Impact Analysis: Analyzing Impact

This is part 5 of our series on Impact Analysis, previous segments are available in our archives.

It’s not easy, but once you’ve assembled your Relationship Model you are ready to do Impact Analysis! Let’s revisit our model from earlier this week and use it to analyze some potential impacts:

Relationship Diagram

We should also know, from building our model, what the conversion rates are for the different relationships. For this example, let’s assume our click-through-rate (CTR) is 4% and our cost-per-click (CPC) is $1. We can ignore Sessions because we know it has a near perfect relationship with Ad Clicks. The value of these metrics today is:

Ad Impressions CTR Ad Clicks CPC Ad Spend
1,000 4% 40 $1 $40

 

Now, if we increase our Ad Impressions to 4,000, assuming the other CTR and CPC remain constant, we know how it will impact the other metrics:

Ad Impressions CTR Ad Clicks CPC Ad Spend
4,000 4% 160 $1 $160

 

If we can further increase our CTR from 4% to 5%, holding CPC constant,then the impact is as follows:

Ad Impressions CTR Ad Clicks CPC Ad Spend
4,000 5% 200 $1 $200

 

As you can see, with the relationship model in place you can begin to explore how changes in one metric will affect the others, and analyze their impact! Clearly, Impact Analysis is well named and a useful tool in business planning.

Next Week: Impact Analysis has many limitations, as isolation of relationships might be difficult or impossible and you may not be able to build clear models for parts of your business. This is especially true when you deal with the highly-interconnected parts of your business, you touch other businesses or entities. There are more robust methods for understanding and planning for impact in these cases, including Scenario Planning which we’ll cover next week.

 

Quote of the Day: “In a gentle way, you can shake the world.” ― Mahatma Gandhi