Marketing Metrics Handbook (Simplified)
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1 Marketing Metrics Handbook (Simplified) Developed by Joanne O Connell and Jeff Nelson August 8, 2014 Copyright 2014 All rights reserved August 8, 2014 Page 1 of 18
2 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 Retention Diamond Retention Diamond Concepts Retention Measures and Metrics Retention Measures and Metrics Concepts Glossary Additional Readings August 8, 2014 Page 2 of 18
3 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 August 8, 2014 Page 3 of 18
4 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 rule applies. Measure 80% and the remaining 20% often takes care of itself August 8, 2014 Page 4 of 18
5 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. August 8, 2014 Page 5 of 18
6 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. August 8, 2014 Page 6 of 18
7 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. August 8, 2014 Page 7 of 18
8 Acquisition Funnel Concepts Level of the Funnel Impressions Visits Prospects Offers Outcome Definition Number of times an advertisement or other image that represents the company is shown to a viewer Number of times contact was established Number of times that interest is expressed and contact information is recorded Number of times that a proposal or price is given The ultimate outcome of the business, namely - what you want members of the target market to do Explanation 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 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. 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 For an e-commerce website, an order is entered and priced For a consulting firm, a proposal is given 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 August 8, 2014 Page 8 of 18
9 ACQUISITION MEASURES AND METRICS August 8, 2014 Page 9 of 18
10 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 August 8, 2014 Page 10 of 18
11 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. August 8, 2014 Page 11 of 18
12 Retention Diamond Concepts Level of the Diamond First Time Occasional Loyal Lapsed General Definition (the exact definition will vary by organization) A new customer A relatively long-term but not a steady customer A relatively long-term and a steady customer A former customer, no longer using the product or service August 8, 2014 Page 12 of 18
13 RETENTION MEASURES AND METRICS August 8, 2014 Page 13 of 18
14 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 August 8, 2014 Page 14 of 18
15 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, , 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 August 8, 2014 Page 15 of 18
16 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 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 that has been tagged using a URL builder ( August 8, 2014 Page 16 of 18
17 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. August 8, 2014 Page 17 of 18
18 ADDITIONAL READINGS Best Web Metrics / KPIs for a Small, Medium or Large Sized 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, Marketing Metrics Made Simple by Joseph Raymond Roy, 2009, Metrics that Matter: A Guide to Measuring the Impact of Display Advertising in B2B, SaaS Metrics 2.90 A Guide to Measuring and Improving what Matters by David Skok, August 8, 2014 Page 18 of 18
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