B2B Marketing Analytics

Consider
$p_{.}=(p(t)-(c_f+c_s+c_m))/(t_s+t_m+t_f)$ , where $p_{.}$ is the profit per customer per unit of time. 

Where

• $p(t)$ is the price at which the solution is sold to the customer,

• $c_f$ is the cost to fulfill (it is usually 10%-50% of $p(t)$),

• $c_s$ is the cost to sell the solution (and is usually 10%-15% of $p(t)$ since this is a typical commission payment needed to sustain a sales team or channel),

• $c_m$ is the cost to market or the cost to turn a cold lead into someone interested enough to receive a sales pitch (typically 5-20% of p(t) - inclusive of advertising spends),

• $t_s$ is the time in days or month to transform someone interested in receiving a pitch to a customer (time to sell),

• $t_m$ is the time in days or months to turn a cold prospect into someone interested enough to receive a pitch (time to market and can range anywhere from 1-30 days),

• $t_f$ is the time it takes to realize the entire $p(t)$ value (it could range from 1 day to 365 days or longer and depends on the payment terms). 

Before a funnel is made, the $p(t)$ is validated by the initial case study as well as the $c_f$ and $t_f$. This results in contribution before marketing value. 

The point of the funnel is to validate: 

1. The cost to generate a lead ($c_m$) - cost of marketing per customer 
2. The time to generate a lead ($t_m$)

The point of the sales process is to validate and improve: 3. The cost to turn a lead into a customer ($c_s$) or cost to sell 4. The time to turn a lead into a customer ($t_s$) or time to sell

The point of the sales team is to validate: 

1. $C_{.}.$, the rate at which the new customer rate relative to the organization is changing. 

Once these values are validated to produce a $p_{.}$ value > $700/month, techniques to scale the machine can be leveraged to increase the rate at which the business acquires capital. 

The following diagram illustrates the differences between $p_{.}$ values ($731vs.$292 vs. $146)whilefixedcosts($c_.$)isheldconstantat$6000 per month. 

	1	2	3
$p$	$25,000.00	$10,000.00	$5,000.00
$cas{h}_0$	$0	$0	$0
$c_f$	$6,250.00	$2,500.00	$1,250.00
$c_m$	$5,000.00	$2,000.00	$1,000.00
$c_s$	$3,750.00	$1,500.00	$750.00
$t_s$	45	45	45
$t_m$	14	14	14
$t_f$	365	365	365
$t_{r}enew$
$p_{r}enew$
$c_0$	0	0	0
$p_{.}(t)$ - day	$23.58	$9.43	$4.72
$p_{.}$(t) - month	$731.13	$292.45	$146.23
$c_{.}$(t)	4	4	4
c_churn_term	80%	80%	80%
$c_{.}(t)$ - month	5	5	5
$c(t)$
fc_dot(t)	$6,000	$6,000	$6,000
fc_0	$0	$0	$0
c_consumption	-$3,377.36	-$45,169.81	-$242,287.74
t_profitability - month	2	5	9

Notice that state 1 achieves profitability in only 2 months, while state 2 and state 3 take longer. Also notice that almost nil money is needed to start in state 1 (only $3kofcapitalisneededcomparedto$45k and $242k). This means that if the p_dot value is high enough, one can avoid raising money completely. 

Solving for c_m and t_m 

• We test marketing channels like outbound prospecting, organic promotion, paid advertising, channel partners. We calculate the amount of time and money needed to get one lead, where a lead is defined as someone who went from ice cold to interested enough into learning how your offer can help them. If one has outbound prospecting skills, c_s and t_s can be solved in a few days of sending emails. If one has paid advertising skills, c_s and t_s can be solved in a few hours and by spending a few hundred dollars. If one only possesses channel or referral marketing skills, the time to validate c_s and t_s could take weeks or months. These are the first metrics we will be solving for. 

Solving for c_s and t_s 

• c_s is typically the fee a salesperson would charge you to sell your product. This ranges from 10%-15% commission. Whether you are paying salary + commission, or strictly commission, this range holds. t_s is found by determining the length of time between the first meeting and the signed contract or purchase. Sales skills are needed here. This can be done through inside sales (which we recommend to start with) or it can be done through a long-form video sales letter (which we do teach, but recommended to create automated sales VSLs only after the offer is validated with the inside sales funnel). 

Solving For t_f

• One can play with the pricing and payment terms to determine the t_f (time it takes to realize the money defined by p(t)). This could be 1 day if you are selling an iPhone, it could be 90 days if you are selling a 3 month payment plan, or it could be 356 days if you are selling month to month yearly contracts. This is one of the most important factors in your p_dot value since t_f relative to t_m and t_s is often much larger than t_m and t_s.**