Data-Driven Decisions vs. The Movies
Movies, TV shows and novels are riddled with uninformed decisions made by characters who don’t know the full story. This lack of accurate information provides tension and suspense as things go awry until another character, who knows the truth, reveals it.
Unfortunately, uninformed decisions are also made by real people who don’t have all the data they need to make informed decisions. And some such decisions are important, high-impact ones that have repercussions for years to come.
Why do humans do this?
Is it because our emotions get in the way of critical thinking?
Is it because we’re too lazy to do our due diligence?
Is it because we believe we have a good “gut feel” for such decisions, so we don’t worry about the facts?
I can think of plentiful examples of each of the above. But I’m always impressed with someone who has done their research and can back up their decisions with data.
Decisions around pricing of publications and increasing those prices at renewal are important for your bottom line. Many publishers believe that their customers will only be able to tolerate a slight increase in price, so they raise the price by a few percentage points. However, in conversations with industry experts, I’ve learned that often publishers leave money on the table. They don’t test in order to gather real data about price elasticity, and their “gut feel” is wrong. Their customers would gladly pay more!
I understand wanting to avoid increasing churn. But churn can be related to other things, which, again, data can help reveal.
One publisher we know discovered that some churn was related to satisfaction more than price. Customers wanted flexibility in choosing which days to receive a newspaper. This is why the key performance indicators that we live by should be reviewed and questioned regularly.
Decisions about how often and by what means we communicate with our customers should also be data-driven. I am subscribed to a daily publication which sends me several emails every week. These were emails I opted into, but I appreciate it when they ask me if I’m receiving too many or am happy with the frequency. They don’t just change the frequency based on gut feel, but collect data to help make such decisions.
Can you imagine if insurance companies set their rates based on gut feel? Instead, actuaries help establish risk factors which go into the calculations of rates. Shouldn’t we be as reliant on data for making decisions as insurance companies are? Don’t we want to maximize profits and reduce churn?
My advice to publishers: test, test, test! (which is the cry of consumer marketers the world over) And collect the resulting data and make informed decisions using that data. It’s hard work but will pay dividends to your bottom line.