Measurement

Which Metrics are Important?

A performance metric is an indicator of how things are trending and the efficiency with which you are hitting your targets. Whereas the strategy speaks to the destination you are trying to reach, your metrics and KPI’s will tell you how much progress you’re making on a day-to-day basis.

As digital marketing becomes more measurable, many metrics have been introduced, and understanding the importance and meaning of each one has become a challenge in and of itself. It’s important to remember that the metrics rooted in revenue will remain the critical ones. Such are (obviously) cost-per-acquisition, revenue per user and conversion-rate.

It’s also important that you outline which ones you will be monitoring and optimizing towards before you begin a marketing campaign. Start with questions that you want to have answered on a daily basis:

• Are my ads improving in quality?
• Are we paying more per user or less?
• Are the conversion rates of our site improving?

In early stage initiatives, you will have limited visibility and not a lot of data. You will have to ‘buy’ yourself some data to have something to optimize to begin with. During the early stages, you may have to rely more on softer metrics, like metrics pertaining to traffic acquisition — cost-per-visit, cost-per-new-unique user, bounce rate, and time on site. As you acquire more ‘hard’ performance data, you can rely more on hard metrics.

The F-word: funnels

The concept of the marketing funnel is that truly permeates modern marketing, but it dates back to the late 1800’s. It visualizes the customer journey as having four distinct behavioral phases (Awareness, Interest, Desire and Action). This ‘AIDA’ model is so pervasive in digital marketing, that many marketers view consumer behavior as a straight-forward, predictable and manageable sequence.

If you study your customers’ paths to purchase in detail, you’ll find that it is nothing like a straight path; it’s not simple, nor predictable, but rather quite chaotic. Consumers are not necessarily even that manageable; with the reason being that so many of the paths are entirely unique. You may find a typical purchase scenario, but it might not represent the majority of your customers very well. Even if you knew which specific message was the ideal on to ‘nudge’ your customer further down a specific part of the path, you can’t necessarily effect that message in the right sequence for the right prospect.

While it’s helpful to structure your campaign activities around a basic AIDA model, you need to remember that the funnel is an analogy; not a descriptive model of how the majority of customers will behave. 

Marketers frequently structure their campaign efforts around rigorous funnel structures. What happens when taken to an extreme is that your campaigns can become unmanageable and results become difficult to interpret. With each campaign performing a different purpose in the funnel, perhaps even using a specific message for each stage, your campaigns become harder to optimize. Also, with more granular, detailed campaigns, accruing learnings tends to take far longer. This is why we need a primary metric to help you guide your day-to-day activities.

The North Star Metric

The North Star Metric is the single metric that best captures the core value that your product delivers to customers. Businesses need the North Star Metric for their marketing efforts because it reduces complexity and confusion while helping you maintain focus.

Why is this necessary? Because, with all the data and measurability comes a lot of clutter, and it’s easy to be tempted to optimize things that don’t matter. What’s an example of a North Star metric? New unique users, sign-ups, basket additions, etc. The North Star Metric is not always actual purchases. Sometimes the absolute numbers of purchases are so low that it’s hard to optimize directly. If you’re trying to optimize for a rarely occurring action, you’re latching onto very small numbers. If you choose a higher-level action, you have more of them (although they might not be quite as meaningful).

One mistake marketers often make is to think that they only need firm performance metrics when they are pursuing direct response marketing. This doesn’t matter if you’re pursuing brand-oriented marketing or more transactional, direct response-oriented marketing — you still need the North Star Metric to guide you and help you cut through the clutter.

Timelines

Businesses often fail to address the timeline aspect of their marketing plans. Consequently, testing campaigns will stretch out into infinity, in the hopes that they one day hit their performance targets. Remember that goals, targets and objectives are meaningless unless you assign firm deadlines to them.

It also helps to clearly outline the time intervals with which you are going to be evaluating your metrics. In other words, with which frequency are you going to be monitoring these KPI’s? How long will it take for you to see outcomes when you make adjustments? This ties into how long it will take to optimize towards your key metrics.