Marketing Metrics

Workshop at Creativity & Convergence Conference on Nov 30, 2015

On Nov 30, 2015 Jeff Nelson and Jake Blumes will be facilitating a workshop on using data to help make better marketing investment decisions at the Creativity & Convergence Conference in Calgary, AB.

The conference is hosted and managed by Alberta Council of Technologies. You can find out more details about the conference and register on this page: http://abctech.ca/.

Our presentation will be on Driving Up Revenue - Using Marketing Data and ROMI.

We will cover the following topics:

Many companies are still basing marketing decisions on what they did last year or what is getting attention on news feeds. Only a few companies are make marketing decisions based on data and a metric called Return on Marketing Investment (ROMI). In this session, we will present a model for determining the ROMI for your company and for each of the marketing channels that you are using. We will show you how to collect measures, calculate metrics and select KPIs for marketing, advertising and sales. To illustrate these concepts we will present a case study of a multi-million dollar company that tracks the marketing campaign for every sale generated. We will summarize with a list of 17 essential marketing metrics for customer acquisition. 

This workshop is for business owners and marketers who are involved in marketing, advertising, communications, public relations and promotion.

 

Jeff Nelson is a digital marketing consultant with extensive experience in presenting, facilitation and teaching. His focus for the last few years has been with helping companies understand the return that they are obtaining for the investments they are making in various marketing channels. Return in this case is revenue that the specific metric is Return on Marketing Investment (ROMI). His clients for in this specific area of consulting include: H & R Block, Eye Recommend, Office Gourmet Catering, SAIT Research and Precision Hyundai

Jake Blumes is an accomplished marketer with deep knowledge and expertise in traditional mass media techniques from Direct Mail and Telemarketing lead generation campaigns to Newspaper and Radio advertising. Jake is an advertising, marketing and research professional in Calgary, Alberta and has been on contract with Grants International Inc. since 2005. Prior to that Jake has been in Marketing and Operations with Bell, a Research Consultant with Service Intelligence, a Research Director with Environics and a Director of Market Research with The Faneuil Group.

We hope you can join us at the conference and for our workshop. To register please go this page: http://abctech.ca/.

17 Essential Marketing Metrics for Customer Acquisition

One of the difficulties when developing a customer acquisition strategy is the overwhelming number and often confusing definitions of marketing metrics that can be used to measure success.

In this post, I will review a list of 17 measures and metrics that are essential for tracking the success of any marketing campaign focusing on the acquisition of new customers. As a reminder from a previous post, our definition of a "measure" is a number that is derived from taking a measurement and a "metric" is a calculation between two measures. 

In the marketing metrics model that Joanne O'Connell and I developed, we differentiate between "acquisition" and "retention". Acquisition involves marketing and advertising activities that find new customers. Retention, in contrast, involves marketing activities that keep existing customers. It is our experience that many companies and most marketers know this difference but often they don't separate marketing metrics into these two categories. We think the distinction is important. Of course, with most marketing campaigns there is overlap but for simplicity we will ignore this aspect.

In this post, we will focus on the Customer Acquisition Funnel. A simple image search on Google gives hundreds of results for "marketing funnel". All of them have value and are trying to make a point. But for the measures and the metrics that we were looking to develop we couldn't find a funnel that illustrated the concepts that we wanted to capture. So we made our own marketing funnel. Obviously, this funnel will need to be modified to suit the specifics of your company.

You can read about our Acquisition Funnel in more detail in this post. Our funnel is a combination of a marketing funnel (Impressions and Visits) and a sales funnel (Prospects, Offers and Outcomes).

This funnel gives us our first 5 measures. The number of Impressions, Visits, Prospects, Offers and Outcomes. If you recall from a previous post, our definition of an Outcome is: "The desired behavior of the members of the target market influenced by the marketing investment and effort."  

The first 4 metrics (calculations from measures) are related to the conversions from one level of the funnel to the next. Each of the conversions is explained below. 

Visit Rate
This is the number of visitors that come to a location, website or social media property from one of the marketing channels. Using language made popular by Google AdWords this would be the Click Through Rate (CTR). The calculation is the ratio of Visits to Impressions. In other words, if there was 100,000 impressions and 1,000 people clicked through to a website, then the Visit Rate or CTR is 1%. 

Prospect Rate
The Prospect (or Lead) Rate is the number of Prospects that are developed as a result of the Visits to the website (or event or physical location). For example, if 100 people expressed an interested in a product from the 1,000 visits, then the Lead Rate is 10%. Note that in some situations like an ecommerce website where there may not be any Prospects. Our requirement for a Prospect is that we need to have enough information from them to be able to communicate with them. We need an email address, Twitter handle, LinkedIn connection or a phone number. If a company doesn't have any Prospects, then the solution is drop this level of the funnel and just use 4 levels in the Customer Acquisition Funnel.

Offer Rate
If we divide the number of Offers by the number of Prospects we have the Offer Rate. In our example, of 100 Prospects, we might persuade 30 to accept an Offer. In this case, the Offer Rate is 30%. As mentioned earlier, an Offer has to include a price. A web page with a price can be an "Offer". There are some unique situations where an Offer can be made without a true Prospect. An advertisement to a consumer target market that includes a price would be an example. In this case, there is not a Prospect as per our definition.

One unique version of an Offer is a Test Drive. This is actually a “Bonus Metric” and not part of the essential 17 metrics because not all companies can offer a “test drive”. There are a variety of things that can be considered for a "test drive" including test driving a car, downloading software as a trial, tasting a sample of food or liquor, or getting a tiny bottle of new shampoo in your mailbox. To calculate this metric you need to know the number of "test drives" or samples given and the number of Prospects. If we have 100 Prospects and 40 take a Test Drive, then the Test Drive rate is 40%. We can also calculate a second bonus metric by calculating the Test Drive Conversion rate. If 30 of the 40 drivers actually buy the product as a result of the experience then the conversion rate is 75%.

Take Rate
Take Rate is the number of Sales as a ratio of the number of Offers. This is often called “The Conversion Rate” but we are avoiding this nomenclature because of the confusion in many different systems, most notably Google AdWords.

An example of the Take Rate would be if we made 30 Offers and 15 were accepted then the Take Rate is 50%. For some companies this would be exceptional, yet for other companies this rate would be dismal and a note for concern.

The next series of metrics are the average cost for each level of the Customer Acquisition Funnel. But in order to calculate these metrics we need to add a sixth Measure: the cost of marketing, or what we like to call Marketing Investment. This is specifically the investment made in marketing over the time period that we are reviewing (day, week, month, quarter or year). Although marketing and advertising show up on an income statement as an "expense", marketing and advertising can be considered an "investment" because shareholders and managers expected that there will be a "return" as a result of the expenditure.

If we know the cost (i.e. the Investment) related to marketing, then we can calculate the average cost for each level of the Funnel.

For each of these metrics the calculation is to divide the cost by the number of Impressions, Visits... or Sales. In theory, these ratios are easy to calculate. However, in our experience, the difficulty is in getting accurate measures (data) out of the various systems and databases in a company.

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At this point we have 6 measures and 9 metrics for a total of 15; 2 more to go.

The ultimate marketing metric that we are aiming for is Return On Marketing Investment (ROMI). See my previous post on ROI vs ROMI for more detail. However, in order to calculate ROMI we need one final measure, Revenue. Once we have that we can calculate ROMI as (Revenue - Marketing Investment) / Marketing Investment. 

In total we now have 7 measures and 10 metrics for a total of 17 essential marketing measures and metrics for customer acquisition. We can illustrate these as a diagram:

or as a table:

The key to collecting the 17 Essential Marketing Metrics for Customer Acquisition is to have a system in place. As outlined at the beginning of this post, part of the system will be based on the structure of your Customer Acquisition Funnel. Once you have defined the levels of your funnel you can start collecting the measures for each level. If you are using all 5 levels of the funnel, you will have the first 5 measures. Calculating the first 4 metrics for conversions should be easy.

Next you will be able to calculate the 5 metrics related to the average cost for each level of your customer acquisition funnel. But these calculations require you to know how much you invested in marketing. Once you have that these metrics should be simple.

The final measure, revenue, is required to calculate ROMI. Most companies know this measure but you may have to segment new incremental revenue from total revenue to determine the true return on marketing investment for newly acquired customers.

The 17 essential marketing metrics for customer acquisition as presented will give managers an idea of ROMI. An alternative approach is to segment the measures and metrics by marketing channel. Obviously, this adds a level of complexity but the value is tremendous. Give it a try or give us a call and we will help you out.

What is Your Marketing/Sales Funnel?

As mentioned in previous posts, Joanne O'Connell and I ventured into the field of marketing metrics a few years ago, only to find that there are so many funnels for marketing and sales that it made our heads spin. 

A simple image search on Google will give you hundreds of results. All of them have value and are trying to make a point. But for the metrics that we were looking to develop we couldn't find a funnel that illustrated the concepts that we wanted to capture. So we made our own marketing funnel.

Our marketing funnel, or was we like to call it "Customer Acquisition Funnel", has 5 levels starting with Impressions and ending with Outcomes (see earlier post).

First, let's look at each level of the funnel and then examine some of the metrics that can be developed using the measures at each level.

Impressions 
Impressions is the number of times an advertisement or other image that represents the company is shown to a viewer For online (or digital) marketing, an “impression” usually means the number times the ad was loaded. For traditional advertising, “impression” usually means the number of times the ad was shown to members of the target group. Note: “Impressions” means the audience was exposed to the ad; it does not imply that members of the audience saw the ad.

Visits 
Visits is the number of times contact was established. For websites, a visit means a person came to a page on a website. For a trade show, a “visit” means the number of persons stopping at a booth. For a retail outlet, “visit” means actual visits to a store location.

Prospects 
Prospects is the number of times that interest is expressed and contact information is recorded. For a website, a prospect may come from a sign-up for a newsletter. For a trade show, a prospect may sign up to request a future call from a sales rep. For a consulting firm, a prospect may request a white paper. 

Offers 
Offers is the number of times that a proposal, estimate or price is given. For an e-commerce website, an offer can be a product page that has a price listed. For a consulting firm, a proposal would be the offer given to the prospective client.

Outcomes 
Outcomes is the number of times the Prospects accept the Offers presented. The Ultimate Outcome of a business is the behavior that you want members of the target market to do. For most commercial enterprises, this is usually to purchase a product or service. For non-profit enterprises, the outcome might be attendance to an event or donating to a cause. Click here for previous post on Outcomes

Outcomes by Funnel Level
The first area that we can look at is what measures are being achieved by each level of the funnel.

One method is to sum the total of Impressions (or Visits...) for each marketing channel such as pay-per-click, Organic Search, Banner ads, eNewsletters, radio, out-of-home, etc. Or you can look at each channel separately.

Once you have the measures collected you can use a ratio between each level to calculate the rate of transfer. All of these are expresses as a percentage (%).

Using language made popular by Google AdWords we first calculate the Click Through Rate (CTR). This world be the percentage (ratio) of Visits to Impressions. In other words, if there was 100,000 impressions and 1,000 clicked through to the website, then the CTR is 1%.

The Conversion Rate is the number of Prospects that are developed as a result of the Visits to the website (or event or physical location). For example, if 100 people expressed an interested in a product from the 1,000 visits, then the Conversion Rate is 10%. Note that in some situations like an ecommerce website, there may not be any Prospects. Our requirement for a Prospect is that we need to have enough information from them to be able to communicate with them. We need an email address, Twitter handle, connection on LinkedIn or a phone number. If a company doesn't have any Prospects, then the solution is drop this level of the funnel and just use 4 levels.

If we divide the number of Offers by the number of Prospects we have the Offer Rate. In our example, of 100 Prospects, we might persuade 30 to accept an Offer. In this case, the Offer Rate is 30%. As mentioned earlier, an Offer has to include a price. A web page with a price can be an "offer". There are some situations where an offer can be made without a true Prospect. An advertisement to a consumer target market that includes a price would be an example. In this case, there is not Prospect as per our definition.

Take Rate is the number of Sales as a ratio of the number of Offers. If we made 30 Offers and 15 were accepted then the Take Rate is 50%. For some companies this would be exceptional, yet for other companies this rate would be dismal and a note for concern.

The final metric in this section is Test Drive. There are a variety of things that can be considered a "test drive" including test driving a car, downloading a software trial, tasting a sample of liquor, or getting a tiny bottle of new shampoo in your mail box. To calculate this metric you need to know the number of "test drives" or samples given and the number of sales that resulted from the experience.

If we know all the costs related to marketing, we can calculate the Cost per Funnel Level.

For each of these metrics you divide the cost by the number of Impressions, Visits... or Offers. In theory these ratios are easy to calculate. Typically, the difficulty is getting the measures (data) out of the various data bases in a company. We can look at over coming this barrier in a future post.

In summary, for this post we have examined the Customer Acquisition Funnel that Joanne and I developed. And we looked are a variety of conversion metrics and cost per... metrics.

What marketing/sales funnel are you using?

 

Quick Measures for Brand Awareness

One of the concepts that Joanne O'Connell and I teach in our Marketing Metrics course at the University of Calgary is Leading Indicators.

The box above is a screen capture from a section of our Mx3 Marketing Metrics Handbook. The full page is called Acquisition Measures and Metrics. This box comes from the top left corner under the Measures section and is titled, Leading Indicators.

The idea behind Leading Indicators is to identify a variety of measures that happen at some point before a sale is made. In the olden days of traditional advertising and marketing it was fairly onerous to measure brand awareness or brand strength. Typically, a market researcher would have to conduct a survey. The survey could be in person interviews or sent out by mail.

Now-a-days, in an online digital world, measuring brand strength is significantly easier. I'll give you some examples of websites that I use on a regular basis to measure brand awareness for our companies and our clients.

 

1. www.Alexa.com
Alexa, now owned by Amazon, has been around forever or at least is seems that way. The site is easy to use: all you do is paste in the URL of a website a company that you are researching. One of our website is www.SEO-Browser.com. It has a Global Rank of 40,750. This score is like a golf score - the lower the better. The score means that of all the websites that Alexa knows, this one is ranked, based on visitor traffic, to be 40,750th down on the list. Facebook, Google and YouTube are the top 3 ranked sites.

From a branding point of view the lower your rank the better.

 

2. www.SimilarWeb.com
SimilarWeb is .... similar. It has a Global Rank but when compared to Alexa the interface is wonderful - I prefer it to Alexa. If we enter SEO-Browser.com the Global Rank is 211,315. This is less than (lower down) the rank as measured by Alexa. 

And the information from a marketer's perspective is fantastic. Just scroll down the page and you will see:
- Monthly Visits
- Engagement
- Traffic Sources
- Geography
- Referring Sites
- Search Traffic
- Social
- Display Advertising
- Audience Interests
- And more

Which brings me to the point of how to use ranking scores like this. There are 2 ways:
a) Compared to competitors
b) Compared to historical data captured on a yearly or quarterly basis

From a branding point of view, if your website has a better score than your competitors then your brand is stronger. It's that simple.

 

3. www.OpenSiteExplorer.org
10 years ago Yahoo had a tool called SiteExplorer. With this tool you could enter a company's domain name and find out what websites were linking to that domain. It was a great tool but Yahoo, in its finite wisdom, stopped supporting it and it faded from view. Moz (formerly SEOMoz) capitalized on the vacuum and created a similar (and better) tool.

From a branding point of view, more links that are pointing to your website is better. If you have more links pointing from other websites to your site then your brand awareness is stronger.

 

4. www.PRChecker.info

About 7 years ago everyone in our industry was talking about Google PageRank. I would go to conferences and people would ask me the following questions:
- What is your name?
- Who do you work for?
- What is the PageRank of your website?

It was ridiculous. A website with a score of 7 or 8 (on a 10 point scale) is fantastic but you have to be a university or a very large corporation to have a PR that is that high. And the scale is exponential. The home page of most companies will have a PR of 2,3 or maybe 4. SEO-Browser.com has 15,000 visitors per month. It has a PR of 4. 

Regardless, from a branding point of view, the higher the PR the better. 

 

5. Marketing.Grader.com

Marketing Grader was developed by Hubspot. It is an excellent tool but it is different from some of the other brand measurement sites. This took incorporates website functionality to give a percentage score. 

Using this tool, SEO-Browser.com obtains a score of 53%. This is okay but lots of room for improvement. According to the tool, we are doing well with SEO and Social Media but not so well with Blogging, mobility and lead generation. 

Typically we use this tool to track the performance of a website rather than as a measure for brand awareness. We still, however, compare our target site to competitors to see who is doing better at what function. We have been using this tool for years - it is excellent.

In summary, figuring out the the awareness and strength of a brand is much easier than it has been in the past. There are many other ways to measure brand awareness but these measures are a good place to start.

Outcomes and Targets

For years, when talking about business and marketing, I have used the terminology of goals and objectives. But I'm changing. I am now starting to use the words "outcomes" and "targets". There are a few reasons for this shift.

The first reason for change is that I can't seem to figure out the difference between a "goal" and an "objective". I must have missed that class in MBA school. I know all about SMART Objectives and DUMB Goals. I have used these acronyms in our company and with clients. And they work. Except that I get confused.

Avinash Kaushik gives his take on definitions of Objectives and Goals. But I'm still confused because I have typically held "goals" as lofty and general and used "objectives" to be more specific (using the SMART formula). Avinash inverts this. And I like Avinash. He has great ideas and he knows what he is doing. I end up having to stand on my head to understand his logic. And I have never been able to stand on my head for long.

The second reason is that I like the perspective of an Outcome. The perspective is from the marketer's point of view and what they want the buyers to do. It is behavioral. This is what I have been learning over the last couple of years from the master, my metrics business partner, Joanne O'Connell. Let me describe her concept of an "Outcome".

She defines an Outcome as: The desired behavior of the members of the target market influenced by the marketing investment and effort. In other words, describe what action you want your target market to do. This is very different from "increase revenue", "improve satisfaction" or "increase quality".

I love her definition because it focuses on behavior - specifically the behavior that you want a person in your target market to do. In the past, I would express an objective (or a goal; see the confusion?) along the lines of, "Increase annual revenue by 20% by the end of the year." This fits the structure of a SMART objective" but it doesn't really say how a member of the target market is suppose to respond to a specific marketing campaign.

An "outcome" on the other hand would describe the behavior that you want someone to do. An example for an online business selling dog biscuits would be:

In this example, we know the target market - individual dog owners. Not retail stores. Not dog walkers. Not kennels.

We also know the behavior that we want people to do - order online. Not visiting a retail store. Not phoning. Not faxing (who remembers facsimiles?).

And we know what we want the buyer to buy - dog biscuits. Not toys. Not leashes. Not food.

This is a simple example. The structure of an Ultimate Outcome and underlying Outcomes can get more complex but we need to start with an Outcome that is simple and clear.

Another way to look at an Outcome is that it is a sentence (remember grade 9). There is a subject - Individual dog owners. And there is a predicate - purchase (action) dog biscuits.

Obviously, most Outcomes are sales which lead to revenue. An Outcome, however, is not always a sale. Some examples include voting for a candidate, booking an appointment, participants at an event, donations or obtaining résumés.

Once we have our Ultimate Outcome and supporting Outcomes we can set Targets for each. In our Marketing Metrics Dashboard model, we set KPIs first. These are the measures and metrics that are "key" to performance or "critical" for success. Next we identify the KPIs and set targets for each. In our model, a Target is a desired minimum or maximum figure for the selected KPIs, to be accomplished by a certain date. We like to show the targets (red line) on the KPI charts.

As I mentioned, I like this language and Joanne's definitions for an Outcome. Together we added the concept of selecting KPIs and Targets (an obvious addition). This structure fits with the way I think and the way that I interact with clients. We are finding that our clients love this approach. It is new and refreshing. Clear and focused.