Measuring marketing performance is fundamental to digital marketing analytics.
In fact, our ability to measure results accurately is a distinguishing feature of digital marketing.
That is, because we can capture more data, we are expected to deliver more data analysis typically through reports.
In Econsultancy’s recent survey on analytics, respondents indicated that ‘producing reports’ was the most sought-after analytics skill in their organisation.
Some analysts, however, seem to do just that. They create large reports full of numbers, charts, and graphs.
These sorts of reports, however, are dissatisfying. They present all of the data, for sure, but they leave the reader to do the analysis.
In these cases, it seems that the analyst is just reporting, not analysing.
Instead, an analyst should edit the information they present and pay very close attention to what data is included:
- Most of the data will stay with the analyst.
- Some of the data will be shared with subject matter experts in the marketing department.
- A small portion of the data will be sent upwards to management.
Then, with the space saved by removing all of the extra data, the analyst can provide insights and recommendations to enhance the report’s value.
But what figures should go to which people?
Before we answer that…
Econsultancy runs a masterclass in Advanced data analytics training.
The boat metaphor
Knowing which figures to send to which people, however, is not necessarily obvious.
One way of determining which data to send is to think of your business as a boat on the open seas (H/T Advanced Performance Institute).
Every boat has various gauges which report constantly changing numbers.
They tell you how fast the boat is going, the amount of fuel remaining, current water depth, and many other things.
It’s not useful to record each and every number, but they are good to know in case there is a huge change.
In a business context, these numbers are metrics.
Some of the metrics tell you whether the boat is operating correctly and efficiently.
For example, the fuel gauge can tell you precisely about how much fuel you have left at any given time.
You won’t watch that number constantly, but you really know if it falls beneath a particular level. These metrics are called performance indicators (PIs).
Certain PIs, such as present location, direction, and speed, indicate whether you are on course to arrive at your destination.
These PIs are different from other PIs as they are ‘key’ to everyone on the boat.
Other PIs may tell you that your ship is in tip-top shape, but if you’re heading in the wrong direction it really doesn’t matter to anyone else.
The metrics which are of interest to everyone on board, in a business setting, are called key performance indicators (KPIs).
Performance measurement terms
Though there is some debate about these terms, it’s clear that we need to distinguish:
- Everyday numbers (metrics),
- Performance figures (PIs), and,
- Indicators which matter to the business (KPIs).
Without these distinctions, your reports may consist of a senseless combination of these numbers.
This confuses readers and reflects badly on the marketing department as a whole.
To help determine which numbers analysts should use for reporting, below are some tips for distinguishing metrics, PIs, and KPIs.
Using these will improve your reports and help you provide better insights and recommendations to your colleagues and the rest of the business.
Five tips for managing your data
1. Keep metrics to yourself
A lot of metrics in digital marketing are like the boat speed or current depth.
They are good to know and interesting for a few people, but most metrics are not useful to the business as a whole.
- Ad impressions.
- Social media fans.
- Engagement (Shares / Comments / Likes).
- Page views.
- Number of channels viewed before conversions.
A figure is a metric if it requires some detailed understanding of the system to understand it fully.
For example, someone would have to know about the dramatic decline in organic reach on social media before the number of fans was truly meaningful.
Metrics requiring detailed knowledge should only be shared rarely, if ever.
They can be useful as part of a ratio (Page views per visitor, comments per post), but on their own metrics should only be reported when they change dramatically.
2. Include PIs in departmental reports
A Performance Indicator, like the fuel gauge, is a metric which is, typically, only interesting to those who are responsible for the maintenance of the digital platforms.
For this reason, PIs are worth sharing with those working in digital and should appear in departmental reports.
Along with the figure, though, a PI should have some indication about relative performance such as making the number green if it’s up on the previous period, red if down.
Ideally, though, an analyst should provide more information about the figure than this in a report.
For example, the long-term average of a PI could be compared with the most recent monthly figure.
Alternatively, if there is seasonality in your numbers, show the PI against the same number last year.
- Total ad spend.
- Number of clicks.
- Cost per click (CPC).
- Unique visitors.
- Bounce rate.
- Conversion rate.
- Repeat visits.
In most cases, the people responsible for maintenance of the digital platforms should be able to influence PIs.
For example, if visitors are low, buy more ads. If the bounce rate is high, have a look at the how the page content relates to the ad or page title.
3. Only include KPIs in company-wide reports
PIs which give insight into the performance of the business (‘key’ PIs, or KPIs), and only such PIs, should be included in reports with a wider, company-wide circulation.
KPIs typically have three qualities:
- They are reported regularly.
- They are benchmarked against previous performance.
- They are well-understood outside of marketing.
Additionally, KPIs should be accompanied with analysis and recommendations.
Report readers will not know immediately whether the numbers are within range or not, and so the report should state so clearly.
Should the the figures be exceptional, recommendations on which action is required should accompany the KPIs.
KPIs are figures which help management understand the value of marketing in terms they understand.
Examples of KPIs include:
- Number of new customers
- Cost of new customer
- Average order value
- Repeat purchases
Note that there may be some variation in what constitutes a KPI depending on the company.
A small startup CEO may want to know customer acquisition numbers and costs whereas management at a larger company may just want to know the value of marketing-assisted sales.
Also, keep in mind that KPIs are not nearly as easy to influence as PIs.
Whereas most PIs have a simple cause-and-effect, many KPIs move for mysterious reasons and a solution may not be readily apparent.
In such cases, it’s recommended to make it clear that a change in a KPI is not yet well-understood and investigation is underway.
4. Start using customer metrics
In our 2016 Digital Trends survey, respondents indicated that ‘Optimizing the customer experience’ was the single most exciting opportunity in 2016.
However, in another survey, Measurement and Analytics (2016), less than half (42%) included ‘Improving customer retention / loyalty’ in the top three growth/profit-related requirements for analytics.
This is disappointing, but not surprising.
Many businesses are keen to talk about improving customer experience, but relatively few use analytics to make it happen.
In addition to finding the PIs and the KPIs to run the business-as-usual side of your marketing, including customer-based metrics is a good way of getting ahead of the competition and planning for the future.
Examples of customer metrics are:
- Customer acquisition cost (CAC).
- Customer lifetime value (CLV).
- Net Promoter Score (NPS).
- Satisfaction levels.
Also, marketers should include more customer-based ad feedback.
Instead of just measuring effectiveness using cost-per-click, more advanced organisations can conduct surveys to see how well the ads performed.
Marketing effectiveness metrics include:
- Ad recall.
- Brand lift.
- Message association.
Facebook and Google (via YouTube) are innovators with customer-based metrics and are providing some of the above figures to selected advertisers.
5. Be careful withs KPI frameworks
When building an analytics programme, marketers are encouraged to use an analytics framework to hold all of their KPIs together.
In his book Cult of Analytics, Steve Jackson details the REAN framework which covers the Reach, Engage, Activate, Nuture goals of most marketing departments.
Frameworks are indeed helpful for covering PIs throughout the customer journey.
Following one of the models will make sure everyone in marketing is using the same set of PIs and understands how social, web, ecommerce, and CRM are interconnected.
Trying to come up with a KPI for each section, however, may be difficult.
Most people in a business do not understand marketing PIs and are likely too busy to learn about them.
Marketing metrics, however, seem to be intuitive, though, and so including PIs in widely-distributed reports may give executives a false sense of understanding.
For this reason, chose only KPIs which are relevant to the business and avoid metrics which are there just to fill an analytics framework.
Ideal vs. reality
Presented above is the ideal scenario. Reports should be short and to the point.
Insights provided in simple sentences along with recommendations which would be considered carefully by management.
Reality, however, is often very different.
Immediate bosses may be interested in the detail of the marketing campaigns and even senior executives may want to know how many ‘fans’ the company has.
These scenarios are unavoidable and so there may only be limited opportunities for providing concise reports which focus only on KPIs.
Such reports should, however, be the goal of the digital marketing analyst who aims to move beyond reporting and toward providing insights and recommendations which provide real value to the business.