Moneyball for Ad Sales
How many of you find yourself competing with the “big guys” on a smaller budget?
Billy Beane, the Oakland A’s general manager, was determined to find a way for a low-revenue professional baseball team to compete successfully with teams spending two or three times as much on top player salaries. He found a way, with strategies vividly described in the book “Moneyball” -- and now the much more widely consumed movie.
The defining scene, for me, was the conference room discussion of whom to draft, where scouts recommended players in part on how they looked, and if they had a good-looking girlfriend -- an ostensible sign of their self-confidence. The girlfriend line, as far as I can tell, was a scriptwriters’ device to summarize all the ways traditional baseball looked at the wrong things. If you read the book you’d read a less-fictionalized account of the real process that is no less off-base.
The A’s adopted an approach to drafting and signing players based on far more rigorous statistical analysis of player productivity that has acquired the moniker Sabermetrics. This new view of baseball player productivity allowed Beane to select and deploy players based more on their actual statistical contribution to making runs and wins, and less on conventional statistics that missed the point.
A great example of Sabermetrics is that batting averages, the most commonly (still) displayed and discussed offensive statistic, ignores walks. The old-baseball view of walks was that they were the pitcher’s “fault.” But since a walk gets a runner on base, increasing the likelihood of scoring a run, almost as surely as a hit, a walk is a valuable contribution to team effectiveness. Some disciplined batters wait patiently for walks, thereby increasing their on-base percentage and up-ending conclusions on value reached from simply comparing batting averages.
Today, fortunes are won or lost and careers made or broken based on advertising sales effectiveness. Sales managers and publishers routinely pride themselves in being bottom-line-oriented. But do the measurements we use properly identify which salesperson is most effective and valuable? Salespeople are routinely hired based on tenuous data at best. Physical looks is one point that is never spoken about, but almost always over-valued, just as “Moneyball “shows looks to be in baseball. In the absence of other good data, how else will managers make decisions?
Two salespeople for the same property are often compared by their sales results in a given period. Is the highest revenue salesperson the most valuable and effective? Or is the one with the fastest growing results adding the most value? Or perhaps the salesperson bringing in the most new business? What if the lower-producing salesperson is working a territory where the biggest advertisers are in a depressed region, or an industry or category that is between product cycles that produce lots of advertising spending only when new products are introduced?
When salespeople are interviewed for new jobs, they invariably tell a story about how much their results were up over the previous year and the new business they won. Salespeople are rightly proud of their results. But too often they are simply the beneficiary of being in the right place at the right time.
Some sales managers talk with buyers at key customers or agencies to learn who the best salesperson in a category is. I guess this is the equivalent of baseball general managers asking the umpires who the best players are. Umpires are on the field all the time, and they see most of the action. Would they name the right players? Agency media directors can often identify dynamic and popular salespeople who wine and dine with appropriate panache (or give out tickets to baseball games). These salespeople may be hard-working and responsive to the agency’s needs. But will a media director recommend the salesperson who goes over their head to the client to make a pitch? Is that sometimes required to break through and win business?
Advertising sales, like sports, is often more of an art than a science. The instincts of a batter who sees a slight difference in a pitcher’s motion tipping off his pitch is a lot like the interpersonal skills of a great salesperson. Sales execs see the management of salespeople too as more art than science. But like baseball, management too often values salespeople on the wrong metrics. As a result investors, like baseball owners, are routinely frustrated that buying more expensive talent doesn’t seem to produce more sales success. Trying to invest in sales results without managing for the metrics that matter is like pushing on a string.
Today’s information systems allow you to manage more rationally, and value (and reward) salespeople more appropriately. We can determine the statistics that matter and manage for those behaviors that produce success. Sabermetrics allowed the Oakland A’s to win the most games ever in a single season despite having a player payroll less than half of its top competitors. Oakland’s successes, built on Billy Beane’s demand to analyze value in a new way, led to Sabermetrics’ adoption by the Boston Red Sox, which went on to “break the curse” and win a World Series.
You can use a new set of sales metrics to win your own world series.