## The One Number To Predict Revenue

1 A year or so ago, a friend recommended “The Outsiders.” It is a book by William Thorndike about eight of the most successful CEOs as measured by the increase in their company’s per share price. As Thorndike explains: “The metric that the press usually focuses on is growth in revenues and profits. It’s the … Continue reading The One Number To Predict Revenue

## The One Number To Predict Revenue (Part 10)

What can you do as a business leader? Here are the 7 steps to getting started with the ideas and apply the ideas of NPR in your business: The starting point is transaction data. Collate customer-wise transaction data for the past few years. Calculate Customer Lifetime Value (CLV) for these customers. Remember that CLV mentioned … Continue reading The One Number To Predict Revenue (Part 10)

## The One Number To Predict Revenue (Part 9)

This single chart brings together the ideas of Velvet Rope Marketing and Net Predicted Revenue. Once the CLV for all customers has been calculated, we get the Predicted Revenue for all present customers. This is indicated by the green and yellow areas under the curve. (Best Customers are the top 20% customers with a CLV … Continue reading The One Number To Predict Revenue (Part 9)

## The One Number To Predict Revenue (Part 8)

To better understand how NPR can be applied, a business can start by charting the CLV for each customer. Next, sort the customers by CLV from high to low on the X-axis. And what do we see? A curve which looks like the power law! We can then segment the customers into Best-Rest-Test. Marketers and … Continue reading The One Number To Predict Revenue (Part 8)

## The One Number To Predict Revenue (Part 7)

NPR as we have discussed is a bottom-up way of predicting future revenues. It starts with the actions of a single customer. Will that customer stay? Will that customer spend? Will that customer churn? Past actions as computed through an RFM (recency frequency monetary value) grid help compute the probabilities for what a single customer … Continue reading The One Number To Predict Revenue (Part 7)

## The One Number To Predict Revenue (Part 6)

Customer lifetime value (CLV) is important because all customers are not equal. In fact, most businesses will find that there is a power law with CLVs. As explained by Wikipedia, a power law is “a functional relationship between two quantities, where a relative change in one quantity results in a proportional relative change in the … Continue reading The One Number To Predict Revenue (Part 6)

## The One Number To Predict Revenue (Part 5)

Before we discuss the power of Net Predicted Revenue (NPR) as marketing’s magic number and the one number which according to me ‘solves marketing’, let’s start with the basics. A company has customers. What it knows for sure are its past transactions with these customers. Aggregate all these transactions in a specific period and you … Continue reading The One Number To Predict Revenue (Part 5)

## The One Number To Predict Revenue (Part 4)

It was then that I re-read an article by Daniel McCarthy and Peter Fader in the January-February 2020 issue of Harvard Business Review about Customer-based Corporate Valuation (CBCV). This excerpt stood out: Recognizing that every dollar of revenue comes from a customer who makes a purchase, CBCV exploits basic accounting principles to make revenue projections … Continue reading The One Number To Predict Revenue (Part 4)

## The One Number To Predict Revenue (Part 3)

For me, the search for the magic number for marketing started with the presentations on Velvet Rope Marketing (VRM) that I started doing to CMOs a couple months ago. (As an aside, this is one place where the lockdown has proven very effective. I would probably have not travelled as much for the meetings in … Continue reading The One Number To Predict Revenue (Part 3)

## The One Number To Predict Revenue (Part 2)

The one number that has attracted a lot of attention in the past few months is R0 – the reproduction number, which tracks how contagious an infectious disease is. If it is less than 1, it means that each existing infection causes less than one new infection and hence the disease will eventually die out. … Continue reading The One Number To Predict Revenue (Part 2)