Key Performance Indicators (KPIs) have evolved a lot over the years, and so too have the ways we measure their success. When digital marketing first took off, we went from making what we hoped were educated guesses about where best to place our ads to knowing exactly how many people looked at and clicked our ad. It changed everything. Not only could we see if our messaging was resonating with the right people, but we were also able to learn more about where exactly our customers were located, what their interests were and what engaged them enough to spark action.
Access to this type of information and immediate feedback had never been available to marketers before. In just a few years, our capabilities and the tools available on the market have grown exponentially. With so much innovation happening in digital right now it’s worth asking: Are you still using the best KPIs in your digital marketing?
First a Bit of History
Digital marketing as we know it started with CPM (cost per mille), which refers to the cost per 1,000 impressions. Impressions are not the same as clicks, but they do allow us to know exactly how many people saw our ad and at what cost. Knowing that we could spend $X and get X in return in views made branding way easier.
Fast forward a few years and Google gave us the gift of goals and conversions. You could now measure the cost per conversion and even the cost per sale if you ran an ecommerce operation. Marketing departments started to realize that you could get away from just impressions and clicks and actually bid on conversions to get better returns on your direct marketing campaigns. Conversions became the golden ticket on which to measure a campaign’s success.
We have entered a new age of metrics. We can now do dynamic bidding based on return-on-ad-spend or return-on-margin. But before we get too ahead of ourselves, let’s look at some of the metrics today’s marketers are using and which ones offer the best return on investment.
Defining the Correct Metrics
There is still some confusion around what constitutes a metric and what constitutes a KPI. There are three metrics commonly mistaken for KPI’s. These are:
- Cost per click
- Impression numbers
If you are spending a lot of time on these metrics then you are not focusing time, effort and resources in the right places. Though they can be helpful in improving your overall results and informing your strategy, they should be seen as directional—guides rather than destinations.
A step in the right direction would be to focus on transactions, whatever that means to your business. By counting sales and making bid and budget decisions based on transactions, you can get a better idea of how your campaigns are doing and thus get better results. If you can’t track a completed sale, try to get as close to this point as possible. In insurance, this is often a quote since it’s completed online. Ideally, you can track beyond that – either to a phone call or, even better, a closed policy.
The Kings of KPIs
We have to remember something simple: the goal of your business is to make money. Revenue is the main KPI for your whole business, so why isn’t it the main KPI for your marketing? Tracking completed transactions is a positive move forward, but it’s worth noting that not all transactions are created equal. The trick here is to start measuring conversions according to their value.
For example, you are able to enter variable revenues either through Google Adwords or pushed from Google Analytics. Of course, other platforms also have their own ways of measuring revenue as well. Almost all analytics tools (such as Adobe analytics) include it as an option. Regardless of the tool you’re using to measure analytics, you’ll get far better bottom line results by making revenue-driven decisions. For example, an auto insurance policy in Quebec is typically lower than in Ontario, so including the revenue per transaction will help you optimize your spending.
Revenue should be a key metric for your direct marketing efforts, but there is one final step you can take: margin. Margins may not be as easy to identify within your campaigns, but it’s certainly possible. A simple way to do this is to calculate the revenue you’re getting back from your campaigns and subtracting the ad spend. From there you can work on maximizing your margin.
Here are a few examples of how Kanetix.ca focusses on revenue and margin in our digital marketing efforts:
Bidding Further Down the Funnel
In an effort to measure further down the auto insurance funnel at Kanetix.ca, to ensure we’re tracking the right KPI, we implemented data integration for the transactions that occur offline – which happens when we route the customer’s call to our partner.
Using GAID (Google Analytics Identification), we were able to track this offline conversion and build a solution to push it to both Google Analytics and Adwords. We could then calculate the return on investment for our ad spend for transfers by keyword and make more effective bidding and budget decisions based on this data, giving us better quality leads overall. In fact, this initiative allowed us to triple our margin from paid search as a traffic source – a great win for the business.
Return on Ad Spend (ROAS)
With Adwords’ recently updated ROAS bidding option, as long as you accurately send Google your revenue data you could literally set it to guarantee profit – at least at a bidding level. This can be incredibly helpful for large retailers that have thousands of products.
Combine this with a dynamic search campaign and you’ll use little resources for a very high return on your investment.
In order to get these results, however, you have to have the proper tracking implemented.
Steps to Implement Effective Tracking
1. Know your funnel:
Funnels are more complex than a lot of people care to admit. While a shopping cart process can be easy to wrap your head around, when you include customer service calls, people leaving and coming back, etc., it can be difficult to ensure its 100 per cent optimized. Tracking performance through your funnel by traffic source will help you focus efforts in the right area. At Kanetix.ca, we track all aspects of performance through the funnel on a daily, weekly and monthly basis. It helps us identify trends in the data and further understand our business.
A single issue leading to customer drop off at one point of your funnel could be costing you significant revenue. By tracking your funnel, you’re able to identify issues early on, optimize conversions through the process and ensure that every ad dollar you spend is optimized. By using revenue as your main KPI in the funnel process, you can see that a single un-optimized part of the process could be costing you a lot of money.
When you have limited resources to fix issues, having revenue as a KPI can also help you prioritize which areas to improve.
2. Measure the journey, not just the final point
One thing I’ve noticed in the performance marketing space is that a lot of marketers are focused on last click stats – the user’s last touchpoint during a visit. They make sure to optimize to sales made in their various channels through methodologies like the ones mentioned above, but they neglect to take into consideration that rarely do people make a sudden buying decision by seeing a single ad.
Your customers go through a buying journey that may include offline sources, several ads, some social media, a blog post, an email newsletter, etc. There are so many factors that help someone determine whether or not to make a purchase—and when to make it.
To get a better understanding of how all your marketing channels are stitched together, attribution tools can help. At Kanetix.ca, we use Google’s Attribution 360 product, but they also have a free beta version – Google Attribution – that can give you an idea of how your channels affect each other. For example, do people who see your display ads convert better when they click a paid search ad? How does email marketing affect social media? If I increase my investment in a particular display campaign, will my organic, and referral conversions increase? This can all be seen at a glance and you can even attribute revenue across your channels and even right down to the creative used.
The best way to get a return on investment on your direct digital marketing dollars is to focus on revenue and margin as your main KPIs.
When you focus on these two KPIs across your funnel and then use attribution to measure it across your entire customer journey, you can get a holistic view of how your channels affect each other. This empowers you to make decisions that will garner you a better return from your marketing spend while also giving your customers the relevant information they need to press that buy button.
About the author:
As Vice-President of Marketing, Leonie Tait leads the marketing initiatives for Kanetix Ltd. Leonie joined Kanetix in 2011 to develop a results-driven marketing team. Since then, Leonie has taken a leadership role in marketing strategy, brand development and digital marketing as well as building an in-house content marketing team. Leonie has 15 years of marketing experience, most of which has been spent in the financial services and insurance industry.