Sales or Profits?

Seems the previous post (Best Seller Gone Bad) really hit home for people; perhaps we should drill into  this a bit.  So:

1.  Is the impact of your work evaluated against Sales or Profits?  (example)

2.  Do you think this evaluation approach is correct for your job and company?  Why? 

3.  Would you change this evaluation method if you could?

4.  What is holding you back from trying to make this change?

Personally, I always choose Profits if I can; the leverage is so much higher than Sales.  It’s much easier to generate $5 in Profits than $5 in Sales for any given $1 in budget, because there is generally so much waste in the Marketing system.

Update: OK, how about answering this question – when your work performance is evaluated, what percentage of this measurement is based on qualitative factors?  quantitative factors?

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6 thoughts on “Sales or Profits?

  1. Hey Jim,

    Great question. I think it depends. As easy as it is to say that profits give you more leverage, it can also stunt growth of a business if focusing on revenue isn’t prioritized at early growth stages. Taking revenue, market share and new customers as fast and furiously as possible when you are early in the adoption stage seems to make sense. Then turning your focus to earnings as part of leveraging the DB you’ve collected seems ensure that over the long haul, you’re driving the fundamentals. Over the long-term, or if you are in an established business, then it has to be primarily about profits. Someone told me once that revenues are for egos and profits are for intellect – I tend to buy into that (and don’t we all need a little of both!).

  2. I buy that segmentation, though personally wouldn’t go about growing a business like that, because the early adopters are often the most profitable customers you will ever have.

    So I take it your success is measured against Sales?

  3. In my case, from what I see, most my clients get stuck at a certain point with their Web Analytics/Optimization/what-have-you efforts. I believe the major reason is that they are not P&L, and more specifically not evaluated on their profitability, but on the sales they bring in.

    I see that exclusive focus on sales, and related concepts (campaigns, conversion, etc.) as one of the big hurdle in the development of Internet marketing.

  4. Here’s the fundamental question, for me.

    What if corporate culture, meaning the HR stuff – training, evaluation, reviews, compensation – is moving away from hard performance measures to softer ones like “works well with others” and so forth?

    What then, is the incentive for employees to care about analytics?

    Have you read any of the HR stuff on Gen Y, for example:

    http://snurl.com/carhf

    Make sure you read some of the comments…

  5. Hi Jim,

    I just perused the article, having read a lot about that question. I also had a look at the comments, and yes, this topic raises the hair on my back (OK, not a pretty picture, I concede)!

    I was born in 1963, which means that I don’t know which generation I belong to, since it varies according to the study I read. Which I guess makes me an X, that lost generation that learned to just shut up.

    The Gen Y are obviously the products of Baby Boomer parents, who wanted to be friends rather than authority figures. The same happened with those kids’ teachers, which means they didn’t learn that human societies are not equal, but rather hierarchical, and that nobody will give you anything just because you want it.

    As you probably know, French has polite and informal levels. Now, almost no one under 30 knows the polite form anymore. I can’t tell you how irritating getting the “tu” form (“you”, but very informal) in stores, telephone, meetings, etc., is. To a point that I now sincerely believe nobody in that generation should be given client-facing positions. I don’t have any employees, but if I did, language training would be mandatory on the first week.

    Having said that, I think your question is very interesting. Since people behave the way they are evaluated, I really think notion such as “performance”, and “productivity” are in for big changes. The Gen Y know, and HR managers too, that companies will bascially offer anything they want once the Boomers definitely leave the party (and us X, will again watch from the side). This is not going to give incentives to create strong measure/analytics company cultures!

    OK, this is bad sociology, but that topic really gets me. And I don’t apologize to any Gen Y readers you might have; sorry, not all “old” farts feel the need to make friends.

  6. Yes, and I’m not trying to be a “generationist” at all here.

    I’m just saying we have the potential for a massive corporate culture collision going on – two trains on the same track, heading towards each other.

    We’ve got the business process measurement, marketing accountability, Six Sigma etc. train on the business (management?) side steaming towards the “don’t measure me that way” train on the HR / (employee?) side.

    Frankly, Re: the future of analytical practice, I’m much more concerned about this kind of macro trend than I am about “education” and I just wonder what (if anything) we should do about it. This is one of the reasons I went to the HR conference in 2007 – and did not come away from that experience optimistic.

    How do we “Compete on Analytics” if the whole corporate structure ends up hard-wired against the idea of competing at all?

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