MEASURING DIGITAL MARKETING PERFORMANCE: KEY PERFORMANCE INDICATORS AND METRICS

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1 Journal of Management (JOM) Volume 5, Issue 6, November-December 2018, pp , Article ID: JOM_05_06_014 Available online at ISSN Print: and ISSN Online: MEASURING DIGITAL MARKETING PERFORMANCE: KEY PERFORMANCE INDICATORS AND METRICS Savitha Nair Associate Professor, GRG School of Management Studies, PSGR Krishnammal College for Women, Coimbatore, India S Shobana Inside Account Manager, Quadrasystems.net (India) Private Limited, Coimbatore ABSTRACT The digital revolution has significant impact on every facet of business, particularly marketing. Today, organizations are required to frame effective strategies to utilize the opportunities thrown open by digitalization. Marketing strategies that involve the convergence of marketing and technology enabled by internet is a significant move to build brands and stay competitive. The digital marketing strategies involve the effective use of owned, earned, paid, and shared media in planning and executing strategies for customer acquisition, retention, transaction, loyalty and brand building. Though many companies have started using digital marketing tools and techniques to engage customers effectively, a majority of them fail to measure the effectiveness of such efforts. This paper explains the importance of measuring digital marketing performance. The major KPIs and metrics available for measuring the digital marketing performance and their objectives are analysed. The marketers need to adopt a combination of required KPIs and metrics to analyze the financial and nonfinancial results of their digital marketing efforts so that suitable corrections can be done to achieve the objectives of their digital marketing programmes. Key words: Digital marketing, Key Performance Indicators, Metrics, Performance Measurement. Cite this Article: Savitha Nair and S Shobana, Measuring Digital Marketing Performance: Key Performance Indicators and Metrics, Journal of Management, 5(6), 2018, pp INTRODUCTION With the emergence of World Wide Web and facilitation of e-commerce, the business world has witnessed massive disruption. The dramatic development in information and communication technology has paved way for a closely knitted world where consumers and companies can interact seamlessly on diverse platforms. Technological advancements, 89 editor@iaeme.com

2 Measuring Digital Marketing Performance: Key Performance Indicators and Metrics presence of social communities, enhanced customer expectations and global connectivity started forcing companies, especially those in the B2C segment, reinvent their business models. In today s interconnected world, consumers have become active participants in brand building than ever before. While online shopping and social media interactions are picking up at a faster rate, marketers are faced with information overload on customer preferences, browsing patterns, purchase histories and demographic insights on the one side and heightening of competition on the other side. To stay on top of competition and satisfy the empowered customers, marketers need to embrace digital marketing tools and techniques that can offer personalized and relevant experiences to customers seamlessly across every touch point. Digital marketing, in simple terms, is the marketing of products and/ or services to customers using digital channels and technologies. Also referred as online, internet or web marketing, digital marketing uses internet as the core medium, though its scope also extends to non-internet channels. Contrary to traditional marketing techniques, digital marketing is more targeted, interactive and measurable. It satisfies the goals of buyers and sellers, and maintains customer relationship through online services [1]. The benefits of digital marketing include global reach at lesser cost, targeting the right audience, ease of gathering relevant customer information and purchase patterns; measurability and personalized marketing. Many businesses today have started engaging in digital marketing practices for reaching out to their customers, yet many fail to reap benefits as they fail to follow a clear strategy for their digital marketing initiatives. In addition, it is imperative to measure the performance and returns from such efforts so that finer corrections and improvements can be incorporated in their existing strategies for better results. Just like any other strategy, digital marketing strategies should start with clear goals, ample planning, systematic execution, monitoring and feedback. 2. IMPORTANCE OF MEASURING DIGITAL MARKETING PERFORMANCE As customers are increasingly interacting with organizations using digital platforms, many marketers have understood the importance to track such interactions and measure the performance [2]. Gartner [3] found that corporate website, digital advertising and social marketing are the top three digital marketing success activities by the U.S firms. Digital marketing is not just a transactional tool, it has the power to change commercial and demand patterns at microeconomic levels In order to understand the effectiveness of digital marketing strategies, companies should possess the abilities to monitor and measure their impact. Hence, appropriate, accurate and timely metrics are critical for assessment [4]. A digital marketing strategy can be considered successful when the outcomes connect the customer behaviour with the bottom-line of the company positively. One of the most important advantages of digital marketing is that it is relatively easy to collect data and track the performance of the digital strategy. The dilemma faced by most of the marketers is the choice of appropriate KPIs (Key Performance Indicators) and metrics. It may be understood that the choice of metrics depends on the goals of the campaign. Certain campaigns may be initiated for lead generation, certain others will be for creating awareness or brand building etc. No one KPI fits all purposes. By choosing appropriate KPIs, the marketer can gauge contribution, return on investment and effectiveness of each campaign and channel, get insights for optimizing the campaigns, identify the trends that enable consumer behaviour predictions, identify opportunities for effective segmentation and targeting and optimize the business processes. Regular measurement of performance enables the company to understand the audience better, improve the approach adopted during the 90 editor@iaeme.com

3 Savitha Nair and S Shobana digital campaigns, achieve better engagement levels of target audience; avoid activities that yield poor results and focus on those that strengthen the financial position of the company. 2. REVIEW OF LITERATURE There are several studies available in literature that measures various dimensions of customer responses and behaviour towards digital marketing activities and campaigns of organizations. However, studies that focus on the measurement of digital marketing performance from the organizational perspectives are limited in number. Marketing productivity analysis and audits are the roots for marketing performance measurement [5]. An understanding of the measurement techniques and a good skill in analytics are necessary for the effective use of marketing performance data [6], [7]. By surveying 212 senior executives from Fortune 1000 firms, Germann et al., [8] found that firms attain favourable and sustainable performance outcomes through greater use of marketing analytics. Deployment of marketing analytics leads to positive performance outcomes. Accessibility, speed and navigation are the important criteria for digital marketing to yield results. Digital tools improve customer satisfaction, commitment and trust and thereby improve customer relationships [9]. Many social marketers measure in volumes, but a successful social marketing often depends on qualitative metrics [10], [11]. Social metrics helps to understand and measure about people s engagement. Much of what is happening in social media offer insights rather than metrics [12]. Control, orientation and institutional theories influence metrics selection by marketers [13]. However, the execution and measurement of online marketing is difficult [14]. Though majority of the B2B SMEs of UK are using social networking sites (SNS) for achieving brand objectives, they are not adopting any metrics in measuring the SNS effectiveness [15]. It is difficult to predict the effectiveness of online marketing campaign in the short as well as long run [16]. 3. OBJECTIVES OF THE STUDY This study is an attempt to explain the importance of measuring digital marketing performance by companies. The major KPIs and metrics that can measure the effectiveness of digital campaigns and activities are analysed based on their objectives. The study is conceptual in nature and the data for the purpose of the study is drawn from secondary published sources. Given the fact that companies are increasingly using digital channels for marketing and sales, the relevance of this study in highlighting the importance of performance measurement and analysis of major tools for the purpose is worth mentioning. 4. ANALYSIS OF MAJOR KPIS AND METRICS The digital revolution has changed the way in which companies promote themselves to the customers. The media available in the digital space can be broadly divided into - paid, earned, owned and shared media. Paid media includes display advertisements, pay per click advertisements, sponsored social media posts etc. Earned media refers to the positive advocacy and coverage that the organization receives due to third party endorsements. Any user generated content with brand mentions in the form of testimonials, social media buzz, back links etc are examples of earned media. media is the most important asset of a company in the digital space and includes websites, YouTube channel, Facebook Page, Blogs and Vlogs and other social media presence the company has. A recent addition to the three tier model is the shared media that would include things like shares, re-tweets and comments off the back of owned media assets. The difference between earned media and shared media is 91 editor@iaeme.com

4 Measuring Digital Marketing Performance: Key Performance Indicators and Metrics that the shared media channels are available to both the brand as well as the consumers, whereas in case of earned media, the marketer has no influence or control over the channel. The digital marketing KPIs and metrics are those measures that are used by marketers to measure and track the performance of their campaigns and programmes in the digital space. To be specific, a KPI is associated with the objectives of the programme and is used to measure the performance and success, whereas a metric is not more than a number within a KPI that helps to track the progress or performance. The major KPIs used by digital marketers are associated with five major objectives of digital programmes- customer acquisition, activation, retention, revenue and referrals. By combining the objectives with the type of media (owned, earned, paid and shared) being used, the following major KPIs and metrics can be suggested for analysis. Table 1 Important KPIs and Metrics to Measure Digital Marketing Performance Type of media KPIs and Metrics Objective Rate on Returning Visitors metric (RVR) RVR=(Total number of returning visitors for given period of time) / (Total number of unique visitors to the website for given period of time) Web Traffic Sources Number of visitors for each source Funnel Conversion Rate Funnel conversion Rate = (Number of leads moved to the next stage in the funnel) / (Total Leads in the funnel stage)* 100 Total Visits Total number of unique viewers on a page Customer Attrition Customer Attrition = (customers lost in a given time) / (Total number of customers) *100 Customer Lifetime Value Customer Lifetime Value = Gross margin(%) * length of lifetime in pay periods* revenue per subscriber per pay period Customer Acquisition Cost Customer Acquisition Cost =(total marketing spend on customer acquisition) / (Total new customers) Lifetime Value : Customer Acquisition Cost Lifetime Value : Customer Acquisition Cost = Gross margin(%) * (1/ monthly churn) * (average monthly subscription revenue per customer: sales and marketing costs) / (New customers won) Content Downloads Total number of content downloads Unique Visitors Total number of unique visitors To measure the effectiveness of the website in building an audience To measure which traffic sources are driving visitors to the website To measure the rate of which the leads move through the marketing funnel Funnel stage: Five key stages that represent the typical customer acquisition process. Stages include: awareness, interest, consideration, preference, purchase. To measure the amount of users that have visited the site or page To measure the rate at which the company loses customers over time To measure the amount of gross profit that is generated from a customer over the entire time of business To measure the total amount of capital costs to gain a new customer To measure the relationship between the lifetime value of a customer and the cost of acquiring that customer To measure the total number of pieces of content downloaded To measure total number of unique individuals who view the website 92 editor@iaeme.com

5 Savitha Nair and S Shobana Type of media KPIs and Metrics Objective Page Views Per Session Page Views Per Session= (page views per session with user A + page views per session with user B+...+ page views per session with user N) / (Total number of user session) Customer Share By Category Customer Share By Category = (Total number of customers within certain category) / (Total number of customers) * 100 New Leads Generated Total leads generated during reporting period Goal Completion Rate Goal Completion Rate = (Number of visits)/ (Number of leads and Number of leads per channel) / (Number of wins) Web Traffic Concentration Web Traffic Concentration = (Number of visitors on a page) / (Total number of site visitors ) Website Traffic Lead Ratio Website Traffic Lead (%) = (Total number of website visitors) / (total number of leads) * 100 Bounce Rate Bounce Rate = (Number of visitors leaving the site after viewing only one page) / (Total number of visitors to the site) *100 Newsletter Signup Conversion Rate Newsletter Signup Conversion Rate = ( number of visitors who completed form) / (Number of people who saw it) * 100 To measure the average number of pages a user views during a single session To measure the number of customers from specific category To measure the number of new leads during specific period To measure how effectively the campaigns make the audience complete their goal To measure the site visitors on a specific page in comparing to total site visitors To measure the conversion of website visitors into leads To measure the number of visitors arrived at the site and left without navigating to any other page on your site To measure website visitors and those who sign up for newsletter External Website Links To monitor external links to improve website ranking and traffic volume Net Promoter Score Net Promoter Score = Proportion of Detractor Scores - Proportion of Promoter Scores Return on Marketing Investment Return on Marketing Investment (ROI) = (Sales Growth Marketing Cost) x 100 / (Marketing Investment) Incremental Sales Incremental Sales = Revenue generated by marketing initiatives - baseline sales Response Rate Response Rate = (Number of customers responding) / (Customers exposed to communications) *100 Marketing Originated Customers Marketing Originated Customers = (Number of customers started out as a marketing lead) / (Total customers) Average Time on Page Average Time on Page = ( Time visitor A spends on page + Time visitor B spends on page Time visitor N spends on page) To measure customer satisfaction and loyalty To measure the ability of marketing campaigns to generate new revenue To show how marketing campaigns are resulting in increased sales revenue To measure the total number of customers who respond back To measure the total shares of all customers that come directly from marketing efforts To measure the duration of time a viewer spends on a page 93 editor@iaeme.com

6 Measuring Digital Marketing Performance: Key Performance Indicators and Metrics Type of media KPIs and Metrics Objective / (Total visitors on page) Paid Paid Earned Earned Shared Cost Per Lead Cost Per Lead = (Total cost of campaign) / (Number of leads generated) Lead Conversion Rate Lead Conversion Rate = (Leads converted to sales) / (Total leads) *100 Keyword Performance Rank keywords based on position in SERPs, CTR, and GCR End Action Rate End Action Rate=(Number of users start activity) / (Number of users complete activity) Referral Traffic Referral Traffic = (Traffic from other sites) / (Total traffic)* 100 Brand Awareness Metrics Number of views, likes, mentions, shares, traffic, impressions, followers, view-through rates, sign-ups Social Media Metrics Number of views, likes, mentions, shares, traffic, impressions, followers, view-through rates, sign-ups To measure cost effectiveness of marketing To measure the amount of leads converted into sales To measure the SEO efforts at driving traffic to the website To monitor the last action of the audience To measure the volume of traffic that are directed to a site from outside sources To track how people are hearing about the brand on social media and search engines To track the account reach and audience engagement Sources: [17] [18] [19] [20] [21] [22] [23] [24] CONCLUSION For a complete analysis of digital marketing performance, marketers should select KPIs and metrics that reflect the short-term and long-term objectives as well as the financial and nonfinancial implications. The present study explains the need to measure the digital marketing performance and provides an exhaustive list of major KPIs and metrics that can measure the performance of marketing campaigns and programmes in various media- owned, paid, earned and shared. A holistic understanding of the interrelationships between them and their balancing is critical to successful deployment. If planned and executed systematically, these measures can provide deeper insights that can help companies in generating greater revenues, loyal customers, thus making the digital marketing efforts successful in the short and longrun. REFERENCES [1] Imber, J. and Betsy-Ann, T Dictionary of Marketing Terms (Barrons Business Dictionaries, Hauppauge, NY 3rd ed, 2000) [2] Chaffey, D and Patron, M, Web Analytics to Digital Marketing Optimization: Increasing the Commercial Value of Digital Analytics, Journal of Direct Data and Digital Marking Practice, 14, 2012, [3] Gartner, Digital Marketing Spend Report, editor@iaeme.com

7 Savitha Nair and S Shobana [4] Yang, Z.; Shi, Y and Wang, B., Search Engine Marketing, Financing Ability and Firm Performance in E-Commerce, Procedia Computer Science, 55, 2015, [5] Morgan, N.A., Clark, B.H. and Gooner, R, Marketing Productivity, Marketing Audits, and Systems for Marketing Performance Assessment: Integrating Multiple Perspectives, Journal of Business Research, 55, 2002, [6] Lenskold, J, Marketing ROI: Play to Win, Marketing Management, 11 (3), 2002, [7] O Sullivan, D., and Abela, A. V, Measurement Ability and Firm Performance. Journal of Marketing, 71(2), 2007, [8] Germann, F., Lilien, G., and Rangaswamy, A, Performance Implications of Deploying Marketing Analytics, International Journal of Research in Marketing, 30 (2), 2013, [9] Bai, Lu., and Wenqin Chen, How Internet Marketing Tools Influence Customer Relationship Management: An Analysis based on Webinar, [10] Cronin, J. J., Brady, M. K., and Hult, G. T. M, Assessing the Effects of Quality, Value and Customer Satisfaction on Consumer Behavioural Intentions in Service Environment, Journal of Retailing, 76 (2), 2000, [11] Fisher, T, ROI in Social Media: A Look at the Arguments, Database Marketing & Customer Strategy Management, 16 (3), 2009, [12] Trusov, Michael, Randolph E. Bucklin, and Koen Pauwels, Effects of Word-of-Mouth versus Traditional Marketing: Findings from an Internet Social Networking Site, Journal of Marketing, 73(5), 2009, [13] Tim Ambler, Flora Kokkinaki and Stefano Puntoni, Assessing Marketing Performance: Reasons for Metrics Selection, Journal of Marketing Management, 20 (3-4), 2010, [14] Ranaweera, C., and Prabhu, J, On the Relative Importance of Customer Satisfaction and Trust as Determinants of Customer Retention and Positive Word of Mouth, Journal of Targeting, Measurement and Analysis for Marketing, 12(1), 2003, [15] Michaelidou, N., Siamagka,N., and Christodoulides, G, Usage, Barriers and Measurement of Social Media Marketing: An Exploratory Investigation of Small and Medium B2B Brands, Industrial Marketing Management, 40 (7), 2011, [16] Oracle, It s all about the Salesperson: Taking Advantage of the Web 2.0, 2008 [17] [18] [19] [20] [21] [22] [23] [24] editor@iaeme.com