What Really Works: Demystifying Causation, Correlation, and Contribution

Sep 22, 2021 | Growth, Operations

How do you really know what’s working for your small business?

Over the last 12 years, I’ve heard all sorts of “this is what works for me” stories. Heck, I’ve told a whole bunch of them myself. Some of them are true. And some of them? Well, we’d like them to be true.

When we get into the nuts & bolts, it’s hard to find evidence that X actually works to create Y result. “What works” ends up being more of a guess than a fact.

Why are we so quick to assume that a tactic or strategy is working when we have little (or no) evidence?

Well, our brains like to find relationships between circumstances and events. It’s a certainty-seeking, energy-saving technique our brains use. By finding the relationships, our brains help us feel a little more in control of whatever is going on around us.

If you’re lacking confidence in your marketing, for example, your brain might start looking for evidence that a particular message or tool is creating results. If you’re feeling stressed about hitting deadlines, your brain might assume that a certain way of scheduling your work or organizing your to-do lists helps you get things done faster. All it takes is just one instance of something “working” for your brain to jump to the conclusion that “this is what works for me” so that you can sleep a little easier at night.

This flaw in reasoning—really an assumption caused by cognitive bias—is so common that we run into it constantly. Sure, it’s present in how we think about our businesses. But it’s also present on the news, in messy interpretations of research studies, at the doctor’s office, and in schools.

Unfortunately, getting the relationship between phenomena wrong can cause all sorts of system-wide effects in a business.

When we assume that a particular tactic or message is causing an increase in sales, we might miss a key shift in the market or the impact of a great referral. When we assume that our high prices are scaring away customers, we might miss that our value proposition isn’t as clear as it needs to be or that we’re targeting the wrong customers. Because these assumptions guide our decision-making and actions, we end up choosing the wrong direction or spending time on things that don’t really lead to results.

Since I don’t think anyone is in the business of wasting time or chasing the wrong strategies, we’ve got to understand what’s really going on with the business and its systems. To do that, we need to be able to identify when there’s a direct causal relationship between 2 phenomena, when those phenomena are merely correlated, and when one phenomenon contributes to another without being the direct cause of it.

Let’s take a closer look at what causation, correlation, and contribution actually are. Then we’ll explore how to apply it to what’s happening in your business.

Causation

When two phenomena have a causal relationship, it means that X thing causes Y thing. I know that if I cut my finger, my finger is going to bleed.

Bleeding can be caused by other things—of course. But I know that cutting myself causes bleeding.

That said, could using a knife be the cause of the bleeding?

Not exactly.

Correlation

I might notice that I’m more likely to bleed when I’m using a knife to cut up vegetables for dinner. So I might start to associate using a knife with bleeding. It would be easy for my brain to assume that using a knife causes bleeding.

But, of course, that’s not true.

I can just as easily use a knife and not bleed.

So while using a knife and my finger bleeding are correlated, they don’t have a causal relationship.

When things are correlated, we observe a relationship between them but we can’t say for sure that one causes the other. Correlation is a far more common relationship between 2 variables than causation. And yet, we’re biased to see causation all around us!

Contribution

Further, I might also put together that when I’m using a knife to cut a really tough vegetable—like spaghetti squash—I’m more likely to bleed than when I’m just using a knife to slice strawberries.

The toughness of what I’m cutting is correlated to the effect of bleeding. I can also say that it contributes to the likelihood of that result.

Of course, this example is pretty straightforward—if also a bit squirmy. I can observe every aspect of the relationship between the knife and my finger. I’m unlikely to get mixed up about what’s causing what and why.

But in most other instances, these relationships get more complicated. So, we have a harder time telling how one variable is related to another.

Causation, Correlation, and Contribution In Your Business

Let’s say you want to figure out what’s going on with your lead generation. You’ve noticed that leads aren’t coming in as reliably as you’d like. So, you want to learn why so you can adjust your action.

A very common jump that I see business owners make is, “If I’m not generating as many leads as I’d like, I need to create more content.” The assumption is that content marketing causes leads, right?

This is an understandable assumption to make! Lots of people will tell you that the more content you create, the more leads you’ll get.

But of course, there are many variables to consider. See also, my TEDx talk:

First, let’s look more closely at the relationship between content marketing and lead generation:

  • Are your existing leads following you on social media or on your newsletter list?
  • Is there evidence that more content marketing causes more people to signup for your newsletter or contact you about services?
  • Are leads who reach out telling you that they found your business through some form of content marketing?

The answer to any (or all) of these questions might be “yes!” But it’s equally possible that the answers are mixed or just flat out “no.”

For instance, after our last sales campaign, our survey of new members revealed that just 2 people learned about What Works on Instagram. This is despite the fact that I spend hours turning podcast episodes & articles into well-received content for that platform.

While I can certainly say that my approach to creating for Instagram this year has garnered me more Instagram followers, I can’t say that those followers have turned into leads let alone customers. I can also say that my Instagram strategy is serving purposes other than lead generation but I can’t say that my posts lead directly to new leads, let alone customers.

This is a very common scenario.

Yet, when the pipeline dries up, many small business owners head to social media to get it flowing again. They sink hours and hours into content that doesn’t have a causal relationship to the results they’re looking for.

If you know there’s a causal relationship between your content marketing and your lead generation, awesome. But if you don’t—and that’s far more likely to be true—then we have to look for other relationships that could be impacting how new customers come your way.

In other words, content marketing might be contributing to the way new leads come into your business—but it’s not necessarily the cause. It’s worth discovering if there are other variables that have a more direct connection to lead generation. Because we want to spend time on what’s most effective (and aligned with our strengths & abilities).

What other variables could contribute to lead generation?

  • Search engine optimization
  • High-quality lead magnet
  • Advertising
  • Referrals
  • Market trends
  • Message clarity
  • Contact process
  • Email marketing

I could keep going… But that list gives you an idea of just how complex understanding the relationships between your actions, the environment, and your prospective customers are.

Example: how we receive leads at YellowHouse.Media

First, YHM has no social media accounts. We have an email list that we don’t use. And we run no advertising. So none of those factors play into our lead generation system.

We have a number of in-depth articles about podcasting for small business owners but we don’t publish regularly. It’s more of a portfolio at this point than it is an active marketing strategy. So content marketing contributes a bit to how potential podcast hosts find us. But it doesn’t have a causal relationship to the number of leads we receive. We don’t see an increase in inquiries or even sign-ups to our defunct email list when I write a new lengthy article.

When content marketing does play a part in generating leads, it’s as a filter for some other factors like market trends, search results, and curious folks who find out about us through a podcast we produce. Our articles do include invitations to get high-quality lead magnets that can further someone’s understanding of what we do. If someone reads our articles, they’re more likely to complete our inquiry process and provide thorough answers to the questions we ask.

Content marketing contributes to the leads we receive. But it doesn’t cause them, and there’s no direct correlation between how often or what we post and the leads we receive.

The main way we actively receive leads is through referrals. Most of our clients heard about us through another client or through a colleague who knows about us. Some of our clients have come through me as, essentially, referrals (through my articles for What Works and my own podcast).

So I can draw a causal relationship between referrals and lead generation. When people are talking about us, we receive more inquiries. We know that referrals cause leads because people tell us who referred them! Of course, we don’t have a lot of control over referrals.

That leads me to the final major contributing factor to how we generate leads: message clarity. Now, I know, “message clarity” is not a lead generation channel. But it’s extremely important in terms of encouraging the right referrals, filtering the people who do find us through content marketing, and making the journey from lead to client incredibly short.

Our message is clear: we help you produce a standout podcast that grows your business by taking everything but content creation off your plate. We dig into exactly what that means from our home page to our services page to our about page and all the way through our articles.

So while message clarity isn’t necessarily sending us leads, it’s absolutely contributing to who reaches out to us and why. Having a clear message is positively correlated to receiving high-quality leads.

You can make better decisions and spend your time more effectively…

…by understanding the relationships between what’s happening your business now and the results you want in the future.

If you assume that raising your prices will cause clients to jump ship, you keep your prices low. But if you examine what really causes your clients to stick around (excellent experience, solid results, trusted relationship, etc…), you’ll probably notice that price isn’t (much of) a factor. Sure, a price increase might contribute to the decision for a client to move on. But it’s rarely the direct cause.

If you assume you’re overwhelmed because you’re managing too many customers, you’ll try to cut back on the number you’re working with. But if you examine what’s really causing you to feel overwhelmed, you might notice that it’s really a lack of boundaries, clear community policy, or messy procedures that are causing your stress.

And of course, assumptions aren’t all based in fear or mismanagement.

We make assumptions about what works, too.

Often we assume positive relationships between what we’re doing and the results we’re experiencing, too. But those assumptions don’t reflect reality in the same way negative ones don’t.

Last week, I was talking with a business owner who has been largely ignoring her email list and social media accounts. She’d been working on creative projects for her business instead. She wanted to know how to find a way to get back to those tasks without it becoming a major burden. She also told me that while she’s been away from those tasks, the business has kept on humming and sales just keep coming in.

She assumed a causal relationship between email/social media and reliable sales. This time away provided the necessary evidence to dismantle that assumption… but it was still a big leap to make! I asked her to think about how the people buying were actually finding her offers—and then do more of that. Or, rather, invest more in amplifying those actions because “more” wasn’t part of the equation at all.

Sometimes, we assume X causes Y because we’re told it should. Other times, we make the assumption because Y is “fine” and X feels comfortable or safe.

To be clear: there’s nothing wrong with not maximizing results because the results you’re getting are enough, and the way you’re running the business feels comfortable or safe.

Here’s where it goes wrong, though. When we assume a causal relationship that just isn’t there, we can often end up working harder or doing more of something that isn’t actually directly leading to results. So what starts as comfortable and safe quickly becomes exhausting and frustrating.

How we perceive cause & effect impacts the decisions we make, the action we take, and the strategy we set.

It’s so important to be curious about what’s really going on because mischaracterizing those relationships leads to poor decisions and bad strategy.

Look for the ways the system creates its own behavior. Do pay attention to the triggering events, the outside influences that bring forth one kind of behavior from the system rather than another. Sometimes those outside events can be controlled … But sometimes they can’t. And sometimes blaming or trying to control the outside influence blinds one to the easier task of increasing responsibility within the system.

— Donella Meadows, Dancing With Systems

Whether you’re making an assumption about what does work or what doesn’t work, assuming a causal relationship where there isn’t one will lead to wasting time and heading in the wrong direction.

To move away from these assumptions, stop trying to find “if this, then that” connections.

And start looking at the full systems at play.

Look for variables and components of the system you’ve never noticed before. Consider what else could be true about the way the system works. Then, you can make a decision about what to do next.

Granted, this isn’t a neat & tidy process.

…we need to confront messes without the fear of unearthing inconsistencies, questions, and opportunities for improvement. We need to be open to the variations of truth that are bound to exist.

— Abby Covert, How To Make Sense Of Any Mess

And I think there’s a real opportunity to accept that true causal relationship are hard to find. But the process of examining what’s really going on in a system to produce an intended outcome will teach you a lot about how your business works even if you can’t find simple cause & effect relationships between much of anything.

Is there an outcome you’re trying to improve? A result you’re looking to boost? Consider how you assume that the intended outcome is achieved and then ask yourself what else could be true. Look for the variables that contribute to the end result and the relationships between different actions that might be correlated but not causal.

You’ll have a clearer picture of what’s really going on—and how you can influence your results without spending time on action that doesn’t move the needle.

Host of What Works

Tara is a podcaster, small business community leader, strategist, and speaker. She’s been helping small business owners build stronger businesses for over a decade.  

Tara McMullin, What Works Weekly Newsletter

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