Interview Summary

This interview featured Andrew Hatcher, an expert on the Chartered Institute of Marketing's (CIM) "Commercial Intelligence" module. Hatcher argued that marketers must overcome their aversion to finance and numbers to be effective and prove their value. He defined commercial intelligence as understanding the financial outcomes and returns of marketing activities. The discussion covered the importance of measuring return on investment (ROI), debunking that 50% of marketing is immeasurable as outdated in the digital age. Hatcher emphasised that all marketing activities, including brand awareness, can and should be financially quantified. He identified three critical metrics for all marketers: the cost to acquire a customer, the cost to retain a customer, and the customer's lifetime value. He also noted that B2B marketers often underspend because they underestimate the true lifetime value of their clients. Ultimately, he positioned financial accountability not as a burden, but as a core responsibility and a way for marketers to validate their work and secure investment.

Interviewee Background

Andrew Hatcher was introduced as a Fellow of the Cambridge Marketing College, an entrepreneur, investor, and advisor. He was presented as an expert with deep knowledge of the Chartered Institute of Marketing's (CIM) module on commercial intelligence.

 

Key Points

  • Marketers frequently avoided the financial aspects of their roles, often using creativity as an excuse, which Hatcher argued was an abdication of responsibility.
  • In the modern digital era, nearly all marketing activities are measurable, and the famous Ogilvy quote about not knowing which 50% of advertising works was now "bunkum" (05:08).
  • Even abstract concepts like brand awareness could be measured and assigned a financial value based on their contribution to the customer acquisition funnel.
  • The three most important metrics for any marketer to know are the cost of customer acquisition, the cost of customer retention, and the customer's lifetime value.
  • Understanding these core metrics provided the financial boundaries for how much a marketer could and should spend to acquire new customers.
  • Hatcher observed that B2B marketers often underspent on customer acquisition because they failed to fully calculate the extensive lifetime value of a client, which could include referrals, maintenance plans, and repeat business.
  • He advocated for an iterative approach to measurement, suggesting it was better to measure imperfectly and improve over time ("build, measure, learn") than to avoid measurement altogether due to complexity.

 

Interview Transcript

Transcripts are auto-generated.

 

Kiran Kapur (00:00):
Hello and welcome this week we are in the world of commercial intelligence, which is a module that's been created by the Chartered Institute of Marketing, but is also something that marketers tend to not necessarily think that they need to be good at.

Andrew Hatcher (00:14):
They've got to know how much it cost to acquire them, how much it cost to retain them, how much are they giving you over the lifetime time with you. And those three numbers will tell you basically whether or not it's worth acquiring. The next one at what price?

Kiran Kapur (00:25):
My guest is Andrew Hatcher, fellow of the Cambridge Marketing College, an entrepreneur, investor, and advisor. Andrew, welcome. I know you are deep in the CIM module of commercial intelligence. So let's look at what the CIM define as commercial intelligence. It's one of those phrases that can mean an awful lot, can't it?

Andrew Hatcher (00:45):
It's one of these things which I think is often, it's a situation where we try and hide the reality of what this is all about. If you are a marketer, most of what you do potentially is not related to finance and financial outcomes and returns and some of the figures that go with it. My experience is that many people in marketing kind of avoid these kind of elements. They seem to be complicated. They involve calculations, and they involve thinking about the actual output of what you're doing as a marketer in measurement terms. And I think sometimes that's a little bit frightening for some people because they feel they may be under scrutiny, and sometimes the numbers are hard to calculate or perhaps even impossible to calculate. Doesn't mean we should be trying to do so. But yes, most of it's around numbers. I tend to find sometimes people will just become a little bit dimmer in their outlook when numbers are involved, particularly when it comes to measuring what they're doing.

Kiran Kapur (01:43):
So that is interesting. So I must admit, when I originally heard that the CIM was producing this module, the commercial intelligence, I sort of assumed it was going to be competitor analysis, but it sounds like it's more than just that.

Andrew Hatcher (01:55):
Yes. I mean I think about analysis is involved in all of this because part of your financial approach to marketing is always going to be how are you pricing, what's your competitor doing? How are they addressing the marketplace? How much money are they spending? So there's a sort of a connection to competitive analysis, but I wouldn't say the module itself or the topic I described is really around analysing competitors unless it's around the way that they're dealing with money and finance.

Kiran Kapur (02:20):
When we say commercial intelligence, it is very easy for marketers to go, but I'm creative. I think I've used that excuse myself actually, but I'm far too creative to get involved in the grubby side. That's what accountants are for. So explain to me what I should be thinking about when I'm a marketer on the commercials.

Andrew Hatcher (02:39):
Yeah, sadly, it's one of these things where you kind of realise that, I mean, lots of people say I'm creative, therefore I have no responsibility for money. I was working with a sculptor a while ago who sculpts very nice things, and he says, I'm no good at the money side. And I'm just like, well, what are you doing it for? Right? Are you doing it just to pass the time of day? And there may have been an element that was about her expressing her art, but ultimately, she did it to make a living. And we're in the business in most cases in marketing, except for someones where there's perhaps not-for-profit elements in there. But still ,there is this sort of sense that whatever you are doing, there should be an output, and the measurement of the output for most people has to show that it's worthwhile doing it.

(03:22):
So if you are in a commercial marketing situation, there is really little point in doing marketing unless you can measure whether or not the money you spend on marketing is being superseded by the money that you are generating from that marketing, in terms of leads and sales and royalty and all the rest of it that goes with it, once you create a sale. So most of this is logical, in the sense that there's no point in many cases in doing some of this marketing if you really have no idea whether or that is having an impact in changing the nature of the income to you as a result of the activity you are undertaking.

Kiran Kapur (03:53):
And it has to be said as a top tip, and we've both been in marketing for a while, if you are angling for a pay rise and most of us would very much like a pay rise, it's a heck of a lot easier if you can prove that you commercially made a difference.

Andrew Hatcher (04:05):
Yes, I mean I think if you're up against the budget committee and you've got a salesperson, I always compare this with a salesperson. So I have a salesperson, I know that a salesperson can generate a hundred thousand pounds a year. So I say I'm add another salesperson that costs 50,000, they generate a hundred thousand, therefore you're likely to make 50,000 out of them. The marketing person turns up and says, well, I'm going to run these campaigns. I'm not really sure what kind of return are we going to get, but I want another a hundred thousand. And so the person at the end is going to go, well, there's no logic, there aren't giving me even a relatively sane indication of what that return on investment might be. You can't expect me to invest in something and just hope. The days of that, I think were last century, and it's too easy and too effective to be able to measure it now that you should be never really be proposing anything in marketing unless you have some idea about what return on the investment in that marketing is.

Kiran Kapur (04:57):
Okay, so let's look at some of the marketing that you can definitely, and then I will come back to the sort of great Ogilvy quote of 50% of my advertising doesn't work, but I don't know which percent.

Andrew Hatcher (05:08):
I disagree with all of that. And I think that's all bunkum now. I think that's 1970s, 1980s rubbish and we just need to forget about it. We are in a digital age where you can pretty much measure everything and if you can't, you can approximate it. So yeah, I think that's often an excuse, I can just hide behind the 50% that I can't measure, and that's good enough.

Kiran Kapur (05:24):
Okay, well let's do the ones that we definitely know we can. I promise we will come back to that one because I think it's quite an interesting area and you're right, it's very easy for marketers to go, well, it's a brand awareness, you have to spend on brand awareness, don't you? Okay, so let's come back to the easier concrete ones that perhaps I can see an outcome. Where would I start?

Andrew Hatcher (05:44):
I mean I think if you are starting out at the bottom, it's pretty easy if you are involved in any kind of tactical marketing to know that any of the systems that are helping you to put your name out, I take any of the syndicated systems. If I just say Google ads as an example, the whole of Google Ads is orientated around money. It's not orientated or anything else. It's around how many ads can I put in front of the person you are targeting? How many times are they going to access that ad, how many calls to action do they initiate? And then can you then measure the result of that stimulus with that customer? So the good thing about Google is it's very clear how much money you're spending with them, and I would say that's another skill to make sure you're spending that well.

(06:27):
But there is no excuse for anyone who's spending money on Google ads not to know what the return is, because assuming you have some sort of digital connection with that customer, then you should be able to at least understand how many leads have come from the campaign. Now if your purchase then goes offline or doesn't remain online, then you have to have a system to sort of track it through. But again, Google provides you with all of the information to enable you to initiate that tracking. So it's then down to your internal system to see whether or not that lead or that click on whatever ad it was, has led to a purchase and has that purchase end up in your ledger, and therefore you can connect the two together.

Kiran Kapur (07:02):
And at the very least, you can say that you generated this many leads for the salespeople, and they might have converted them, but you generated the leads in the first place.

Andrew Hatcher (07:09):
Yeah, I mean I think leads again are sometimes a little bit of a hideaway, that says we generated lots of leads. I'm going, yeah, but what kind of leads were they? Were they leads that were just people who were competitors who were having a look, or were they leads of people who actually had the desire and who were going to purchase in the next month? So a lead has a lot of quality, and the ones that are going to turn, convert quickly a higher value and the ones that the competitors looking at it on properly negative value.

Kiran Kapur (07:34):
Okay, how do I know?

Andrew Hatcher (07:36):
How do you know the quality of a lead? I mean, to a certain extent, if you're doing a Google Ads campaign, it's going to be hard to do so, right? But the more higher value of thing your selling, more interesting it is to then qualify the lead. And if you move into sort of HubSpot area where people are using software to manage their sales activity, you can see how data can be generated very quickly around the person who's indicated an interest in what you're doing. To some extent, you can then apply some parameters and some criteria against that person to say, are they in the industry? Are they in a business which has sufficient cash? Whatever it might be. So you might then be able to evaluate the quality or credibility of that lead depending on who's actually behind it. In a sense, that means a bit more sophisticated and obviously that's slightly more prevalent in the B2B world than it is a B2C world because the prices are higher and the cycle times are longer.

Kiran Kapur (08:34):
We talked about Google ads and yes, and anything of that ilk that allows you to sort of track people through. So let's come back to brand awareness because I think we can all understand the idea that if I click on something, I can track it through, but brand awareness, profile raising, Andrew we teach profile raising, raising brand awareness, it's really important. How do I prove it?

Andrew Hatcher (08:58):
Well, I think the first thing to say is a brand awareness and profile raising are not standalone activities. They are part of a suite of activities that you should be thinking about as a marketer with an overall budget around all of them. So if you have no awareness of your brand first, if you look at any kind of customer journey, first thing you've got to do is make people aware of your brand. Now that is obviously an important thing because people can't choose you unless they're aware of you. So you have to spend some money on getting to front of mind or within the choice, within the choice parameters of the person who's buying. So that is important. Now, the key thing is it, is going to cost you money to do that. So you can put out any kind of messaging that raises your brand, makes people aware of who you are.

(09:40):
I noticed that Chick-fil-A, the American chicken brand, has just opened three or four outlets in London and they're in the process of doing this. Nobody really knows about Chick-fil-A in the UK, but it's a big brand in the US, so they're right at this point. So nobody's heard of Chick-fil-A, so who the hell are these people and are they worth my wealth, considering if I'm going to buy chicken food? So that's going to cost you money. Now the key thing is what's the measure out of that? Well, the measure is if I then go and ask somebody about chicken, how many people recognise the brand Chick-fil-A? Now, the good thing is if you can get that number, then you should be able to turn that number into a valuable amount of money because you know, or most people should know, to some extent, how much your customer's worth once they're inside your system, what is their lifetime value or how much money do they generate over a period of time?

(10:25):
So brand awareness is clearly linked to potential customer acquisition, I would say. So if you have got this brand awareness, then your percentage closer to having them as a customer, therefore you can give them some value. They aren't valueless just because they're aware of you. They now have some value, a bit like a bit like a HubSpot tube, a funnel at the top of the funnel, not worth very much near the bottom of the funnel they're worth a lot more. So you can start to apply some value with brand awareness on its own, but brand awareness can be valued. You can give a value to someone who is brand aware versus someone who is not brand aware and therefore you should be able to say, well, was it worth getting that customer to that level of awareness for the money I spent?

Kiran Kapur (11:03):
This sounds like an awful lot of math Andrew.

Andrew Hatcher (11:05):
Yeah, don't get me started on the maths bit. So I think one of the common things I do here is I'm not very good at maths, and it's somehow taken as an accolade of some wonderful way in which you've navigated life without ever being good at maths. Well, I would say there's some that people aren't very good at maths, but I would say actually you don't need to be good at math, you just need to know what you're doing. And if you're in marketing, I would say it's entirely irresponsible to say I'm only responsible for the spending bit and not for the income bit. So you have to be responsible for both parts, expenses and income. If you're going to spend money on marketing, you have to have some awareness of what that marketing is going to generate, what is the return on that investment?

(11:44):
So you don't have to be good at masks. Most of the masks can be done by machine, by calculators, by and even by the providers who will even do all the maths for you. The only maths you need to know is how much money we put in, and how much money have you got back and is the last number bigger than the first number to some extent. And so to sort of shroud it in a dislike of maths, I think is just a game to avoid the responsibility of being culpable for what you've done. If you've spent money on a campaign and it has generated some return, then hopefully that return is more than you spent, otherwise the money has been wasted, right? I mean I'm sure there's more nuance to it than that, but in essence, that's the limit of math. You don't really need to go much further than that. Everything else can be done by machine or by calculator or somebody who can help you with the math. If you're not very good at math, which I understand not everyone is good at maths.

Kiran Kapur (12:31):
To some extent. You just think marketers are being lazy.

Andrew Hatcher (12:34):
I mean, I don't want to stimulate the wrath of every marketer in the world, but I tend to think it's people not even lazy, just don't think it's their responsibility somehow. I mean, whether that's laziness or not. I would say if you are a marketer, particularly if you are in a small business, it's all your responsibility. So why would you ever shy away from it? I can't imagine there'll be many people who are solopreneurs or small companies who don't realise that it's their responsibility not to waste money. We don't want to spend money on something that doesn't generate return. And if you're in a large organisation, I would hope the same responsibility exists in the sense that you're not there to waste money or at least have information about the value of the money you're spending. So I feel in a sense that it's everyone's responsibility.

(13:15):
And I often say even if you're writing a blog post, right? You're spending an hour writing a blog post or two hours now that's however much you're paid, think about how much money you're spending. That could be a hundred pounds being spent on a blog post. The question is, does that blog post generate anything? Is it just filler? Is it generating a lead that may be worth at least a hundred pounds or 10 leads? I think you think that way, then it might actually stimulate you to write better stuff anyway. Stuff that's more orientated towards capturing the lead in the first place.

Kiran Kapur (13:43):
That's a really interesting point. Again, we are quite often we ask people to produce a blog post or we sit down to write a blog post, and you're just sitting there waiting for inspiration rather than, and perhaps thinking, what do I want post, what my audience want to hear.

Andrew Hatcher (13:57):
I can only agree with that. How many times I've been anyone, got anyone got any to put in the newsletter? I'm like, oh, for God's sake, please don't do that. Please write stuff that's useful and valuable to the person who's reading it, because we all see people scrolling and they're just scrolling past the stuff that is irrelevant to them. So make stuff that's relevant, if it's relevant, that is valuable and therefore it can generate some income for you. But I mean that's a wider issue. That's not just a commercial intelligence that's about understanding the nature of the customer and what they're interested in and what they're not interested in, what's relevant and what's not.

Kiran Kapur (14:28):
So if I'm sort of sitting thinking maybe I haven't done this and I should do, where should I start?

Andrew Hatcher (14:35):
Well, I think again, depending on what you're doing, I think some systems, I said earlier on, some systems are very good at this. So if you go and use Google ads or Facebook ads or any of the sort of large syndicated networks, they will provide you with a dashboard that will show you what your spend is and they'll say, this is what you've allocated to spend this month, and they'll show you what the results of that spend is. Now, you generally can allocate value to the output. So if it is brand awareness, you've spent a thousand thousand pounds on brand awareness and you've now got 1700 leads, so to some extent you can work out how much you need cost you, and therefore if you have an internal metric that can say, okay, so a lead is worth 50 pounds, then you can do the simple calculations.

(15:15):
I mean you have to bring these two things together. Some are going to be provided by the provider of the system that is interacting with a customer, but essentially you've got to have some internal data around how much customer is worth. So perhaps a lot of people may not know that, but I think I spent a lot of time talking about cost of acquisition of a customer and cost of retention and therefore the lifetime value. And I always think they're possibly the three most important metrics for anyone in marketing to know. If you don't know this in your company, I'm going to say, well, whatcha are you doing? Then? How could you be marketing and not know what the value of your customer is? You have no idea how much you'd be spending to get the next month. So it's almost like that seems to be the first place you should start.

(15:52):
Is there anyone in the company that knows how much it costs to acquire a customer? Do we know how much it costs to retain a customer and therefore do we have a sense of the lifetime value of that customer? So if we have those three things in place, then you are already ahead of the game in terms of understanding. So should I do this campaign or not? The lifetime value is X, so the cost of this campaign is Y. If Y is greater than x, then that's good, but if it's not, then you might be worrying about why am I doing this? I'm never going to be able to acquire enough money to cover the cost of acquiring them in the first place.

Kiran Kapur (16:20):
Yes, and it's one of those sort of classic things, isn't it? The sort Huggy nappies thing of realising that people don't just buy a single pack of nappies. You actually buy nappies over a period of two years, three years, whatever it takes to get you out the other side.

Andrew Hatcher (16:34):
In every subscription we subscribe to is a lifetime value goldmine, right? In the sense of even the people who are providing the application that manages your subscriptions on your behalf, which is in itself a subscription, they have a lifetime value. So everyone, in theory, has a lifetime value. It may not be easy to calculate, and as we all know from our history, not everything in marketing is easy. In fact, the only thing is, but certainly understanding lifetime value is not easy, but it is incredibly valuable to know that because it sort of sets the boundaries around which you as a marketer are able to spend money effectively.

Kiran Kapur (17:08):
And what about B2B? Because we mentioned that earlier on, and I think again, I do hear B2B marketers can be both sharper at this, but also more naive sometimes, in my experience. Where do I go with B2B?

Andrew Hatcher (17:23):
Yeah, I think it's much more relevant to B2B because in theory we assume that the average income increment is higher, therefore we may be spending more money on marketing, therefore there's probably a higher risk. So if you are in the business where your unit sale is 20,000 pounds, the question is how much money should I be spending to acquire that 20,000 pound unit, particularly if that 20,000 pound unit may be a say, I'm buying a piece of farming equipment or something, but there's a maintenance plan, there's insurance, and there's all kinds of warranties and stuff that go on past it, and the lifetime of a piece of equipment may be 10 years, 5 years, 10 years. So you've got to think about that in terms of the holistic nature of it all. So it isn't just about the purchase prices, about the whole lifetime of that customer, and also at the end of that period, are they going to come back again?

(18:11):
So is there extended lifetime which you can then put some value to? So all of that needs to be taken into account. And so it means that often I find actually with this in B2B, people don't realise how much money they can spend in order to acquire a B2B customer, and they tend to underspend on the basis that they think, well, I can't spend that much money, but they don't really understand the lifetime value. If the lifetime value is clear in their head and the lifetime value of that person I just talked about is 50,000 quid, well then you can spend a fair amount of money acquiring them, right? You can visit them more than twice and you may be able to take 'em out to dinner once or whatever it might be. But I think understanding it just gives you that sense of positioning about where you are relative to the value the client's going to give you and how much money you are willing to spend to get it.

Kiran Kapur (18:56):
Okay, so it's interesting you think that in B2B, people tend to underspend.

Andrew Hatcher (19:00):
Well, I've come across quite a lot because as soon as you think of marketing spend, particularly per capita, it gets a bit odd that you might spend 10,000 pounds on a client to acquire a 20 or 30,000 pound lifetime value. But I'm saying logically it's clear, right? That is a good thing to do. I mean, if you could spend 5,000 pounds and get the same client, then that's good, but don't spend 500 pounds assuming that somehow that is going to be good enough to acquire a 30,000 pound client. So I tend to find that the distance between how much you spend, people are reluctant to spend lots of money even though the outcome may be high, partly because they're not really sure about the outcome value, and I think the outcome value is the key thing. How much money are we going to acquire from getting this customer?

(19:44):
And maybe it's linked to that thing, so if it is a purchase and something else and something else, but how valuable is the referral? How valuable is the loyalty? Those kinds of elements should come into it too. So it's not just about the purchase, it's about is that person is now satisfied with what I'm doing, are they going to tell the next person in the chain, and does that have some value? Especially if I service that first customer well. So lifetime value can be quite extensive, and therefore, that drives quite a lot of how much money you should spend on acquiring them in the first place.

Kiran Kapur (20:12):
It's interesting, actually, referrals, as so many of us do. I was actually got a referral link on a B2C side, and I think they were offering me, I dunno, 5% off my next order or something if I referred a friend. And I remember thinking it was a bit mingy. This is a brand that potentially you could spend quite a lot of money with. What do you mean it's only 5% off? So yes, you can actually undersell the referrals.

Andrew Hatcher (20:38):
I think so, yeah, I think there are some stories that probably only you and I and some older people remember of people being too generous with rules and loyalties and stuff, which almost crushed companies. I think there is generally a feeling that don't offer too much because if after too much, then the person might think, actually that's too much of an incentive. That's too generous, if you want to change your bank account. I think I did see someone offering 250 pounds to switch your bank account to their bank account. I'm thinking, wow, that's a lot of money to acquire a customer. But then if you think of a bank account, hold a second, how long is the lifetime of a bank? Well, probably most people have it for 10, 15 years, and most people are in credit, aren't they? So the bank is making money out of them. So you can see how very quickly you could end up with a thing that is bigger than you thought. I think there may be some psychological issues about it being too big. Then people say, well, that sounds like there must be something fishy, but it's too big. But I think underselling is more of the norm than overselling in terms of incentive to change.

Kiran Kapur (21:37):
That's interesting. So commercial intelligence, I need to stop being scared of maths. I can't use that as an excuse. I can't sit around going, but I'm creative. I don't do maths. That's what accountants are for.

Andrew Hatcher (21:47):
In fact, more creative you are the better it is, because the more value you possibly can create.

Kiran Kapur (21:52):
And I thought it was a really good point about your sculptor, but if you are trying to make a living at something, you presumably have bills and targets that you just physically have to meet to keep a roof over your head and food on the table.

Andrew Hatcher (22:05):
Of course. And I think particularly with things like sculpture, it is very hard to know what the price to value kind of equation looks like, right? Because I could make a piece of sculpture and I go, yeah, that's worth 50 p, you can make me a sculpture. And you said that's worth 50,000 quid or 500,000 quid. So the value of things that are slightly more intangible in terms of their value to most people, that becomes complicated. And I think to sense it, that also puts people off by saying it's I have a thing that's intangible, therefore difficult to put a price on, therefore different value. Therefore, I'm just not going to think about it. I've met lots of artists who are either really poor or very rich, depending on whether they've actually caught that wave. I think if they've worked out that they can sell their art.

(22:51):
I had a friend who's an artist in Edinburgh, and he was sending his art for ridiculous amount of money. I told him for a zero on the end of it all, he started selling more art. And we hear many stories like that, but his art was clearly worth more than he was selling it for, and he suddenly had excess money and he could build a studio and suddenly there was benefit to all of it. So he's just the thought about it, focusing it as part of your marketing activity, is that profit is important. All surplus if you in a not-for-profit is important because that then validates what you're doing and enables you to do more. I mean, with all that stuff, I mean if you really do have the right product that fits the customer need and all that sort of stuff, then charge for it. I mean charge for it. Make sure you understood what the charging is and therefore spend enough money on trying to acquire the customer who's going to benefit from it.

Kiran Kapur (23:33):
And that's where you can easily put that on something like professional services. So a legal company that's top the golden circle can charge a lot more for what is essentially possibly the same advice as my local solicitor, but nonetheless, they've got the branding around it, they've got the values around it, and they've got the trust around it.

Andrew Hatcher (23:52):
Absolutely. Absolutely. Yeah. I did some research recently on the value of an MBA, which is quite interesting, a master's in business administration around the world. And I noticed that I think we did some research about 60 business schools, 60 top business schools and found out basically they're teaching exactly the same stuff. The curriculum is almost identical in every place, whether it's Sweden or South Africa or Kuala Lumpur. What the difference is the context within which you're being taught is there connections, do it have superstar professors, those kind of things. So it isn't necessarily always about the commodity bit, it's about the other bits that can add the value and the delivery and the context and the other value. Some of the intangibles that go about that go with it. And so that's part of your thinking, but equally, it still has to go into that equation that at the end, which is how much you're going to get for it, how much you're going to pay to get the customer, who's going to pay. So you have to have that fundamental foundation stone if you like. Otherwise, most of your marketing has been done in a blind space and therefore it's not really going to be value or you're spending too digitally spending too much. But if you don't know, then you don't know. And how can it be effective?

Kiran Kapur (24:53):
That's a fair comment. So I need to know my cost for acquiring a customer. I need to know the cost of retaining a customer, which gives me the lifetime value.

Andrew Hatcher (25:02):
Yeah, I mean you've got to obviously know how much money they're generating for you. That's the last piece of that. So you've got to know how much it cost to acquire them, how much it cost to retain them, how much are they giving you over the lifetime of their time with you. And those three numbers will tell you basically whether or not it's worth acquiring the next one at what price.

Kiran Kapur (25:17):
That's a good point. And in working out the cost of retaining them, one of the things I have to think about, is there anything I have to do? So you and I obviously both work for education institutions. There are certain things that we are required legally to do that are overheads to us, but are part of the benefits. So therefore you have to do those, and you must include that in the cost extent.

Andrew Hatcher (25:37):
Yeah,

(25:37):
I think so.

(25:38):
I think you can be relatively generous in terms of working out what the cost of acquisition is just working out. So if you have a CEO who spends one hour a month on your client base, then in theory that should be included. I mean, it becomes a bit tenuous as you get towards those overheads. So you can probably do a relatively generic approach to what overhead am I spending on acquiring my customer? But I think there should be something because someone's doing the admin and someone's paying my salary and all the rest of it. So those things are part of it. So if you are a marketing person, of course your salary is part of the cost of acquisition because you are doing the activity. Now you may be paid 30,000 pounds, so how much is it per client? Well work it out. How many clients have you got and how many hours are you spending on this? Therefore, you should be able to work out those costs. Again, these sound like mathematical things to do, but they're not complicated things. I mean, most people can do the relatively simple math that are needed to do that. It's more of a mindset around actually doing it rather than actually the functional bit of working out the numbers.

Kiran Kapur (26:35):
Do you ever find people sit just completely overwhelmed? We use the phrase analysis paralysis, and I could very quickly get very overloaded. Oh, should I be thinking about this? Should I be thinking about that? Should I add this in? Should I end? Is that actually a problem or is that another excuse not to start?

Andrew Hatcher (26:49):
Yeah, I think it is. I think as soon as it gets complicated, people do lose a little bit of momentum. So I heard somebody said it's probably, who knows? Some philosopher said something. There's no point in trying to measure it perfectly all the time. Measure it imperfectly and improve, right? So if you dunno how to measure something, don't just say, I'm not going to measure it too hard to measure and hear that so many times. This is too hard to measure. I'm going, well, no it's not. You just don't know how to measure it yet. So use some basis of measurement and then share that with everyone else and see whether or not they agree with it. If they agree with it or ask them, then what else I need to add in is it then modify it. So go through a build measure, learn kind of cycle where you build up a metric.

(27:34):
And I would say some of the best metrics I've ever come across are the ones that have been built by companies that don't have standard situations. They just worked out our client isn't normal. So measuring those things we just talked about becomes sort of like a company expertise in the sense that you're building something that's very specific to you, and as soon as you do that, then that's good, but you don't get that first time out. You'll probably do that once and go around a cycle and change it and change it and change it. Most good things, they mature over time. So by the time you've made your 10th adjustment to it, you are now getting a better measurement of all the things you want, but you shouldn't be afraid to stick first step. It was bound to be inaccurate, but it's the first step towards measuring something that's important rather than not measuring it at all, which I think is just application.

Kiran Kapur (28:17):
Brilliant. So build, measure, learn. Finally, we have to come back to that great Ogilvy quote, you really weren't comfortable with that one. 50% of my marketing doesn't work, but I dunno which 50%.

Andrew Hatcher (28:28):
Yeah, I had a sort of slight variation on this, which is the three things that marketers hate, other most afraid of is that number one, they don't know if their marketing works at all. Number two, they do know if their marketing works, but they're not really sure why. And three, they have no idea which part of their marketing works, which part of it doesn't, right? So some of those fears are normal, but I would say they're all kind of irrational fears. In a sense. You should be able to start off with the basis that all my marketing works. But the question is, some of it that works well and some of it doesn't work well. But if you are doing marketing that doesn't work well, then you have to stop doing that and start doing something else. But your only way you're going to know that is if you've measured it in the first place.

(29:08):
And some of these measures are not hard. You can definitely see from digital, from digital syndicated networks, you can work out pretty quickly whether or not your spend is generating income. It's just a really basic thing to do, and anyone who says they can't do that is just avoiding some of the basic work that markets should be doing in this current era. I'm sorry for those people that have been hiding behind their books saying, Ooh, maths is not for me. But I'm just going, well, if you want to have a job and you want to be good at that job and you want to make money out of it, then you've just got to be aware of this. It's not magic at all.

Kiran Kapur (29:42):
Fantastic. Andrew Hatcher, thank you. That was a really great overview of why we should do commercial intelligence and why marketers should stop avoiding doing the financial elements of marketing. Thank you very much.

Andrew Hatcher (29:54):
A pleasure as always.