Posts Tagged ‘Media evaluation’

October 19th, 2010

On a clear day: Measuring ROI in Social Media

Measuring ROI in social media is a big concern for marketers as they consider moving budget away from traditional media channels and into social media activity.  But before they can invest in social media, marketers need to get an idea of what it can contribute to their brand.  This has driven a debate about measurement in social media but unfortunately much of the discussion is focused on measuring social media for social media’s sake. What we should be asking is how do we measure the delivery of marketing objectives when we run activity across the social media platform. When we look at it this way we focus on measuring marketing outcomes versus marketing objectives and the answers become much clearer.

As a start point, everyone needs to recognise that social media is a media channel. It is not a marketing discipline. It is not a marketing objective. It is not a marketing strategy. So we might use the social media channel to raise brand awareness (objective) by targeting affluent new car buyers in social media (strategy), we might use social media to increase consideration (objective) by informing new car buyers about the unique benefits of the car we are selling (strategy) or we may use it to increase sales (objective) by communicating a last minute ‘walk-in’ trade-in deal (strategy). The metrics we use to measure social media should therefore relate directly to the objectives and strategies that we managing through the social media channel.

So, before we can measure social media we need to understand what we want social media to deliver from a marketing perspective. Only then can we select the right types of measurement and metrics to get the job done properly. Here are three examples of how we might measure social media activity against the delivery of three different marketing objectives:

  1. Objective: Raise Awareness: There are a number of good tools for measuring online brand awareness, ad awareness, product awareness and salience. Ad Index from Dynamic Logic allows you to play ‘spot the attitude difference’ between web users who have been exposed to your messaging and those who have not. You can ask exposed and non-exposed groups bespoke questions about your brand and campaign activity which allows you to contrast and compare the differences between the two groups. Brand sentiment can be measured using sentiment trackers like Sentiment Metrics; through without bespoke surveys these may include a range of external references to your brand, not just your own social media activity.
  2. Objective: New Customer Acquisition: If we want to use social media as a new customer acquisition tool then we should be using customer acquisition metrics. Microsoft’s Atlas can be used to track the online behaviour of your social media users across all touch points in the sales funnel. Bespoke tracking URLs in your social media pages can be used to identify visitors to your site originating in your social media pages. This type of tracking means you can ultimately relate customer value back to your social media activity.
  3. Objective: Increase Retention / Loyalty: Here we can combine online tracking, data collection and customer data analysis to understand the contribution of social media. We can collect prospect and customer data in social media pages or in pages that link directly to social media. Fusing data collection with online tracking means we can find the data source of known named customers and measure their progress and value in the sales funnel and through cross sell and up-sell. The results from this type of activity may not be instant; customer value from market source can take a year or more to establish, but once it’s in place you will be able to see how social media is building sales revenue for your business.

The message is that we can’t measure social media for social media’s sake. We should always be measuring how social media performs against a given marketing objective. If we are clear about this, the techniques and metrics for measuring and evaluating social media ROI become much easier to identify, select and implement.

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February 24th, 2009

Using ROI metrics to evaluate Pay per Click search marketing

For many online advertisers, trading and evaluating paid search marketing (PPC) has now moved beyond paying for clicks.  More advanced search marketing campaigns are traded and evaluated on cost per “action” - i.e. paying for a marketing outcome; the generation of a lead, subscription or sale for example. Even more advanced campaigns are evaluated using Return on Investment (ROI) metrics where search engine marketing activity is optimised around the relationship between online spend and revenue generated.  ROI evaluation can be a very powerful way to evaluate paid search, but it is not without its own pitfalls. You need to be careful about which ROI metrics you work with - pick the wrong ones and your best endeavours may still end up generating high volumes of low profit business.

I thought it might be interesting to explore how we can look at ROI as a measure of margin or even profit.  But before I do that, here’s a quick review of current PPC evaluation 2options.

1) Cost per Click

Cost per click is the most basic and easy to obtain evaluation metric in search marketing. Unfortunately, clicks are of limited value for a number of reasons. First they do not represent whether or not a purchase has taken place. Second, they offer no view of sales value. Third, they are the metric by which most paid search campaigns are traded. Search engine owners want to sell you as many clicks as possible because they’re paid by the click. But you need sales because only sales will drive your business forward. So how can you move from evaluating search on clicks alone? There are two options:

2) Cost per Action

Cost per Action (sometimes called Cost per Conversion) is a much more interesting metric. It can be obtained using either the conversion tracking tool in Google’s main Adwords dashboard or via the Google Analytics tool. You can set conversions as particular actions “goals” or on your site. These might be sales, leads or subscription sign-ups. So if you have a target cost for generating lead or sale, conversion tracking can help you to achieve this. But there is a problem with looking at Cost per Action alone; it does not allow you to understand your revenue Return on Investment.

3) Revenue Return on Investment

Search marketing can only be fully optimised when you can understand the relationship between the cost of generating a sale and the value of that sale. If you are selling a product, or capturing online orders, then it is possible to capture the sales value from the forms generated on your web site. You can then use an analytics tools to look at the relationship between sales cost and sales value across either keywords, ad texts or products.

How do we develop ROI as an evaluation metric?

Calculating ROI in isolation of margins can produce superficially healthy feedback which in fact covers potentially disastrous business practice. ROI ratios can be used to help us understand the business metrics that keep businesses healthy - gross and net profit margins.  Here’s an example of three sales:

1) Sales Value: £200 Cost Per Sale: £50 Sales ROI: 400%

2) Sales Value: £600 Cost Per Sale: £100 Sales ROI: 600%

3) Sales Value: £900 Cost Per Sale: £125 Sales ROI: 720%

So, which sale would you rather have? In sale 1, the cost of the sale is 25% of the revenue generated. In sale 2, the cost of the sale is 16.6% of the revenue generated.  In sale 3, the cost of the sale is 13.8% of the revenue generated. Whilst the capital cost of sale 3 is much higher, it offers more potential profit because it’s a lower proportion of the revenue generated.

If you were optimising your campaign on a cost per sale basis at £75 per sale, then cutting out keywords or ad text that delivered over this level may mean that you miss out on higher margin business which offers better profitability. In a worse scenario, because revenue is flowing in, you might think that the relationship between ppc spend and revenue is healthy and bid for a higher share of the market. But this may be an online form of the venus flytrap;  the revenue may mask preilkously low margins or even loss-making business.

As a post text, there’s an interesting book about understanding the economics of generating sales in direct marketing by Peter Rosenwald, a former CEO of both Wunderman Worldwide and Saatchi & Saatchi Direct called “Accountable Marketing, The economics of Data Driven Marketing”.  Rosenwald attaches great importance to calculating and understanding your own “Allowable Cost Per Order” (ACPO) so that you can organise your marketing activity to deliver profits as well as sales.  Tim Ambler at London Business School takes these ideas further, arguing that marketers need to look at the rate at which cash is generated in relation to outgoing marketing expenditure.

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