Is Your Team a Cost Center or a Profit Center?

by Jan 20, 2020

Are You A Profit Center or a Cost Center?

In the intro­duc­tory install­ment of this blog series on being success­ful with digital analyt­ics, I outlined the problem at hand — too many orga­ni­za­tions that are not derived value from their invest­ment in digital analyt­ics. Common symp­toms of the problem include poor digital analyt­ics imple­men­ta­tions, poor data quality, over­whelmed teams, confused busi­ness users and so on.

When I am up against complex issues like these, I find it helpful to go back to the begin­ning. In this case the begin­ning is think­ing about why your orga­ni­za­tion invested in digital analyt­ics in the first place? While this may seem trivial, it is not. I would bet that 98% or more of you reading this were not at your current orga­ni­za­tion when they first decided to invest in digital analyt­ics. That deci­sion was likely made in the early 2000’s or nearly twenty years ago! At that time, the Inter­net was just getting started. The expec­ta­tions of digital analyt­ics tools were pretty basic i.e. “Show me how many “hits” my website got…” At that time your orga­ni­za­tion likely invested in digital analyt­ics because every­one else was doing it and/or because one of the purported advan­tages of “online” was that you could digi­tally track customer behav­ior.

But that was all a long time ago. So why does your orga­ni­za­tion continue to invest in digital analyt­ics? Are your exec­u­tives crystal clear on why you have digital analyt­ics? Unfor­tu­nately for most orga­ni­za­tions, I find that if I ask five differ­ent people, I will get five differ­ent answers. As a follow-up task, I would encour­age you to do a survey to some of your leaders and ask them in an open-ended way why they think your orga­ni­za­tion has digital analyt­ics. I think the variety of the answers will surprise you. Once you get these various answers, you can trim them down and then use that short list to see which reasons are most impor­tant to your lead­er­ship. Some­times taking a step back can help you to move forward.

Some digital analyt­ics teams are viewed as cost centers and others as profit centers. Ideally, your team will be perceived as the latter, but that is easier said than done. For example, when I first joined Sales­force, I am not ashamed to admit that the analyt­ics team I took over was a cost center. We ran reports each week, counted how many forms were submit­ted and provided IT with some infor­ma­tion that helped them know which browsers to support. The percep­tion of our team wasn’t great, and we weren’t brought into strate­gic project meet­ings. Being viewed as a cost center is not very fun and if your orga­ni­za­tion ever encoun­ters any budget cuts, you are likely among the first to lose people and resources.

Instead, you want to be viewed as a profit center. The best digital analyt­ics teams are proac­tively using digital analyt­ics data to make the orga­ni­za­tion more money or, in some cases, save money. If you can lever­age the data that you are collect­ing to iden­tify hypothe­ses that then lead to website/app changes that ulti­mately lead to incre­men­tal revenue, you are a profit center. Another reason you want to be a profit center can be illus­trated by this scary concept — your orga­ni­za­tion doesn’t gener­ate one dollar of ROI on digital analyt­ics until it effec­tively uses data to make the orga­ni­za­tion money or save it money! In fact, if you add up the amount of money spent on digital analyt­ics tools, your analyt­ics head­count and the time exec­u­tives and other stake­hold­ers spend working with your team, it is not uncom­mon for digital analyt­ics to cost an orga­ni­za­tion a million dollars or more! That means that in order to provide value to the orga­ni­za­tion, you have to gener­ate enough incre­men­tal revenue or cost savings to cover your team every year! Even if your exec­u­tives aren’t currently asking you to earn your keep, it is impor­tant for you to compute your team’s cost and cost-justify your­selves. Doing this will help focus your team and is a great defen­sive measure in case budget cuts rear their nasty head.

Going back to my time at Sales­force, our team decided that we wanted to be viewed as a profit center instead of a cost center. We began automat­ing the boring reports that were expected of us so we could free up time for more strate­gic work. We focused on gener­at­ing more leads for the sales team since they were a power­ful group within the orga­ni­za­tion. We scru­ti­nized all visitor behav­iors around lead gener­a­tion and began iden­ti­fy­ing points of fric­tion. Once iden­ti­fied, we ran targeted A/B tests to see if alter­na­tive designs or approaches led to increased form conver­sion rates. We inves­ti­gated tools that helped us iden­tify which compa­nies were on our site so we could tell sales which compa­nies were actively check­ing out Sales­force and even iden­ti­fied which prod­ucts in partic­u­lar each company was click­ing on. While it didn’t happen overnight, the word spread that our team was helping drive leads and help sales close deals. This got the atten­tion of the CMO and led to our team present­ing at Market­ing all-hands meet­ings and so on. Within a year, we were given more money for tools and head­count. We were offi­cially a profit center and got the spoils that went with it!

So, is your team a profit center or a cost center? If it is a little of both, is it 6040 or 7030? I encour­age you to take some time to reflect (and be honest with your­self!) about whether you are the former or the latter.

Action Items:

  • Survey some of your stake­hold­ers on why they think digital analyt­ics is needed today at your orga­ni­za­tion. How would their world change if you shut down the digital analyt­ics team completely?
  • Look at the last two weeks of work that your team has done and attempt to quan­tify what % was spent on cost center activ­i­ties (i.e. running reports or perform­ing analy­sis result­ing in no changes to the website/app) and what percent was spent on profit center activ­i­ties (i.e. analy­sis that was done to improve some­thing specific).

In the next post of the series, I will delve into one of the worst culprits causing orga­ni­za­tions to not become profit centers — the dreaded SDR (Solu­tion Design Refer­ence).

We’re here to help you through this.

I consent to having Search Discovery use the provided infor­ma­tion for direct market­ing purposes includ­ing contact by phone, email, SMS, or other elec­tronic means.