This example is based on an actual case of my client, with identifying details changed. The data has been greatly simplified and condensed to enable understanding of the concept without need of special analytical tools. |
Once there was a small business building sales websites.
The owner, let’s call him Zelig, worked alone with 3 freelancers.
Zelig worked hard, marketed frantically, but despite this, earned little.
Sometimes he had to use personal savings to keep the business alive.
He also had to deal with family crises because of the situation.
Finally, he concluded there was no other choice — he needed professional help!
Let’s follow his journey, which began with a marketing consultant, as he assumed his problem was marketing — after all, marketing is the most important thing in business, right?
The marketing consultant began by questioning the business owner:
From Zelig’s answers, the consultant thought that apparently he was doing things right
In the next stage, the consultant checked 2 things:
He summarized his findings in a table.
Eureka! the consultant exclaimed… I found it!
He concluded that Zelig’s problem was obvious.
He was “clearly” wasting over half his marketing budget on the “less effective” Channel II.
Therefore, he advised Zelig to double the investment in the first marketing channel (I) while maintaining the total investment.
Zelig felt disappointed. He’d already tried playing with channel budgets – didn’t change anything.
It sounded It sounded very unserious to him. He fired the marketing consultant and moved on.
(Spoiler: later, he was proved that this recommendation was wrong)
The business consultant — as befits a serious consultant — looked at the big picture.
He asked many more questions — in marketing certainly, but also in pricing, sales, financial management, and subcontractor management.
Subsequently, he also checked the same analytics and conversion data.
He built a much more comprehensive plan, with suggestions for changes in several areas.
But first – immediately – he gave the exact same advice as the marketing consultant.
This time Zelig hesitated, but finally fired the classic business consultant too.
Because if the initial advice seemed unserious, why trust the rest?
Zelig almost gave up (plus, wasted money and time).
But then he heard about something new and intriguing…
The new consultant actually asked fewer questions.
Instead, he requested and received numerical data from the business.
He learned that Zelig sold 3 types of products (sales websites) with different prices, costs, and profits.
(Costs = payments to the freelance website builders).
He also checked the leads and deals data.
He discovered that the distribution of deals by products was completely different in the two marketing channels:
Calculating gross profit from both channels was simple:
From the table, it’s clear that Channel II actually brings much more profit!
Which contradicted the recommendations of the two previous consultants.
Of course, the data-driven business consultant didn’t settle for insights from gross profit calculation.
He also checked expense data (in addition to product costs).
Subsequently, he calculated net profit before tax.
With such profit, clearly Zelig wasn’t satisfied.
After all, as a salaried software professional, he could easily earn twice as much, without stress and mental confusion.
Finally, the consultant conducted a simulation showing what would have happened if Zelig had listened to the previous consultants.
Their advice was, essentially, to double the investment in Channel I while maintaining the total investment.
He showed that in this case, gross profit would actually be smaller at 210,639 and net profit would decrease to 11,107.
Suhail Doshi (Mixpanel founder)
קיבלת סחרחורת מהמספרים
Did you get dizzy from the numbers and couldn’t follow the example to the end?
Here are the key insights:
