Today, marketing professionals have access to more data than ever before. Digital marketing is providing quantifiable measures and KPIs across channels covering interactions with customers, behaviour, choices, feelings, purchasing history, etc. At the same time, technology has significantly evolved, allowing us to collect, process and utilise data at any stage of planning and delivery of integrated campaigns.
What is interesting is that the availability of data has not transferred into meaningful insights, a full understanding of metrics and setting tangible KPIs. There is a gap between the data available and its strategic application.
Marketers Still Rely on Basic KPIs
According to a recent study conducted by AdAge and Advertiser Perceptions in the UK and US, 93% of marketers state that utilising data in processes is important. However, just 45% consider themselves advanced in applying data science. Further, 43% state that their biggest barrier to utilisation of data in marketing is the lack of understanding of its true impact on business (AdAge, 2018). In a nutshell, technology is there, but it is not fully implemented.
As a result, in many cases, marketers still rely on the basic metrics and use them as KPIs. This might include impressions, clicks, page views, traffic, time on site, email open rate, number of fans/followers. The list of measures to monitor is long and the majority of digital agencies limit their reporting to this first level of metrics and any further in-depth data analysis requires internal expertise and complex digital infrastructure.
Linking to Objectives
If we take a step back and look into what exactly a KPI is, the definition is ‘a metric that helps you understand actual performance against pre-set business objectives’ (Kaushik, 2012). The key word here is ‘objectives’. Diving into analysing metrics and setting KPIs, without thinking about the key business and marketing level objectives first limits the true potential of a data-driven approach. Moreover, there are too many metrics to select from and finding the right focus is challenging.
Of course, there isn’t a universal formula for selecting the right KPIs. Every business would have a unique set of strategic goals, objectives and needs The reality is that metrics such as impressions, clicks or followers are easy to get hold of, but the true value is in those that require combining measures and further calculations. A few examples are:
Customer Acquisition Cost (CAC)
This KPI is calculated by dividing all marketing expenses by the number of customers acquired in a specific time period. It requires precise reporting on activities and following customers through their customer journey. While challenging, it gives a really clear idea on campaign ROI.
Conversion Rates by Channel
This KPI will help you answer the most important question – what part of our media mix actually works. In the long term, you will be able to precise your marketing spent, investing in the channels bringing the highest ROI.
Average order value (AOV)
This a vital metric for businesses relying on regular purchases and cashflow. A good example is ASOS, using this metric as one of their KPIs. In 2018, their AOV was £73, indicating a 1% increase compared to the previous year (ASOS, 2019). A small increase or drop in the average order value can have a substantial impact on the profits and the marketing ROI.
Customer Lifetime Value
As generating new customers and leads is one of the most expensive marketing activities, focusing on measuring the long-term profits and retention of the existing client base should be monitored and reported on.
These are just a few examples of KPIs going beyond the traditional and vanity metrics. It is easy to spot that these are not numbers readily available through most CRM systems or platforms. Making them available will require planning, setting up processes, investment in martech and organisational commitment. Moreover, a full digital transformation might be required to facilitate the process.
This post was written by Kalust Manukyan, Digital Tutor at Oxford College of Marketing.
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