Lessons from the road: why average is rarely ever the answer

So I'm a keen, if unremarkable runner. Like lots of us these days I love tracking my miles and uploading my efforts to #strava

I find there are often great business lessons to be found in everyday life. Here is one taken from my last week of running activity about the imperative to dis-aggregate data if you want actionable insights!

 So last week I ran a total of 14.5 miles in 2hrs 9mins. The quick summary suggests an average pace of 8mins 55 / per mile. Not great; not too bad for a slightly overweight middle aged executive.

 Dig a little deeper though and my week had 3 efforts:

• 3.2 miles @ 7:25 / mile on Weds
• 8 miles @ 10:07 / mile on Saturday (long run with my wife pushing a buggy with my daughter)
• 3.3 miles @ 7:33 / mile on Sunday

Now I'm looking for a new challenge right now; and am hoping to target a 1/2 marathon PR in the Spring 

If I'd based my training goals and plans on my average pace i'd be missing a lot. In fact I didn't run a single one of my 14 miles within 1 minute of 8:55 pace.

 So far, so obvious, right.

 But here is the thing. Time and time again I see businesses relying on data about their "average" customer. And time and again, just like my 8:55 mile, that average customer doesn't exist.

And time and again, just like my 8:55 mile, that average customer doesn't exist.

Let's take a illustrative subscription business:

• A customer LTV of $400
• An average orders per customer per year of 4

Let's take a couple of lessons from my week of running:

1. Beware the average. Just like I hadn't run any 8:55 miles it's likely you have very few "average" value customers. If you focus your organization around moving these averages you will come up with generic initiatives and are likely to fail. Instead drill a level deeper...you may find:

• Average LTV is often dragged down by a tail of customers with low or even negative value. What do they look like? Can you re-target acquisition efforts to skew away from these groups?
• How much value is generated by your best customers? A concerted effort to even better monetize your top 20% of customers who could be generating 60-80% of value is likely to yield better, and radically different actions than a focus on the "average".

2. Context is critical. Just like seeing my long run was spent pushing my daughter we have to add contextual information to our raw financial analysis. Add rich data around customer engagement to your pure financial metrics and you will derive actionable insights.

• Do you have a group of subscribers still paying but that have stopped engaging with your content -- they are tomorrow's churn
• New members who are engaging with everything -- get them on the fast track to VIP status; they are your most likely brand advocates if you treat them right

At nakedwines.com we are passionate about understanding our customers; and about understanding our business and the investment decisions we make. We know the first step to success if looking beyond the average.