How Is the Law of Marginal Gains Used in Marketing

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The law of marginal gains is a simple idea. It is the idea that small performance improvements can have large effects on overall performance.

In sports, this means that even if you don’t win every game, you will still improve as long as you make a few small gains in each game.

It’s been used in sports for quite some time to explain why some players are better than others.

This law applies to all disciplines of sport, but it seems especially applicable to sports like basketball and soccer where there are many moving parts and little margin for error.

The law of marginal gains can be applied in business too by making a series of small improvements over time. The best way to do this is to break down your skill into smaller pieces and work on improving each piece individually until they are all at their peak level.

If you want to push yourself beyond what your body can handle, then find some new ways to train that will allow you to challenge yourself without going too far or hurting yourself.

How to Deploy 1% Improvement Rule in Marketing?

The law of marginal gains is a simple concept that states that when you make a small change, your overall impact increases. This is because you’re now improving the quality or quantity of the item, which means it will be more valuable to customers.

The law of marginal gains is successfully used to improve operations in a lot of top startups today. For example, the North Star metric of a company like Uber would be the number of trips taken. Even a marginal improvement in this number would have a cascading effect on the overall growth of the company.

The 1% improvement rule is an extension of the law of marginal gains. It states that if you make one change at a time and test it, you’ll discover multiple improvements. This means that if you implement one change at a time, then test it with your customers, you’ll improve your metric like CAC, ARPU, and ROI over time as more changes are implemented.

For example, let’s say you’re selling a product for $100 and your margin is $10. If you spend $1 on advertising, then the incremental impact on revenue would be $9 ($100-$1). If you spend $1 on research and development (R&D), then the incremental impact on revenue would be $9 ($100-$1).

If we take our example above and apply this principle to it, we see that spending just $1 on R&D would yield an 80% improvement in revenue. On the other hand, increasing advertising by just 1% will result in an 11% increase in revenue — a significant difference!

Let’s take another example:

If you sell $100 worth of products and have $100 in sales, then by making one additional sale or adding one more customer, your revenue has gone up by $1. If you get two more customers for $10 each, then your revenue goes up by $2. If three more customers come in for $20 each, then your revenue goes up by $3. And so on until eventually all of those customers are paying full price for all of their purchases.

This means that if your company has 100 customers who each spend $1 per month on average, then after 2 months of taking action on this new strategy, every single customer will have spent at least $2 per month instead of just $1.

Challenges with the 1% Improvement Rule

Requires a Lot of Patience

The challenge of marginal gains in marketing is that it is a very slow process and requires a lot of patience. The 1% improvement rule is one of the best ways to improve your marketing strategy, but it can take months or years to see results.

The 1% improvement rule looks at how much you can improve your business by improving just one percent of your current product or service. This could be anything from working on your sales objection, turnaround time, or even NPS score. It takes time for this improvement to show up in sales figures, but once it does, you can start using it as a benchmark for future improvements.

Difficult to Measure Progress

It’s challenging to find ways to measure progress. You will need to figure out what parts of your business are working and which aren’t working well enough before you can find ways to improve them. This can be difficult because there are so many factors that go into determining whether or not something is working properly (such as customer feedback).

Presents Many Missed Opportunities

Another challenge for marketers using this method is that they may focus too much on just one area where there are problems instead of looking at all areas where there might be problems. This can cause them to miss other opportunities within their business that might provide handsome returns.

Does Not Consider External Factors

This rule assumes that external factors do not contribute to business growth. Unlike sports where a week’s break does not immediately put you back by several weeks of effort, in business that can actually happen (for example, the pandemic reset the revenues and gains of businesses by several years). So, a 1% improvement is not always possible.

External factors include business environment, competitor strategies, and regulations (including things like fuel price, inflation, etc.)

How to Execute a Successful Marginal Gains Marketing Strategy?

In marketing, a ‘marginal’ gains strategy focuses on improving the performance of an already successful campaign. It’s a way to improve conversion rates, revenue, and overall performance without changing the original idea behind your campaign.

It can be applied to any business, but for small businesses, it’s especially important because of the limited resources available.

As Hicks Law states, conversion rates can be impacted by the number of options available to the consumer. To achieve this, you may consider a marginal gains strategy by removing one option at a time to arrive at the optimal offering.

Here is how you go about executing a marginal gains strategy.

• The first thing to do is to pick a metric that is immune to external factors. For example, revenue is influenced by external factors. But conversion rate or engagement metrics do not have to.

• Gauge your improvement for a short-term period (weekly, or monthly). This way, you only measure success by improvement over the previous week which is more realistically possible to achieve.

• Repeat this process for every metric that matters to you and measure how you’re doing against your goal. Once you’ve found the ones where you can make progress and measure it, keep repeating this process until you have a list of metrics that show consistent growth on average every month. This will give you confidence in your strategy and allow you to focus on what matters most: improving each metric one step at a time with measurable results each week.

The law of marginal gains is all about constant improvement hidden within the details. Of course, there’s always room for improvement, and marketers probably aren’t making use of 100% of the infinite possibilities out there. But that doesn’t mean that an effective marginal gains marketing strategy has to be implemented overnight. In fact, it’s better if it isn’t — that gives you more time to recognize and execute on the incremental changes that you can make.

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