Internet Marketing Metrics that Matter
Well hello, everybody, and welcome to this week’s podcast. My name is Paul Slack. I’m coming to you live from Dallas, Texas. I have my co-host with me, Ray Larson. Who happens to be in the frozen tundra of St. Paul, Minnesota. Ray, Why don’t you let everybody know what we are going to be talking about today? Well, Paul, you love to remind everybody that it’s warmer where you are than where I am. And yes, it is the frozen tundra in St. Paul Minnesota. It’s 9 degrees here today. This week we’re going to be talking about marketing metrics that matter. As a business owner, and past CEO, I can’t tell you how many times, in my past, I was bombarded with statistics that had nothing to do with how my business was performing. Instead, they had everything to do about how my employee was performing. So, what we’re going to do today, and for the next couple of podcasts, is that we are going to talk to you about how to cut through the clutter and concentrate …
… on the essential few metrics that mean the most to you as a business owner. Where I’d like to start is with a quick story of one our customers. He was reviewing a performance report for a directory listing that he had signed up for last year recently received through email. And naturally, they wanted him to re-up. So they concocted a totally bogus spreadsheet showing that their directory listing provided five times … … what actually happened in terms of referrals and a bounce rate for their directory… … that was lower than Google’s organic traffic. Have you seen this very often, Paul? I was flabbergasted. Well you know, that’s why having a session on the marketing metrics that matter is so important, because if you don’t really know the marketing metrics that do matter for your business … … it is really easy for the agency, or that employee, to give you information that looks important, but is really meaningless.
We do see it from time to time, usually not as flagrant as what we saw this week, where the numbers were quite frankly just a lie in a desire to get their client to re-up in their directory. We were able to very quickly prove that just by looking at Google Analytics. Yeah, I don’t see that very often. I thought it was pretty bold. I always talk to you about this analytics guru that I follow. I read his blogs and books. His name is Avinash Kaushik, and he is the Google Analytics evangelist. He is a public speaker and author. Kaushik is really good about distilling down something that can be very, very complicated down into what he calls a “select few metrics”. Basically, what Kaushik proposes is that you need to be kind of myopic. Analytics is this great, big, tool and there is a ton of information there.
As business owners, we need to be myopic to the things that are existential to your business: what are the metrics that tell you how healthy your business is? He then proposes that everyone in the organization needs to know what the metrics are. Have you heard of Kaushik before, Paul, and this kind of philosophy about distilling everything down to a “select few” as he calls it? Yes, absolutely. When it comes down to it, we can all suffer from something call “analysis paralysis”. Quite frankly, there is so much that you can measure and when you think about internet marketing, there is so much more than you can measure than other … … traditional types of marketing, because everything is so tractable. Given the fact that we have this mountain of information available to us, it really is critical that you do get a little myopic … … and find out what are those core things that really are the drivers of your marketing campaigns online.
You really need pay attention to those, and as we’ll talk about a little later on, “manage by exception” is to really focus in when those key … … metrics aren’t hitting where you hoped that they would. Asking yourself the difficult question of “why?”, and how do we fix that. As long as I’ve know you, you’re a process guy. And you have been talking about this tool called a Marketing Balanced Scorecard. When I first heard about it, I looked it up online and did an image search to see how exactly a balanced score card was supposed to look. I think it’s a really powerful tool, but I think that it can get really complicated. As a matter of fact, let me read you the definition of a balanced score card. The new balanced scorecard transforms an organizations strategic plan from an attractive … … but passive, document, into marginal orders for the organization on a daily basis that provides the framework that not only provides performance measurements …
… but helps planners identify what should be done and measured, and enables execs to truly execute their strategies. When I look this up online, it seems like that this tool has been hijacked over the years, and is something that is very complicated. I know that you have a very different take on that. Let me just explain for those of you who may not be familiar with the balanced scorecard. Like you said, Ray, that concept has been around a long time.
It is a very valuable tool for running your business. In a typical balanced scorecard, you’re looking at these 4 key quadrants that are inter-related and kind of feed into one another. That is why it is called a balanced scorecard. It helps you look at key areas within your business so that you can identify what needs your attention. I’ve been a big fan of, as you mention, of a balanced scorecard. What we’ve done to really manage the desired outcomes for our clients is to come up with a scorecard for internet marketing. What I’d like to do is cover those really quickly and then we’ll go into each one of these in more detail.
Then plan the next four podcasts will be covering each quadrant of our score card. But the 4 quadrants are the four P’s. The first is the Purpose quadrant, where you want to measure and manage what is the purpose of your website, and how are you doing as it relates to the purpose of the website. Are you achieving that macro objective, that we talked about in our last week’s podcast? The second quadrant is the Profit quadrant; this is where we’re going to measure metrics around profit and production of leads and production of sales at the right dollar amount.
That gets into the micro key performance key indicators that we talked about last week. The third quadrant is the People quadrant. This is where we want to measure activity that humans are interacting with us. Somehow, someway, inside the internet. Inside our website. The fourth quadrant is production. Are we producing the things that we planned on producing to help us really achieve our objective. Well, going back to Kaushik and tied into what you’d said, just an editorial comment.
These four p’s that you’ve come up with, just now makes sense. When I first looked it up on the Internet, I said to myself, “No way! I’m a business executive. I got a huge organization, I have a lot of things I need to cover. I need to look one place and see how healthy my business is.” So starting with purpose, this is where you would state your mission statement or this is your mission statement for your online activities? Yes, going back to what we said last week, if you’re going to be successful online, you got to be putting in a quota.
In order to put internet marketing on a quota, we have to have a macro goal, and we have to have micro key performance indicators. So what goes in the purpose quadrant of your balanced scorecard really is an understanding of the purpose of your website … … and how you are going to measure that macro objective. Last week we used the example of: your business wants to grow by a million dollars in net-new-revenue in a 12-month period of time … … and you wanted the internet to generate about 10% of that, or a $100,000. And so what you’d put in that first quadrant, that purpose quadrant, in this example, is $100,000.
But more specifically, Ray, is break that down by quarters. What is my Q1 contribution towards that $100,000 goal? What’s my Q2? It might be as simple as $25,000 for each quarter. Maybe ramp it up in Q4 will have more of a contribution than Q1. Have 5 or 10 thousand in Q1, 20 in Q2, etc… But for arguments sake, just for today, let’s pretend that each of our goals for each quarter is just taking that 100k and dividing by 4.
So, 25 thousand dollars each quarter. Very easy for you to understand, as a business owner: am I achieving my internet marking objective? Simply looking at the numbers at the end of the quarter, and saying “is there 25k in net revenue contributed by the internet or not?” Now you now if you achieved that objective or not. Well, I like that you used the word “macro objective”, because we talked about macro and micro objectives. So the purpose quadrant is where I’m going to find my macro objective. Do you propose that everyone on your team knows what that macro objective is? Quite frankly, everybody on your team needs to know each of the quadrants and what the goals are KPI’s are for each of the quadrants. But absolutely, you want to share that with everybody. You know, that sounds so 1960’s-ish, that you would not let your employees know what the goals are or what the metrics are. In this day and age … … especially with transparency, with team building, and advanced management techniques … … I think that is important that there is transparency and everybody knows which way that the team is to work toward.
Is that correct? Yes! That is absolutely correct. So, in the next quadrant, we’re going to talk about profits. And I guess this is where we’re going to have more of the micro objectives? Yeah, this is absolutely where some of the key macro or micro rather key performance indicators come into play. So the first P, that’s the Purpose quadrant, is where our macro objective lives. The second quadrant, and kind of working from left to right, is the profit quadrant. This is where we’re wanting to make sure, that not only are we hitting our revenue goal, but we’re hitting our revenue goal that is profitable to the business.
Ray, you’re an entrepreneur like I am, generating a $100,000 in a year sounds great unless is costs $200,000 to produce it, right? Yes, I don’t want to say “done that”… but I was actually doing that until you came along in 2003 … … and gave me a dose of reality and told me that I was spending way too much for my sales. And certain ones, remember? You have those really cool simple human trashcans that you were selling for about a $100 a piece. We looked at the metrics, and you were paying $150 for a sale. Remember that? I remember that very distinctly. It hurt. My introduction to you was a splash of reality—it was like cold water. But you set me straight! Yeah! That is exactly where we are getting. We are getting into the profit goals. What makes up the profit goals would be— actually, you wrote a great blog this week about CLV, Ray, and understanding the customer lifetime value, and this is where you’re going to understand how long a customer stays with you.
Are there any changes in that? Has your lifetime value gotten smaller?–because that is critical. If your lifetime value has gone from 3 years to 6 months, that is going to change your profit and everything else. You need to constantly monitor the lifetime value and your margins that you’re making with the average customer. Getting more micro, get into the CPA, cost per acquisition. You talked about that in your blog this week. What did we spend over the quarter and how many sales did we make. When divided those together, did I achieve my cost per acquisition target?–and the same for leads? How much did I spend in the quarter? How many leads did I generate? Were they are the right cost per lead? Has anything changed to my customer lifetime value, or am I hitting my goals.
Am I hitting my goals for cost of acquisitions? Am I hitting my goal for cost of leads? So those are the things that make up that second quadrant, the profit quadrant. As I get older, that simple human example, it kind of ties back to why I wrote that blog about CLV. Told you that I always want to continue to learn. I didn’t feel that strong about my understanding of CLV. So, what do I do? I dig in and do the research and write! Now we’re going to talk about people. I’m not sure exactly how this fits in. I understand. We’ve got a profit at our macro object that shows us by metrics if we are getting close to our goal.
How do people figure in this? Great question, Ray! Remember the whole idea about having a balanced scorecard isn’t about creating a lot of work for us, or creating … … a lot of work for our clients to understand what we’re doing… or to understand our value. It is designed to work together as a team and to be able to manage by exception and to focus our mental energy on things … … things that aren’t working so that we can continue to spiral our internet marketing initiatives in the right direction. The reason why we have to look at people, is ‘people’ is going to be potentially an indicator where things aren’t working.
So, we have to have goals around “how do human beings interact with us on the internet?” Inside of the People quadrant, you’re going to have things like community growth: how many new likes do you want? —how many new followers were you expecting on your twitter environment? —how many visitors came to your website during that period of time and how does that relate to what you are expecting? –How many came from search?–Froom paid search? These are example of things that might be in that People quadrant. Now every business is different, so you have to design that People quadrant on where you are focusing.
If you’re not focusing on Facebook, if that’s not a channel for your business, maybe you’re a B2B company … … and that’s not where you think you should be, then certainly you’re not going to have a KPI around Facebook community growth. But maybe you’re going to have something over on LinkedIn. So understand: what are those people behaviors and things that we can measure? —growth, traffic, engagement, are people liking my blog, sharing my blog, or are people retweeting my tweets? These are all things that you can measure that are an indicator of if you’re bringing in the right type of buyer and if they’re … … ultimately going to become leads or sales that are going to become revenue and profit, leading to your goal. That is how the people quadrant comes into play. If you think about it, you cant really have a balanced scorecard without knowing what the people goals are. That makes a lot of sense now, thanks for explaining that very clearly to this dense person sometimes. So the last quadrant is Production. I assume that to get those people and hit those micro conversion we’re going to have to produce.
Right, absolutely. One thing, Ray, you say all the time, I say all the time, content is the fuel that makes your internet marketing campaigns go. You can’t have a great objective, and you can’t have great KPI and goals as it relates to human behavior … … without producing something that you’re going to publish out into the internet on a regular basis. That’s what we’re talking about on a production perspective. As you’re in that strategic planning phase, building out your business plan for the next 12 months … … you’re going to come up with a game plan that says “we’re going to be publishing a blog a week. We need a video a month. We need to be doing some long form content once a quarter.” Every business is different, but you need to come up with that game plan of producing that lead-with-value content that you’re going to be sharing with your community.
And by sharing it with your community that moves very quickly into the people quadrant. They are going to interact with that and visit it, which will show traffic. They are going to like and share it. They are going to opt-in for it. These are all example of why production is important. If we have our production goals in place that tie into our people goals, which tie into our leads/sales/CLV … … which ultimately ties into our objectives, now we are in a really good position to know when things are falling short. Remember, Ray, last week we talked about that torpedo analogy, where torpedoes are really never on target, they are always heading …
… in a direction and they’ve got servos on board that kind of tell them when they need to shift course. But they are deadly accurate, even though they are never really on target. The balanced scorecard kind of becomes that servo for our internet marketing campaign, so … … every time we look at this, we can say “hey, we didn’t hit our objective this quarter, and why is that?” “Well it was because of our cost of acquisition being too high.” “Why was our cost of acquisition too high?” “Well maybe it is because we spent a lot of money but we didn’t get the visitors to our site.” “Why?!” “Maybe we didn’t write enough blogs or didn’t make enough videos.” You can see how it all starts to come together, making it really easy to reverse-engineer and fix those things that aren’t working.
When we first started talking about this a couple of weeks ago, you gave me three purposes of a balanced scorecard: course correction, management by exception, and quarter by quarter goals. Do I have a pretty good understanding of this now? Absolutely, Ray. I’m glad you brought up the quarterly thing too, because these balanced scorecards are really important and we do get pretty myopic with them. That is why I do not recommend exceeded a Balanced Scorecard meeting but once a quarter. In between those quarterly meetings, you do want to get monthly updates, and your team should be looking, updating, and analyzing, on a daily and weekly basis … … but I don’t think you need to have a big balanced scorecard meeting every single month.
In between those things, you want to look at KPI’s, certainly around where you are spending money. For example, if you’re doing Google Adwords or Facebook ads, you want to see if you are spending according to your goals. If my budget is $5,000 a month, am I spending $5,000 a month? Am I getting the traffic? How many leads or sales did it lead to? Don’t go in and try to fix or course correct in these big ways like a balanced scorecard will help you do, but maybe once a quarter. Paul, is there anything else you’d like to add on the balanced scorecard?—I think we hit it pretty well. I do think that one of the key things that everybody needs to understand is going and jumping into the deep waters of internet marketing is really important. I think every business needs to be in internet marketing.
I don’t care if you’re a B2B or a B2C company. Really one of the key goals is that we want you to win. You can participate in tactics and a lot of people are going to try to put shiny tactics … … in front of you, or try to get you to invest in the next big thing. One thing that we really want to focus on is how tactics follow strategy. Then, overlay key metrics and measurement that matter so that you can make those course-corrections, ultimately winning. There are too many companies out there spending too much money online not getting results needed to generate. Thank you, Paul! Thank you for joining us. Next week we will talk about mission statements, goal crafting, and how we want you to win.
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