You can greatly simplify your testing and tracking. Let’s take the following example.

2 different “actions” are:

• A $100 product, a $250 product, a $500 product and a $1000 product (four product choices)
• Opt-In, Telephone Conversation, Receive Product Trial Sample (three steps in the sales funnel)

If you want to connect all the dots, you’ve got 144 things to measure. If you put all 144 combinations on a spreadsheet, it would look like this:

1	2	3	4	5	6	7	8	9	10	11	12
13	14	15	16	17	18	19	20	21	22	23	24
25	26	27	28	29	30	31	32	33	34	35	36
37	38	39	40	41	42	43	44	45	46	47	48
49	50	51	52	53	54	55	56	57	58	59	60
61	62	63	64	65	66	67	68	69	70	71	72
73	74	75	76	77	78	79	80	81	82	83	84
85	86	87	88	89	90	91	92	93	94	95	96
97	98	99	100	101	102	103	104	105	106	107	108
109	110	111	112	113	114	115	116	117	118	119	120
121	122	123	124	125	126	127	128	129	130	131	132
133	134	135	136	137	138	139	140	141	142	143	144

There are several problems with this: It’s too much data to reasonably keep track of, and perhaps the least obvious problem is that box #142 may turn an insanely high ROI this week (from ONE customer who bought ONE time) and box #143 gives you a big fat zero. You eliminate #143 but what you don’t know is that #142 was pure luck – it never happens again – and #143 would have performed nicely if you’d given it more time.

The problem here is we drew this thing the wrong way. All the squares are the same size! What we ignored is the fact that cause and effect are ALWAYS disproportionate. The 80/20 rule is not just a clever business school concept, it’s a law of nature. The grid gets drawn much differently if we understand that every dimension of your sales machine has a disproportionate relationship between cause and effect.

We had 12 keywords, right?

Three or four of them are going to bring most of the traffic. In fact if you’ve got 2000 keywords, 95% of your traffic is probably going to come from less than 20 of them. Do you need to track the other 1980 keywords?

Well you’re sure not going to spend hours and hours setting up elaborate tracking for each one!

We had four products – and one or two of them is going to produce most of the sales. We had three steps in the sales funnel, let’s say the opt-in is a prerequisite for all sales, so the other two steps are the ones that actually flip the buyers. So what do we have on our shortlist?

• Three keywords
• Two products
• Two sales funnel steps
• 3 x 2 x 2 = 12.

Now we’re down to just 12 things to watch, not 144. Three keywords, two products, two steps. That’s manageable!

Here’s the RIGHT way to draw the grid – the 80/20 Sales Matrix:

	Keywords
Products / Sales Steps	1	2	3	4	5	6	7	8	9	10
	13	14	15	16	17	18	19	20	21	22
	25	26	27	28	29	30	31	32	33	34
	37	38	39	40	41	42	43	44	45	46
	49	50	51	52	53	54	55	56	57	58
	61	62	63	64	65	66	67	68	69	70
	73	74	75	76	77	78	79	80	81	82
	85	86	87	88	89	90	91	92	93	94
	97	98	99	100	101	102	103	104	105	106

The columns represent keywords. Three of them bring more than half the traffic.

The rows represent combinations of products and sales steps. The top three combinations, like the keywords, also bring more than half the traffic.

If you only pay attention to 1, 2, 13 and 14 in your matrix, you’re covering more than a third of your business with only four things to think about. If you only pay attention to 1, 2, 3, 4, 13, 14, 15, 16, 25, 26, 27 and 28, you’re covering more than half your business with only twelve things to think about.

And if you focus your attention on making the big squares bigger – doubling them, let’s say – then you grow your business 50% with 1/10th the effort. To put it another way, let’s say it takes you a week of work to double a square.

Do you want to double square #1 or square #77? In four weeks you can double some little squares, or double some big squares.

It’s up to you.

What to Be Anal About in Your Matrix!

Obviously it’s the big squares that deserve the attention. For square number one and the other big squares, you need to measure everything. Know your numbers to the penny. So here’s an example, from Julie Brumlik’s Google campaign for Dremu Skincare.

This particular campaign is organized very well, just as I teach: two ads rotating, a very narrow band of closely related keywords (and no other keywords) in this group; she’s tracking sales conversions and adjusting bids on each keyword accordingly.

Notice how this group is sorted: by clicks. The keyword with the most clicks is “skin care” with 4,216 clicks. Out of 7,576 total clicks, that’s 56% of all the traffic just from one keyword. More than 80% of the traffic comes from the top three keywords.

These top 3 keywords matter a lot. The keywords with fewer than 100 clicks hardly matter at all. The next step in developing this is to peel-and-stick the top 2-3 words and put each in its own group, all by itself. The word “skin care” gets enough traffic, all by itself, to merit tracking sales conversion on each individual ad. Click Thru Rate is important, but which ad gets the most buyers? Most people never bother with this, and yes, it’s admittedly pretty granular. But for one keyword that costs $2500 a month, it’s worth tracking those fine details. (Did you know that Google’s special report function will tell you sales conversion rates for individual ads?)

This one keyword may deserve its own special landing page, which should also be tracked. Yep, that’s more details to look after. But it means you can mostly ignore the fine details on hundreds of other keywords.

What this means is that in any given context, at any given time, there are only 3-4 things you need to focus on to get your business to the next level. 3-4 keywords in your present Google campaign. 3-4 pages on your website. A couple of critical steps in your sales funnel. A couple of products.

It’s not that the other stuff doesn’t matter, because it does. But it deserves the minority of your attention. Your job is to figure out what the main thing is and keep the main thing the main thing.

“OK, so if I’ve tweaked e-v-e-r-y-t-h-i-n-g to the max that’s inside one of the “big squares,” what do I do now?”

The next thing for you to be anal about is not to start polishing a bunch of little tiny turds. You don’t peel and stick the six-word phrase that gets 15 impressions a month; it would take four years to get meaningful numbers anyway. You look for the Next Big Thing. I don’t know what that is for you, but it’s likely to be something from the following list:

1. A super-deluxe version of your product at 3X the price
2. There’s usually an unmet need that nobody in your market is dealing with, and there’s pent-up demand
3. If you perform a service for people, sell a product that teaches “˜em how to do it. If you sell a how-to product, perform the service.
4. If you sell a service, add a physical product. If you sell a physical product, add a service.
5. If you’ve tapped out your existing market, take your skills into a new market.
6. “Widgetize” your product to create more dimensions of value. See the first part of this newsletter for examples from Microsoft, Apple, Google.
7. If you sell something on a one-time basis, turn it into repeat purchases with a membership

Marketers have so many e-books, have listened to so many teleseminars, have heard so many “great ideas”, my experience is they’re just overloaded. They have way too many options. My job in many cases is to eliminate options, not give “˜em more. In fact that’s what I find myself doing the most in coaching: narrowing things down to the 3-4 actions that will get them the most bang for the buck.

…And Now That You’re Working on the Productive Areas of Your Process, Let’s not forget about the CUSTOMERS!

Ken McCarthy just sent an interview with direct marketing analyst / financier Don Libey to his System Club. The subject of their discussion was RFM, which in Don’s opinion are the health indicators of just about any business. Ken pointed out that nobody in the Internet marketing world is really teaching this.

Shame on me, because even though I know about this (I’ve talked about it on sparse occasions, and its principles are an intrinsic part of my own business methods, including my “building the maze” approach to email marketing), I’ve not taught nearly enough about it. So today, I take the concept I just described and apply it to customer value.

Who Should You Pay Attention to in Your Business?

RFM is about who you pay attention to, based on who’s paying attention to you. It’s a feedback loop, in the same way the testing / tracking sales improvement process is a feedback loop. You pour more and more energy into the stuff that’s already working, less and less into what you have clearly determined is not working. We’ll take a closer look at RFM next time.

Perry Marshall