eMarketer recently wrote on industry studies measuring the effectiveness of online advertising. Over 60% of companies in one study did not believe their current approach measured web strategy effectively. In another study, less than 40% of respondents had complete confidence that they were measuring the right things.
Why is there so much confusion about measuring online marketing, ostensibly the most measurable activity in the history of marketing?
The truth is that tying online marketing to profits involves a fair amount of complexity, yet if tied to profits, people are very confident in their strategy and metrics. Here are three reasons why people lack the confidence they should have, and what to do about it:
1. Traditional metrics are often about web server performance, and not about customers and profits. If your company relies on “hits”, “unique visitors”, or “time-on-site” in its top-level marketing reporting, chances are it has a problem with its web metrics. At best, these traditional metrics are only early indicators. At worst, they are completely misleading. Web site optimization needs to be focused on measurements of engagement, value, and revenue.
2. Tying marketing to revenue and profit requires ancillary data. Companies may realize that marketing success metrics lie with revenue, but are unable to tie revenues to marketing because sales and profit figures live in different systems, databases, or departments. Someone, and probably Marketing, needs to bite the bullet and take ownership of this problem. The more that these data gaps are filled, the clearer the true measurements of success will be.
3. You need to factor in time. A very common problem in assessing marketing is forgetting to factor in time, whether measuring the time from first visit to action, or from lead to close. Revenue generated right now should not be measured against current marketing cost because the revenue being generated right now stemmed from marketing done in the past. Whether that was yesterday or six months ago will be critical in terms of how marketing strategy, tactics, and cost are assessed. Companies that ignore the time factor will draw incorrect conclusions about cause and effect, will devise misguided strategies based on those conclusions, and will have a very difficult time optimizing their online marketing.
The good news is that companies don’t need to live with bad metrics or uncertainty about their online marketing. Smart metrics allow for smart choices.
