Helen Edwards wrote a MarketingWeek article titled Even the simplest metrics require forensic analysis.
« You can have a bunch of metrics, each accurately assessing a single facet, but… as essayist Nassim Taleb observes, in complex systems it is the interactions that really count, with the result that “the ensemble behaves in ways not predicted by its components.” »
« A business-to-business brand competing in a dynamic market might constitute an “ensemble”. A simple metric within that might be sales data by customer. A common finding deriving from that might be that 80% of sales come from just 20% of the customer base – the so-called Pareto principle in action… Professor Byron Sharp has shown that this 80:20 Pareto skew is less common in consumer brands, but in my experience it is alive and well in the B2B world. »
« The finding, whether revealed by your own observation or by an outside analyst, gives you an uncomfortable feeling that you should be doing something about it. But what? Look for maximum efficiency by cutting off the 80% customer tail that’s bringing in just 20% of revenue? Treat those smaller customers a bit like second-class citizens so you can focus better on the big ones? Try charging smaller customers more? The conclusion that would be dangerous to miss is that what you should probably do is nothing. And the reasons for that derive from a combination of detective work and a recognition of Taleb’s dictum. »
« Once you stop seeing the two types of customer as distinct groups, and look for the interactions between them, you get a feel for why you have any big customers at all. I’ll use my own business as an example… How did the customers in the ‘big-but-few’ cluster get to be there? Some started as small customers but grew large – either organically or through merger. Some had become led by individuals who had previously worked in one of our smaller customer businesses. Some were there through recommendation, including by smaller customers. »
« There is a danger in extrapolating from that methodological simplicity the notion that the interpretation and implications are also simple. They rarely are. Just as painting by numbers will not get you much of a picture, so branding by numbers will not get you much of a brand. »