Data Driven : Online 'Cousin' Metrics

The numbers you no longer can afford NOT to track and analyze

It used to be so simple, didn't it? We mailed, we tested, we measured, we refined. Good spreadsheet and analytical skills were necessities for every direct marketer. Our ability to compare this year's data with that of years prior was easy to do, of paramount importance and valid without a shadow of a doubt.

But like the movie title, "That Was Then, This Is Now," today's marketer needs to measure far more than in years past, updating and benchmarking data and creating new metrics that didn't exist a few years ago.

Defining Online 'Cousins'
It's become clear that every traditional direct marketing metric has found an online counterpart—its "cousin." The "cousin" analogy is especially appropriate for two reasons. First, cousins are part of the same family. You like them, and to a degree, you understand them. These online metrics are familiar because they are closely related to those we're accustomed to watching in our offline direct marketing efforts. Second, you may not immediately recognize the cousins you only see once a year, but once you do, you quickly become comfortable with them. In the same way, we must embrace our online "cousin" data.

Direct marketers have been quick to accept and adopt the Internet, especially anything transactional. The greatest shortcoming, however, is to assume that the only purpose of your Web site is taking orders. Creating involvement—whether emotional or relational—is better for your business. Finding and managing the right metrics to measure this involvement increases the likelihood of a more profitable customer. With this in mind, are you measuring and benchmarking the following pieces of cousin data?

• Web Site Traffic Reports: How many Web contacts have you had this year compared to last year? What happens when your mailings hit; does your mail drive Web activity? You need to evaluate this weekly and create the revenue metrics associated with traffic. Look for patterns that explain sudden increases in traffic, and find ways to convert this Web activity into sales.

• Revenue Per Visit: Another important metric is sales or revenue per Web contact. This is a number you will want to track as you find ways to motivate customers to visit your site.

• Visits to Conversion: This metric is similar to close rates on the phone. Knowing what this number is, how it is trending and what you can do to improve it is vitally important.

• Frequency of Visits: You need to segment your Web activity by frequency of visit. During certain seasons, you may experience drastic increases in the one-time, never-to-return visitor. Examine your metrics to see how this segment's behavior on your Web site differs from your "everyday" customers.

• Source Code Reporting: Much like traditional direct marketing, source code reporting tells you where orders are coming from; the online cousin sources identify where Web traffic is coming from. Are your paid search campaigns and other traffic drivers properly segmented? Are you contacting each customer or prospect segment differently?

Defining Your Sales Source 'Pie'
Understanding what percentage of your sales to credit to your online efforts can help guide future decisions about allocating budget and resources. The charts (on page 12) provide an example as to why this is so important. The first represents sales by channel. For many of us, the Web is the channel of choice, and your pie may look a lot like this. The second depicts the original source of the sale. What prompted the customer to make a purchase? What medium is generating the most sales?

Your pie undoubtedly looks different, but do you know what that breakdown actually is? Do you know what it looked like a year ago? Two years ago? What are you doing today that will influence what it will look like a year from now? What is your ROI by slice? Ideally, you are measuring this at least monthly, noting trends and seasonality.

E-mail Address Penetration
You have a zero- to 12- and a 13- to 24-month buyer file, and ideally you have e-mail addresses associated with each segment. Response by each segment represents e-mail penetration, and it is a number that needs to be carefully tracked to ascertain its effectiveness.

It's Not Circulation Planning Anymore, It's Contact Planning
For many, direct mail is the driver of sales. For years, testing has guided you to the optimal number of contacts for each of your buyer segments. Today, we need to do more. If you are not supplementing your existing circulation plan with newer "contact planning" by incorporating/replacing e-mail contacts, you may be spending more on marketing than you need to. You should be leveraging lower-cost contacts where you can and investing wisely in direct mail where the ROI has been verified.

Don't Forget Your Roots
For those who marketed in a world before the Internet, every variable was tested "real time" before rolling out in quantity. Perhaps we are forgetting our direct response roots! Recognize the e-mail marketing variables such as:

• Best day of week for e-mail blasts.

• Business vs. consumer segment—Recognize that you may have a business-to-consumer customer who receives her e-mails at her place of business.

• Open/click/buy rates will be different and can be managed for better performance.

• What is the trend for your bounce and unsubscribe rates? How clean is your e-mail database, and are you in danger of spamming your own file?

• Average order, revenue/contribution per thousand e-mails circulated, gross margin return on investment—how do these vary by segment and by time of year?

• Measure and manage your key metrics for social media sources and live chats, and you may be surprised.

Matchbacks
Today most marketers do a terrific job understanding where the sales credit for miskeyed/non-keyed list sources truly goes via their existing in-house, agency or service bureau matchback processes. Are you tracking Web orders with the same diligence? Just because the order was placed through the Web site doesn't guarantee that the Web site drove the customer to action.

Metrics, 2010-Style
To paraphrase Garrison Keillor, "We're all multichannel merchants now," necessitating an integrated, data-driven approach to understanding, measuring and managing our businesses. It used to be a simple and rote end-of-season report—but that was then, and this is now. Now, more than ever, you simply cannot manage it, unless you can measure it.

Ken Lane is senior marketing consultant at the Mission, Kan., direct marketing agency J. Schmid & Associates. He can be reached via e-mail at kenl@jschmid.com.

• MORE ON
• DATABASE & CRM