed is simple math to navigate the P&L (Profit & Loss), be it for the entire business, or for individual items within a business.

Simple math, adding and subtracting and making sure that you include everything (the best surprise, is no surprise at all!) is the type of math practiced playing cards, counting in Bridge, Cribbage or Hearts.

Those who do play frequently have initiated face to face contact and social interaction, skills which every successful marketer has. They walk around and care about feelings and people.

A self-made female millionaire I know very well went from flat broke, with a child, in a new province to becoming President and sole owner of a company which generated $10M in top line sales. Yet she struggled with simple math. After weekends of card games, today she puts people to shame with her rapid counting skills and strategy, just by having fun and practicing and loving the game. Her investment strategy for that money today is now reaping even bigger dividends.

Putting Math to work in your head, in minutes is also how to work smart first!

Situation:

You are looking to buy a business or franchise. The pro forma P&L’s on the websites or the ones you are given by the seller are meaningless without validating the top line number of customers and sales.

Sit in front of the/a store or business that you are looking to buy and estimate the average sales/day based on customer traffic. Once you extrapolate these out over a full year, you will then be confident that the sales numbers are indeed possible.

If they are, then move to step two.

Step 2:

What is the estimated profit on those sales? What is your salary to be and what is left over to pay off the cost of the business? This is back of the napkin calculations. If there is nothing of significance, then you just bought yourself a job and are not working for yourself, but for your landlord and the government.

Step #3:

You are running the business and you have an hour a day where you are not selling and there are no customers. Take this time to evaluate the profit on your biggest 5 items. This is the application of the 80-20 rule where 80% of your profit comes from 20% of your items being sold (inventory). These most profitable items are the ones you want to promote, prominently feature at the front of the store, near the checkout. Doing so allows your cashiers to interact with consumers, communicating the benefits of such an item, with the objective of convincing consumers to make an incremental purchase (one they did not intend when they walked in).

I was stunned that some of the largest CPG (Consumer Package Goods) marketers did not know the unit sales or the profitability of key items, off the top of their heads! This is where the easy money sits!

Get the Sales Team to focus on the most profitable items and you improve your profit mix (more profitable items with no extra work).

After evaluating the top five items in your portfolio, then work your way down the list. Once past the 20%, become ruthless. These are items that are making little money because of either low sales or high costs. Get rid of them! Clear them out and do not order them again. Tying up money on these means less inventory and turns (number of times you sell the item in a given period) of the higher profit items. These items have a significant Opportunity Cost.

Avoiding the Excuse of Opportunity Cost:

My model for buying and selling a specific group of low-risk stocks was born out of necessity. You cannot live on 1% interest rates on T Bills. Confident that the best person to manage money was to not outsource, I devoted many weeks and hundreds of hours testing the responsiveness of over 50 top blue-chip stocks in North America, and tested them back prior to the correction of 2007. Only 18 companies proved to respond with the greatest accuracy to a specific parameter.

In the first year of executing LIVE, my partner did not want to adhere to the system, selling when the indicator said we should, because it would lead to a loss of $1/share on 1000 shares

Being stuck holding this stock for a full 12 months (most trades are no more than 30 days) had an extremely high Opportunity Cost! During this period the price dropped considerably lower, forcing us to hold until it returned to that original $-1/share loss.

However, the Opportunity Cost was $20,000! During this intervening year (during which we were holding this stock), it had 5 entries and exits which combined to deliver $20/share on 1,000 shares.

Better to take a short-term loss, than to let time pass for the same loss and what you could have been doing with that money? Making even more!

Marketing is this kind of game. Optimizing the ROI (return on your money) against other opportunities you might find…. to make even more money.

I sold the Kernels Popcorn store 3 years after purchasing it, as I could make more money doing what I do best (growing businesses) than I was going to make because the President of Kernels, did not believe in the benefits of advertising. With all of our personal money tied up, to live exactly the same life, just did not make sense, so we got out. And I never looked back.

The Numbers do not Lie, more importantly, they help take the emotion out of decisions and lead you to Work Smart First!.

The objective is to win the game! You do so by securing the maximum profit from both time and money invested.

Now how do you make the most out of the time your employees spend with your customers? Simple, take the WalMart intent…. but have you and your people optimally put it into practice….. in the next experience.