Emotion often trumps logic.
We buy the story before we buy the product.
How our experience with a brand makes us feel can overcome the simple calculus of pro’s and con’s.
Because of this, I advise start-up entrepreneurs and deeply experienced corporate types alike to start with the story, to envision the full experience we want to deliver, to design for how we intend the customer to feel and how we hope they will amplify our message to their tribes.
But then comes the math.
And, alas, there is no escaping a few basic equations.
You can’t escape the fact that customers can’t buy your product or service if they aren’t aware of it. In an increasingly noisy world, where the toll-takers who often control getting your brand in front of the right customers keep raising their prices, you had better crunch these numbers.
If you are in any kind of retail, you can’t escape the math that your sales are a function of the amount of traffic you drive to your store or website, your conversion rate, the average unit retail of the items sold and the # of items purchased. Failing to understand these dynamics–and the throughput at each stage–is often where things start to fall apart.
In any business, if the lifetime value of the customer is less than the cost of acquisition and ongoing costs to serve, your numbers will never add up.
If it’s costing you more and more to acquire new customers, while you are experiencing high-rates of churn among existing, lower cost to acquire customers, the wall is fast approaching.
If you are adding a lot of cost to become omni-channel while merely spreading existing sales over a now higher cost base, you don’t have to be Descartes to know that’s not a long-term winning formula.
There are two ways we fight math. The first is to ignore it in the first place. The second is to stick our head in the sand when it starts to become more and more obvious that our numbers don’t add up.
Math–like feelings, ironically–doesn’t go away because we ignore it. Math doesn’t care that we are all about brand building. Math doesn’t have an opinion on how disruptive our start-up is. Math couldn’t care less that we hope to get acquired and cash out before we have to demonstrate profitability. Math is immutable and dispassionate. Math is a stubborn you-know-what.
Fight the industry incumbents all day long. Fight The Man, the power, the haters and the status quo as much of you want. Math doesn’t care.
But at some point, your numbers will have to add up and multiply through. And you’re going to want math on your side.