Once a month, I take a peak in my ‘to read’ folder in my Google Drive and catch up on some reading.
One almost-forgotten article written by MarketingProfs.com highlighted some research showing big measurement gap between ‘what’s important to management’ and ‘what can actually be measured.‘ (see chart way below). According to the research, marketers seem to focus on data that is least important to management; they tend to focus on likes, clicks, downloads, etc. Unfortunately only a small percentage are starting to focus on key areas such as customer lifetime value:
In an earlier interview here, Gary Angel, CEO of Semphonic highlighted this points:
They are (beginning to) look at customer segmentation and lifetime value, and building predictive models that help you understand which customers might attrite or which are the best candidates for retention- models and analysis that really help you understand which of your operational and marketing efforts drive incremental lift and change customer behavior.
Financial institutions, airlines and others with affinity type of programs have been some of the few industries to understand their various customers from a financial perspective. When I worked at American Express back in the late 1900s (1989-1992), all members were placed in deciles (In descriptive statistics, any of the nine values that divide the sorted data into ten equal parts, so that each part represents 1/10 of the sample or population). Companies, especially those on the web or on mobile platforms, need to start approaching their customer base in this manner so they can understand their most valuable customers (not always the ones spending the most), their least valuable customers, and those with high probability to move up to one of these important segments.
Some important items to consider when looking at the value of a customer:
- Determine how much it cost to engage with them and drive them to a transaction
- Break this information down by channel (Google, social network, email, etc.)
- Subtract your costs (decide if you want to make these costs fully-loaded included the costs of employees)
- Ensure that you can track each individual, their original channel, etc. over time
Tracking true ROI and lifetime value requires a real metamorphic change in some organizations. It requires a lot of data crunching, strong analytic skills (something that is in high demand), and is intellectually challenging. As Gary Angel points out it’s a challenge “to balance the long-term impact on retention with a short-term monetization opportunity around display than to simply “optimize” your revenue, that the two tasks can hardly be compared.”
The research also touched upon the discrepancy between what is being tracked and what managements wants to track were highlighted in the reports, such as brand awarenes: 78% of marketers said it is important to executive leadership, but just 32% of them feel they can actually assess this. This is nothing new. For decades, brand (only) marketers have fought to prove their value because so much of awareness advertising is untrackable.
Today, though, marketers finally realize that building brand encompasses a great deal more than a nice logo or tag line. The complete customer experience impacts the awareness and impact of a brand. (See my Hugh Dubberly interview).
One area marketers seem to be doing a good job is in driving traffic to the site. The problem, however, is that driving traffic to the site is kind of an older paradigm (unless you want to own all the transactions). I would recommend to ‘fish where the fish are,’ and conduct your marketing efforts and engage with customers where they spend their time.
NOTE: MarketingProfs.com customer base was used for this research. It’s site states that it’s user base consists of 449,000 entrepreneurs, small-business owners, and professional marketers at the world’s largest corporations. This leads me to believe that not many executives were included their research. Most of these people (at least ones I work with and some of my big data research has shown) believe management can not clearly articulate its KPI’s for success. Lets just say there’s a healthy tension between the two groups.
It’s important to really (gently) force management to clearly articulate its quantitative criteria for success, and if you don’t have the means to get to those numbers yourself, then seek outside assistance. I can recommend some firms, if you would like (and not promote myself).