|Essential Metrics for Online Marketers|
|Wednesday, 19 July 2006|
Topic: Essential Metrics for Online Marketers
How to create a simple metrics dashboard to track what really matters.
You can listen to a recording of this clinic here:
Many marketers feel overwhelmed by the volume of data generated by all the reporting programs they have in place at different levels of the marketing process.
Do you need all those figures? And how do you identify and analyze the metrics that do matter?
In this brief we cut through the clutter and show you how to:
SECTION 1 – The key to identifying and tracking the most important metrics is to understand your own business model.
Web analytics reporting tools track and report an increasing number of metrics. In fact, some services will give you a choice of dozens or even hundreds of different reports.
The danger here is that you can become overwhelmed by the sheer volume of data.
Worse still, one can base decisions on data that is not a true indicator of how well you are achieving your core objectives.
What is important is to determine WHICH metrics you really need in order to make smart marketing decisions.
The key is not to be distracted by metrics that simply don't matter to your business.
Step 1: Establish a baseline by calculating both the cost and yield of each desired action on your site
Calculating cost and yield per interaction on your site can be achieved very simply by answering the following questions:
This can be expressed with a short formula:
YPx-CPx then gives you a revenue figure for each visit to your site.
X is the variable, representing the desired interaction, which might simply be a visit, or it might be a sale, a referral, a phone call or a subscription.
To calculate the cost per interaction you need to list all the difference sources of your traffic, as each source will have different costs associated with it.
These traffic sources might include:
It is important to remember that although some sources of traffic may not appear to have a hard cost in terms of price per click or exposure, they will likely cost you in time spent by your staff or in fees from outside suppliers. This will certainly be the case for search engine optimization, for example.
As another example, if there is an email capture form on your site, whatever you are offering must be valuable enough to convince visitors to give you their email address.
If this is turned into a mathematical equation, then X is whatever the website is offering. X must be more valuable to the customer than their email address or the privacy of their email address. If not, then the site does not have a strong enough value proposition.
Step 2: Identify those metrics that are most likely to impact both the cost and yield of your visitors.
Once you have a clear idea of your cost and yield per desired interaction, you need to start tracking those metrics which can help you identify where improvements can be made.
For instance, if you track from the source of traffic all the way through to sales, you will be able to identify the traffic sources that gives you the highest ROI and look for ways to get more of the same quality of traffic.
The exact metrics you focus on will vary according to your business. A site selling hard goods may find their key metrics are different from a company selling subscriptions, for instance.
When you cut through all the confusion, there are really only four elements you can measure:
SECTION 2 – How to avoid collection pitfalls
The first potential problem to be aware of when collecting metrics is what we refer to as “Collection Pitfalls”.
These pitfalls occur when the data collection is unreliable for some reason. If you use these figures in preparing future marketing plans, your decisions may be flawed.
Here are a few areas where you might experience collection pitfalls
* With CPM advertising you will often find a disparity between the click-through figures provided by the advertiser and those you find in your own log files or web site analytics tool.
There have been some changes at Yahoo!, but you still may not be able to pull the product, shipping, and order amounts from Yahoo! shopping carts like you can with other solutions, because you can not implement your own coding on their cart pages to capture that information.
* If you run PPC campaigns you may see differences between the PPC engine's click-through reporting and your own site stats.
Why? There are several reasons:
Recently we conducted a brief test that enabled us to track visits through both the tools provided by the PPC engines and an affiliate tracking program. The test was brief and the figures are small. However, this does serve to illustrate how different reporting tools can give you results which vary significantly.
What You Need To UNDERSTAND: According to the My Affiliate Program tracking system, our number of visitors was over 20% higher than reported by the PPC engines.
KEY POINT: Relying on inaccurate metrics can give you a very misleading picture of the performance of your site and adversely effect future marketing decisions.
In a second test conducted for a separate partner we came very close to making significant web site changes based on a metrics report which turned out to contain serious inaccuracies.
We were using a third-party testing platform and relying on the data they provided. Due to an instrumentation error, the figures we were looking at were incorrect.
You can see the difference between the reported figures and the actual figures we compiled from the raw data files.
What You Need To UNDERSTAND: Had we relied on the third-party metrics alone, we would have made some marketing decisions based on data that off by up to 900%.
To ensure you are seeing accurate metrics, follow these simple guidelines:
KEY POINT: In spite of enormous advances in all areas of online technology, at this time there is no single service, product or solution that can be relied upon to give you totally reliable metrics. By using two or three different solutions, you can compare results and at least identify where you have problems.
SECTION 3 – Use our Essential Metrics Dashboard to understand where you have been, where you are now and how to achieve your goals for the future.
Perhaps surprisingly, the most valuable tool with which to track these metrics is not something you have to pay hundreds or even thousands of dollars for.
First, use two or more reporting tools to gather the raw data. (As we mentioned earlier, the use of two independent sources of metrics allows you to identify areas of possible inaccuracy in each.)
Once you have the raw figures you can then use a simple Excel sheet with which to track your performance.
You can download our Essential Metrics Excel template.
As you will see, we have provided input examples to show you how it works.
Based on the metrics described above, the tool records CPx and YPx in three areas:
By using past performance as a baseline and current performance as a starting point, you will be able to set reasonable goals for future CPx and YPx.
The entire purpose of the Essential Metrics Tool is to free you from the overwhelming clutter of web analytics and log file data, and give you a clear picture of the metrics that really matter to the future of your business.
The key metrics will then help you identify where the greatest opportunities for improvement lie.
And how do you achieve those improvements? By testing.
As we like to say at Marketing Experiments, online testing IS online marketing.
The first question to ask about any home page or landing page is this: What is this page's primary objective?
If you have a clear answer to that question you can then look at every element on your existing version of the page and ask: Does this element directly contribute to achieving the page's objective?
Very often pages have too many competing objectives and elements, which confuse the reader and disturb the natural eye-path.
If you have decided on your primary objective, then build a sequential, vertical communications path from the top of your center column downwards. The main, center column is the most effective space in which to communicate your unique value proposition and lead the reader forward to taking an action.
Finally, be clear about what you are asking your reader to do. Don't confuse people with too many choices or variations on one choice. Keep your call-to-action simple, and make it compelling.
RELATED MEC REPORTS:
As part of our research, we have prepared a review of the best Internet resources on this topic.
These sites were rated for usefulness and clarity, but alas, the rating is purely subjective.
* = Decent | ** = Good | *** = Excellent | **** = Indispensable
Editor — Flint McGlaughlin
Writers — Nick Usborne
Contributors — Jimmy Ellis
HTML Designer — Cliff Rainer