Content
 

Performance Measurement Basics

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Sven Balnojan    15/04/14

Marketing Controlling, Search Engine Advertising (SEA), SEO, Social Media, Web Analytics

 

"The big challenge for crossing any modern chasm is rarely technology or tools. The challenge is entrenched mind-sets.“ (Avinash Kaushik, Autor von „Web Analytics 2.0“)

Everything we do online is stored, tracked, and distributed. As a result, it is increasingly possible to measure more and more facets of digital marketing. This is a crucial element for any business that runs online marketing campaigns. In this area, however, firms tend to be divided into two groups. The first group, large international companies, use performance analysis and available data for active 1-to-1 marketing. The second group relies on standard metrics which are provided by basic analytics tools. The belief in this second group is that marketing campaigns are nearly impossible to measure accurately.

It’s obvious that performance measurement of marketing activities is closely correlated with continued success (See O’Sullivan, Abela 2007). Here at effective, we wholeheartedly agree with these findings, and work with our customers to build successful and measurable campaigns. In order to do this, we will discuss here the necessary foundation for performance measuring—the absence of which can cause problems for many companies.

 

1. The Connection Between Marketing and Sales

One of the main purposes of digital marketing is to increase the long-term profitability of the company. In this way, it is essential to accurately determine the average cost associated with acquiring a new customer in order to bring this forecast into the decision-making process. Of course, it can be difficult to assess whether or not a customer who purchased was exposed to some sort of marketing, which leads to skewed results and questions overall about the general effectiveness of marketing activities.

In the field of e-commerce, however, this information gap is narrowing thanks to the ability to track sales figures and cycles online. However, in the B2B sphere, where sales cycles are longer and the products more expensive, it is essential to determine in impact of online marketing initiatives. In order to do this, a bridge between the CRM System and Web Analytics or other marketing systems in extremely necessary. Some systems can offer automatic integration, whereas other take advantage of a data exchange via the API.

Without such an exchange, certain problems can arise in terms of evaluating marketing initiatives.

1.1 Cost per lead (CPL) numbers are too low/inaccurate. In turn, the digital marketing budget is set too low and revenue suffers due to lack of opportunities/exposure.

1.2 Difficulty to track where a lead or customer came from vis-à-vis marketing vs. sales. Proving that a lead came through online marketing gives marketers more budgets to work with and thus continued opportunities to increase sales overall.

2. Understanding Costs With Performance Measurement

Companies can theoretically have infinite amounts of data available and yet still miss opportunities to implement those data in ways to solve business-related questions and challenges. This leads to the discussion of whether or not invest in IT and Big Data, or rather to maintain and patch the existing infrastructure. Typically the decision is the latter, making it even more important to build an understanding of the different stages of performance measurement from the outset. This can easily be based on the “Google Measurement Model,” which can be found in the Google Analytics Academy, Digital Analytics Fundamentals. To illustrate:

 

Measurement

 

The Google Measurement Model

Step 1: KPIs and objectives are allocated to the selected marketing strategies. Here, it is necessary to think about which performance indicators need to be measured and which data needs to be linked together to gain meaning.

Steps 2 – 4: IT infrastructure is evaluated to assess what still needs to be done, in order to measure selected KPIs. Costs can be estimated during the planning phase (step 3).

Step 5: In the last step the KPIs are refined and adapted if needed.

Failing to apply this process often leads to the following missteps:
Planning is underestimated
The focus is on standard metrics and figures (initially the focus should be on “What do we want to achieve?”)
The IT budget is too low. As a result the company has to make do with sub-par, inconclusive metrics and KPIs (the IT department is needed for performance measurement and IT costs money)

3. Benefits of Performance Measurement

Performance measurement has some clear advantages. It allows companies to be more efficient and to identify opportunities, as well as quickly find areas for improvement. It also aids in the planning of future for campaigns by bringing in past experiences, as well as realistic and measurable KPIs to the process.

Read more about which analytics tools are right for these processes here.

Or, if you want more personalized information about performance measurement in online campaigns, please contact Ms. Sara Valeria Noori by phone at +49 621 17893 150 or via email at noori@effective-world.com.