marketing metrics handbook - · pdf file8/8/2014 · marketing metrics handbook...

Marketing Metrics Handbook

August 8, 2014 of 18

Marketing Metrics Handbook (Simplified)

Developed by Joanne O’Connell and Jeff Nelson

August 8, 2014

Copyright 2014 All rights reserved



Contents

Overview .................................................................... 3

Perspective ................................................................ 4

Marketing Metrics Model ............................................ 5

Marketing Metrics Model Concepts ................................................. 6

Acquisition Funnel ...................................................... 7

Acquisition Funnel Concepts .......................................................... 8

Acquisition Measures and Metrics .............................. 9

Acquisition Measures and Metrics Concepts ................................ 10

Retention Diamond .................................................. 11

Retention Diamond Concepts ....................................................... 12

Retention Measures and Metrics .............................. 13

Retention Measures and Metrics Concepts .................................. 14

Glossary ................................................................... 15

Additional Readings ................................................. 18



OVERVIEW This Marketing Metrics Handbook presents the elements of the Marketing Metrics Model. It uses concepts and language that we find valuable to most marketing situations. We believe that marketing excels when a marketer’s good instincts blend with good marketing data. We have developed a system to organize data so marketers can identify which marketing approaches are working better than others. The system can diagnose problems and help to develop solutions. The Marketing Metrics Model:

Identifies the marketing channels used by the company to reach customers

Obtains measures of data points within the marketing channels

Calculates metrics from the measures, to show the extent of marketing success

Presents the key performance indicators (KPIs) in easy-to-understand graphic charts



PERSPECTIVE In developing a functioning marketing metrics model, we have learned that:

Marketing metrics analysis is part art and part science

Marketing metrics analysis looks down the road - not only in the rear-view mirror

Metrics are only signs on a guidepost - the marketer still needs to navigate

The data are never perfect

Some data, properly managed, are better than no data

The 80-20 rule applies. Measure 80% and the remaining 20% often takes care of itself



MARKETING METRICS MODEL The Marketing Metrics Model illustrated below show two parallel processes.

Marketing Actions undertaken by the marketer – salmon blocks, left side

Marketing Dashboard developed to support the Marketing Actions – blue blocks, right

side

The Marketing Metrics Model can be adapted to:

One or more products or product lines

One or more marketing channels

One or more geographic locations

One or more customer segments

For a marketing system with multiple products, channels, locations or segments, each is treated as a separate entity when independent data are available. When independent data are not available, the measures and metrics are combined in the most useful form.



Marketing Metrics Model Concepts

Marketing

Strategy

Strategy is a broad term. For the Marketing Metrics Model, strategy involves choosing marketing channels, or the ways in which the marketer communicates with the market. For example, the channels could include:

a website, further subdivided into SEO (Search Engine Optimization) or AdWords (paid advertising),

social media (interactive digital media including Facebook, Twitter and others),

traditional media (including print, radio and TV), and

specific-to-company channels such as trade shows, direct sales calls, open houses, and the like.

Investment

The resources required to carry out the marketing activities within the selected marketing channels. This will include direct costs (e.g. Google AdWords) and the staff’s time to manage the activity.

Activity A marketing activity uses a specific marketing channel to communicate with the market. Many marketing activities are on-going but some are time-limited.

Outcomes The outcomes are a result of the marketing activities. Examples include revenue, net income, products sold, visits to a website, donations, Gross Rating Points or people attending an event.

Dashboard

Measures

Measures are just the data, no more – the result of quantifying.

Metrics Metrics are calculated from measures and are developed to show the extent of marketing performance and business success.

KPIs (Key Performance Indicators)

KPIs are a subset of measures or metrics which are mission-critical to success of the organization. They may be represented visually in charts, or shown with trend lines to indicate direction of change, or positioned against targets.



ACQUISITION FUNNEL The Acquisition Funnel is a key part of the Marketing Metrics Model. The Funnel can be used to describe the company’s overall marketing as well as marketing by channel. In the commercial world, the word “Outcome” in the bottom tier of the Funnel would often be replaced by “Sales”. We prefer to use “Outcome”, a more generic term which we understand as the ultimate behavior which the marketer wishes to bring about in members of the target market. For a commercial enterprise, this is indeed most often a “sale”. However, for a not-for-profit organization, the ultimate behavior may be something other than a sale. For example, a health program may wish to have young children brought in for immunization, or a charity may wish to solicit donations. These are not “sales” as usually understood but are clearly the intended “outcomes” of the marketing activity. The Funnel combines traditional Marketing concepts with a classic “Outcome/Sales” funnel.

Impressions and Visits are the marketing steps that bring future customers within the reach of the client organization,

Prospects, Offers and Outcomes are the classic steps by which closing is accomplished and a customer is created.

Some companies will modify the 5-level approach to suit the nature of their company.



Acquisition Funnel Concepts

Level of the Funnel

Definition Explanation

Impressions 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 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 Number of times that interest is expressed and contact information is recorded

For a website, may be a conversion based on signup for a newsletter For a trade show, may sign up to request a future call from a sales rep For a consulting firm, may request a white paper

Offers Number of times that a proposal or price is given

For an e-commerce website, an order is entered and priced For a consulting firm, a proposal is given

Outcome The ultimate outcome of the business, namely - what you want members of the target market to do

For a commercial enterprise, this is usually purchase of a product or service. For non-profit enterprises, the outcome might be attendance at an event, or lobbying government, or donating to a cause



ACQUISITION MEASURES AND METRICS



Acquisition Measures and Metrics Concepts

MEASURES Quantitative measures, data only

Leading Indicators Predictors of success in obtaining customers

Outcomes by Funnel Level Numbers at each level of the Marketing Acquisition Funnel

Financial by Channel Revenues and costs by marketing channel

METRICS Calculations, based on measures, indicating extent of success

Average Conversion Rates Ratios that show numbers passing through the filter of the Marketing Acquisition Funnel down to the next level

Marketing Cost per Funnel Level Ratios that show costs per level of the Marketing Acquisition Funnel, for each marketing channel

Financial by Channel Ratios that show return for total investment and marketing investment



RETENTION DIAMOND The Retention Diamond is a second key part of the Marketing Metrics Model. It represents the composition of the organization’s customer base. It is the simplest way we have found to capture key information about customer retention. It subdivides current customers into three main groups, namely,

First time

Occasional

Loyal As well, it captures information about,

Lapsed customers For some companies, the diamond shape is not a reality but a target. Example, a failing company may have more lapsed customers than first-timers. The diamond shape is distorted indicating the distress of the company. Some companies will modify the 4-level approach to suit the nature of their company.



Retention Diamond Concepts

Level of the Diamond

General Definition (the exact definition will vary by organization)

First Time A new customer

Occasional A relatively long-term but not a steady customer

Loyal A relatively long-term and a steady customer

Lapsed A former customer, no longer using the product or service



RETENTION MEASURES AND METRICS



Retention Measures and Metrics Concepts

MEASURES Keeping existing clients

Leading Indicators Predictors of success in keeping clients

Outcomes by Customer Type Numbers that reflect stability of client base according to the rate of customers’ arriving and leaving

Financial Revenues and Costs associated with ongoing customers

METRICS Calculations, based on measures, indicating extent of success

Retention Ratios Ratios that relate different levels of the Retention Diamond

Churn The rate of retention or loss of customers

Marketing Cost per Type Ratios that show costs per level of the Retention Diamond

Metrics by Customer Type Sales and revenue numbers by levels of the Retention Diamond

Financial Ratios that show return for total investment and marketing investment



GLOSSARY

Measure

To quantify something; the data

Metric

Calculations, based on measures, indicating extent of success

Normally, metrics are associated with one or both of two qualities: a) They track over time

b) They show proportion to something else

Ultimate Outcome

The desired behavior of the members of the target market influenced by the marketing investment and effort

The ultimate outcome is not always a sale. Some examples include buying a product, voting for a candidate, booking an appointment, or obtaining a résumé

Conversions

Some people use the language of “micro-conversions” and “macro-conversions” to classify indicators and outcomes.

The definition of a conversion depends on the situation. A “macro-conversion” is generally an online sale or an online sales prospect. A “micro-conversions” is some other measurable behavior by a visitor such as signing up for a newsletter, Liking your Facebook page, or watching a video. Many of these “micro-conversions” are prospects.

KPI

Key Performance Indicator

A measure or a metric deemed by the marketer to represent critical success or failure for an outcome

Dashboard

The Dashboard is a collection of data and information including Measures, Metrics and Charts.

It can be delivered as an Excel spreadsheet or from more sophisticated visual platforms.

Target

A desirable minimum or maximum number for a measure or metric to be accomplished by a certain date

Marketing Channels

The various ways in which the marketer can communicate with the market

Channels can be of many types: o Traditional – TV, radio, out of home, newspaper, etc

o Online – SEO, PPC, banner ads, email, blogging

o Mobile – ads, apps, SMS

o Word of Mouth: referrals, drop-ins, recommendations

Market

The people whom a marketer wishes to influence

For simplicity, we assume that the “market” is people, but it could be companies or some other entity



Acquisition

Attracting and creating customers Retention

Keeping customers Consumer Buying Path

Steps that consumers often take before arriving at the ultimate outcome

For many products this may be: o Need Recognition & Problem Awareness

o Information Search

o Evaluation of Alternatives (e.g., Test Drive)

o Purchase

o Post-Purchase Evaluation

Reach, Frequency and Impressions

The three foundational media measurement concepts: o Reach - The number of people in the target group exposed to the message o Average Frequency - The average number of times that people in the target group are

exposed to the message within a time period (usually one week) o Impressions - The number of times the message was shown to the target market group o Impressions are based on Reach x Frequency, that is – the numbers of persons exposed to

the message x the average frequency of exposure is the numbers of impressions

Brand and Transactional Marketing

Two types of marketing commonly practiced by companies o Brand marketing has the intent of strengthening brands of products or services by making

promises, reducing risk and conveying symbolic value o Transactional marketing has the intent of enticing a short-term sale

Unaided and Aided Survey Questions

Characterize the type of answer requested of the respondent o Unaided questions ask the respondent to reply suggest the answer o Aided questions provide a list of choices and ask the respondent to choose

Visit Classifications

Direct: Visitors who type in the URL or come from an email that has not been identified as a Campaign

Search – Organic: Visitors who come to the website from the organic (e.g., natural) part of a search engine

Search – Paid: Visitors who come to the website from paid ad on a search engine (e.g., AdWords)

Referral – Normal: Visitors who come to the website from a link on another website (e.g., a backlink)

Referral – Social Media: Visitors who come to the website from a link on a social media site

Campaigns: Visitors who come to the website from a link in an email that has been tagged using a URL builder (https://support.google.com/analytics/answer/1033867?hl=en-GB)

https://support.google.com/analytics/answer/1033867?hl=en-GB



Line of Business

A general term which often refers to a set of one or more highly related products that serve a particular customer transaction or business need. o e.g., Stores such as Staples and Future Shop now have a product line of business (they

sell things) and a service line of business (they service and maintain products such as

computers).

o e.g., Internet marketing businesses may offer a website development line of business and

a separate SEO service line of business.



ADDITIONAL READINGS

Best Web Metrics / KPIs for a Small, Medium or Large Sized Business: www.kaushik.net/avinash/best-web-metrics-kpis-small-medium-large-business/ Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, 2nd Edition, by Paul W. Farris, Neil T. Bendle, Phillip E. Pfeifer and David J. Reibstein, 2010 Measuring Marketing: 103 Key Metrics Every Marketer Needs, by John Davis, 2007 The Definitive Guide: Marketing Metrics and Analytics by Marketo, 2011, www.marketo.com/b2b-marketing-resources/best-practices/the-definitive-guide-to-marketing-metrics-and-marketing-analytics.php Marketing Metrics Made Simple by Joseph Raymond Roy, 2009, www.marketing-metrics-made-simple.com/getting-started.html

Metrics that Matter: A Guide to Measuring the Impact of Display Advertising in B2B, http://b2bmarketing.bizo.com/MetricsThatMatter

SaaS Metrics 2.90 – A Guide to Measuring and Improving what Matters by David Skok, 2013. http://www.forentrepreneurs.com/saas-metrics-2/

http://www.kaushik.net/avinash/best-web-metrics-kpis-small-medium-large-business/

http://www.kaushik.net/avinash/best-web-metrics-kpis-small-medium-large-business/

http://www.marketo.com/b2b-marketing-resources/best-practices/the-definitive-guide-to-marketing-metrics-and-marketing-analytics.php

http://www.marketo.com/b2b-marketing-resources/best-practices/the-definitive-guide-to-marketing-metrics-and-marketing-analytics.php

http://www.marketing-metrics-made-simple.com/getting-started.html

http://www.marketing-metrics-made-simple.com/getting-started.html

http://b2bmarketing.bizo.com/MetricsThatMatter

http://www.forentrepreneurs.com/saas-metrics-2/

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