1
Measure
We exist in a world dictated by measurements and comparisons. From the moment of our birth, metrics like height and weight define us. As we progress into school, we are evaluated through marks and grades. To gain college admission, we undergo competitive exams like JEE (in India) and SAT (for US), earning ranks or percentiles that determine our next educational step. In the professional realm, our salary serves as a tangible measure of our contribution and significance within an organisation. Within our social spheres, we often find ourselves subconsciously gauging our net worth against others.
In the corporate landscape, a plethora of metrics such as profits, earnings per share, and Return on Investment (RoI) serve as barometers of success. There’s been a growing inclination among businesses to employ tools like the Myers–Briggs Type Indicator to identify the diverse personality types within their teams, fostering a deeper understanding of employee dynamics.
As we navigate through different life stages, our health metrics become pivotal, necessitating regular monitoring of cholesterol levels, blood sugar, Vitamin D, and other essential indicators. The importance of measurement extends beyond individual and organisational levels to encompass nations. Countries are evaluated and ranked based on various parameters including population, GDP, inequality, and economic freedom, among numerous other indices and figures.
Essentially, the narrative of an individual, a business, and a country is intrinsically woven around measurement. It is through these quantifiable entities that we perceive, understand, and navigate our existence, ensuring continuous growth, development, and well-being in a world that thrives on comparison and competition.
As James Vincent writes in “Beyond Measure – The Hidden History of Measurement”:
As it stands today, the world around us is the product of countless acts of measurement, their presence rendered invisible by their ubiquity. Whether you are reading these words on the page or on a screen, their finished form is the product of careful weighing and counting. The pulp that forms the paper was made using a chemical mix finely calibrated to tease apart the wood’s fibrous cells without destroying their structure. The resulting sheets were forced through gigantic metal rollers of staggering precision, squeezed to the consistent thickness you now feel between your fingers. They were cut and bound to a familiar size, before being packed, weighed, and shipped around the world. Even the font used to render these words is the product of careful measurement; every serif pruned, the gaps between each pairing of letters nudged into equilibrium. And if you are reading this in a digital format, then this chain of measure is even more complex, starting with the atomic-scale engineering of silicon chips and the carefully balanced alchemy of your device’s battery. Regardless of whether we think about it or not, measurement is suffused throughout the world; an ordering principle that affects not only what we see and touch, but also the often intangible guidelines 6of society, from clocks and calendars to the rewards and punishments of work.
… we regularly turn to measurement to fix the greatest problems in society, whether in healthcare, education, or policing, so why should we be surprised if it is capable of threatening our happiness too? This, I think, is the true beauty of the subject: its depth is hidden on the surface. Peel back that thin layer of familiarity and measurement is anything but banal. It is a complex and turbulent force that has shaped history; it has been a tutor to humanity and an overlord also. Over time, it has been the concern of gods and kings, and an inspiration to both philosophers and scientists. It is a child’s art, practised with a pencil and ruler, but also the means by which some of humanity’s greatest achievements have been orchestrated. In the final reckoning, measurement has left its mark on us all.
If businesses need to embark on their journey to becoming a profipoly (profits monopoly), they will need to measure progress. In this series, we will discuss the “Profipoly Score.”
2
Key Numbers
In a previous essay on “Profipoly: Marketing’s Final Frontier” [LINK], I had written about the need for a business audit. In this series, I will discuss the questions that Chief Profipoly Officers need to answer as they implement the innovations. The score from these questions can be the North Star Metric to help them measure progress along the transformation journey. The Profipoly Score is calculated on a scale of 100.
We will begin with 5 key numbers, each worth 10 points.
1. Profits Alpha
What is the alpha for the profits (or EBIDTA)? Alpha, a term from the world of finance, is the excess return relative to a benchmark. Scoring:
- Same as industry benchmark: 5 points
- Then add or subtract 1 point depending on whether the alpha is above or below the benchmark.
For example, if the industry benchmark for EBIDTA is 10% and your EBIDTA is 13%, give yourself 8 points on a scale of 10. Floor and ceiling are 0 and 10.
In case data is not easily available, estimate the numbers to the best of your ability. The reason for looking for alpha is that every industry has a different structure, so what matters is how well you are doing as compared to competitors.
2. Growth Alpha
Do similarly for growth. Same scoring as above.
3. Market Share
What is your market share of the profits pool? (If you are not able to estimate, you could do it on revenues.) Remember the goal is for a “profits monopoly.” Give yourself 1 point for every 10% market share that you.
4. Earned Growth
Earned Growth measures growth from existing customers and referrals. It is measured thus:
Earned Growth = Net Revenue Retention + Earned New Customers (ENC) – 100.
Scoring:
- 50 or more: 10 points
- Reduce 1 point for every 10 reduction in Earned Growth (and round-off the result).
Thus, Earned Growth of 65 will fetch 2 points, while 118 will fetch 7 points.
5. NPS (Net Promoter Score)
Baseline is 5 points for a score of 10. Add or subtract 1 point for every 10 points above or below, with 0 and 10 points as the floor and ceiling.
Thus, if your NPS score is 32, give yourself 8 points. If it is -20, you get 3 points.
Add up the 5 scores to get your mini-Profipoly Score (on a scale of 50).
Example
- Profits Alpha: if the alpha is 3%, then you get 8 points
- Growth Alpha: if the alpha is 1%, then you get 6 points
- Market Share: if the market share is 20%, then you get 2 points
- Earned Growth: if your earned Growth is 12, then you get 6 points
- NPS: if your NPS score is 20, then you get 7 points
Thus, your mini-Profipoly Score is 29 on a scale of 50.
3
Frictions
I have previous discussed the five Funnel Frictions [LINK]. It is time to score the ‘frictionlessness’ in the customer journey.
We will begin with the 3 frictions related to existing customers, and then look at the 2 frictions associated with new customers. Each is worth 5 points.
1. Attention Recession
The ‘good fraction’ is 1%, meaning that 1 out of every 100 messages sent gets a response. Response can be defined as clicks or in-message actions. Apply this across all the channels used: email, SMS, WhatsApp, and RCS. [You could also do it for nudges.]
Score 1 point for every 1% of responses. Thus a 5% response rate will get you the maximum score of 5.
2. Red Journeys
The ‘good fraction’ is 3%, meaning that 3% of the visits to a website or app result in a transaction (conversion).
Score 1 point for every 2% conversion. So, if you are getting an 8% conversion rate from visits to your properties, then give yourself 4 points. A 10% or higher conversion rate will get you the maximum possible of 5 points.
3. Dormancy and Churn
The ‘good fraction’ is 33%, meaning that typically a third of the database is being actively communicated to.
Score 1 point for every 10% of active customers, peaking at 5 points for 50%.
4. AdWaste
Typically, half the marketing spend on acquisition is being wasted. Most businesses tend to spend 80-90% of their budgets on new customer acquisition. The goal here must be to balance the spending between new and existing customers.
Score 1 point for every 10% of the budget that is spent on existing customers. Thus, a 30% spend will get you 3 points, with the maximum of 5 points for a perfectly balanced spend of 50:50.
5. Identity Gap
Typically, 10% of the visitors to a brand’s digital properties are known. The goal here is to reduce the anonymous traffic as much as possible.
Score 1 point for every 10% of identified visitors for a maximum of 5 points. Thus, if you have 30% known traffic, you get 3 points.
Example
- If the messages response rate is 4%, you get 4 of 5 points
- If the conversion rate is 6%, you get 3 of 5 points
- If the active database is 40%, you get 4 of 5 points
- If your martech spend is 30%, you get 3 of 5 points
- If your identified base is 20%, you get 2 of 5 points
Thus, your Frictionless Score is 16 on a scale of 25.
4
12 innovations and 13 Questions
The final element in calculating the Profipoly Score is to track the adoption of the innovations and get a sense of the qualitative steps taken. Each Yes is worth 1 point, for a total of 25 points.
Score 1 for every innovation adopted.
- Unistack
- Large Customer Model
- Digital Twins
- Velvet Rope Marketing
- Catalog and Customer Data
- AI-enabled Catalog Enrichment
- Unichannel
- Email 2.0 powering Inbox Commerce
- Atomic Rewards
- Action Ads
- Progency
- Earned Growth
Score 1 for every Yes answer.
- Do you have a Chief Profipoly Officer?
- Do you have a system for doing the Profipoly Score every 3-6 months?
- Do you collect data from every customer touchpoint?
- Do you have a program to capture identity info for every anonymous visitor on the website?
- Are you collecting two identities for every customer? (An identity is like an email ID or mobile number, with right of way in the form of an opt-in.)
- Are you collecting name, gender, and location for your customers?
- Are you calculating CLV for every customer? (CLV needs to be calculated right; there are many ways to do it wrong.)
- Do you know the Best Customer Genome of your customers?
- Are you using the BCG for new customer acquisition?
- Is every email that you send an AMP email?
- Does every email have a footer with various AMPlets (eg. NPS, progressive profiling)?
- Do you have omnichannel recommendations?
- Do you have a referrals program focused on Best Customers?
This will total to a maximum 25 points.
**
It is now time to calculate the Profipoly Score by adding up the sub-scores on a scale of 100.
- 5 key numbers (on a scale of 50 points): mini-Profipoly Score
- Actions on the 5 frictions (on a scale of 25 points): Frictionless Score
- Innovations adoption and actions taken (on a scale of 25 points)
The Profipoly Score is a tracker for measuring the progress in the transformational journey towards exponential forever profitable growth. It is a leading indicator for the health of the business, a metric which will indicate the capacity of a business to maximise the profits pool in an industry. The Profipoly Score needs to become as important as earnings per share and NPS in the management lexicon.
