Using Metrics to Determine Marketing
and Site Performance
by Brian Schraff
In the next several issues, we will examine the strategies necessary to successfully drive Web site traffic and influence visitors' behavior once they've entered a site. The series of articles will discuss metrics, advertising and promotions, online branding, affiliate programs and syndication. This month's article takes a look at metrics—what they are and why they're necessary.
What Are Metrics?
Webster defines metrics as the process of ascertaining the origin of a target, or its place in a system of classification, by means of an analytical table. In the Internet world, metrics can be defined as real-time monitoring, reporting, and analysis that enables a company or organization to gain an understanding of its audience and what that audience is doing at its Web site. In other words, it's the ability to capture site visitor behavior in real time to determine the marketing initiatives that are returning the highest value opportunities and site dynamics that positively or negatively affect a company's online mission.
New power tools such as Andromedia provide Web marketers with a wealth of data that helps them identify patterns, determine the appropriate response, and measure results.
For example, using Web site analysis software, site owners can track visitors' paths to find out where visitors entered the site, how many pages they viewed, when they came and how long they stayed. Some software packages go beyond just tracking paths, and provide information such as what information or services consumers want, and how best to deliver it.
These packages also allow site producers to categorize visitors or measure the effectiveness of advertising campaigns and promotions.
The software can also help e-commerce marketers understand their visitors' online shopping behavior. Armed with this information, the Web marketer can make adjustments in real time to create a better online shopping experience and increase sales.
Why create a metric model? In today's competitive marketplace, it's foolish to manage a site without having data about what customers are doing, what they want and how they're getting what they want.
Metrics allow the Web marketer to stay informed, in real-time, about a site's marketing and site performance; provide a baseline quantitative view of revenue and click streams; and provide a system of quantitative feedback relating to business performance.
Site Visitors: Who Are They and What Are They Doing?
At the very basic level, site owners need to know who their customers are. Sites that require registration for all or part of their content can gather demographic information about their visitors. But the marketers' desire for this information must be tempered with the visitors' desire for anonymity and their patience for answering questions.
Beyond demographics, sophisticated site analysis software can reveal a wealth of information about site visitors. It can conduct click stream analysis (what they came to the site for), user base analysis (how often they're coming to the site), content analysis (where they're going when they leave the site), commerce analysis (what they're buying while they're on the site and site design analysis (how they're navigating the page). It can also tell the site owner the referring URL or banner ad, what the user is doing on the site and whether the visitor is a new or repeat user.
This ability to capture site visitor behavior in real time and then acting on that data is key to successful online marketing. It's the foundation upon which all site marketing should be based.
Measuring Advertising Effectiveness
Forrester Research predicts that online ad spending will reach $22 billion in the U.S. by 2004, and emphasizes that performance-based advertising will be the key to robust spending growth.
Many potential Web advertisers are hesitant about the medium because they're unsure about whether its effectiveness can be measured. However, there are many sophisticated methods to measure results of interactive ads that go far beyond what is achievable in the print world. Additionally, because online advertising is so measurable, data mining will be increasingly used by smart marketers to optimize current campaigns and create more efficient campaigns in near real-time fashion.
The most basic form of measuring ad effectiveness is cost per clickthrough. When someone clicks on an ad banner, it registers as a clickthrough. Measuring the cost per clickthrough is determined by dividing the cost spent on a campaign during a specific time period by the number of clickthroughs generated from that campaign during the same period.
While cost per clickthrough may be the simplest form of measurement, it is not the most reliable because clickthrough quality varies widely from site to site. Take, for example, two sites that are generating clickthroughs at the same rate. One of those sites may be converting five times those clickthroughs into customers. An industry report by AdKnowledge says that click rates have little value as indicators for return on investment (ROI) optimization because their correlation to conversion rates is so low (conversion rate is considered to be the rate at which people are converted from a view of an ad on the Web to a desirable action on an advertiser's site, such as a sale or registration). According to the report, the ad with the highest click rate in a campaign also being the ad with the highest conversion rate occurs only 14.3 percent of the time.
For example, if an ad generates 100 visitors, and five of those visitors executed the desired response (registered, downloaded a product, etc.), the conversion rate is five percent. If another site generated 1,000 visitors and only 20 people executed the desired response, the conversion rate is two percent.
Consequently it's necessary to measure beyond the clickthrough to get a true reading of effectiveness. There are a number of ways to do this. One way is to establish a unique home page URL for every site on which the advertising is placed. Another way is to implement "back end" user tracking. This method tags the linking URL from the banner with a unique code. This code follows the user through a visit to the site so that when information is entered through an HTML form on the site, the data is stored along with the code to identify the specific user—complete with referring site and click stream information—into a database.
Metrics can also provide information on how much ads really cost. In order to determine which of the two ads in the example above was the most cost-effective, the cost of the ad itself must be considered. In the example, the cost to get one desired response on the site that achieved a two-percent conversion rate might actually be lower than the cost to get one desired response on the site that achieved a five-percent conversion rate. This can occur when ads are placed on widely accessed pages, as opposed to those more targeted to the desired audience.
Ad performance analysis measures such details as number of impressions, percentage of those impressions becoming visitors to the target site, conversion rates, fees per transaction, average sale, etc.
This analysis reveals which sites and banner ads refer visitors that tend to register for services, spend more time or money on the site and have a higher lifetime value by making the site their home page. It also tells the Web marketer which campaign drove them to the site. From this information, the Web marketer can determine which online programs to continue and which to adjust or eliminate.
E-Commerce Metrics: Understanding Online Shopper Behavior
As companies ramp up with e-commerce, the need for data grows exponentially. How do people shop? Do they put things into their virtual shopping carts and then take them out? Do they abandon a transaction without completing it? Do they go directly to a competitor's site? Tracking such activity is essential to the success of an e-commerce site.
Metrics can help the e-commerce marketer understand commerce events, such as determining if visitors from a specific campaign are purchasing products, recognizing when items are removed from the cart, determining if the session was ended at that point or whether the visitor replaced those items with other products, tracking where customers are lost in the acquisition process and where they go once they leave the site, and determining if a site has implemented a strong sales process.
Despite the obvious need for such data, a survey recently conducted by Primary Knowledge discovered that while e-business executives deem many ROI initiatives as "mission critical," most companies have reached only the planning stage for realizing these initiatives. Steps such as getting ROI maximization technology in place, tracking all Internet contacts by customer and tracking sources of the most profitable customers are not given due priority, according to the report.
Site producers enjoying the most success are those that can convert the flood of available Internet metrics to gain meaningful business insights and get a precise handle on who their visitors are. Only then can they increase the value of those customers and maximize the yield of their online customer relationships.
Crunching data is one thing; acting upon it is much more challenging. Many marketers making a transition from brick-and-mortar business to online business are moving slowly in their use of Internet metrics.
New power tools provide a solution to managing the data. The challenge is getting executives to use it. Some companies are amassing huge amounts of Internet statistics on a daily basis, but are not using the information once they have it.
Until these companies figure out how to act on the data, they will lag behind their competitors who are responding to the data at Internet speed—real-time.
Brian Schraff is president of Schraff Group. The agency has a 21-year history in Orange County and provides integrated marketing communications to local, Silicon Valley and out-of-state technology clients. The interactive services group handles clients across a broad range of industries.