In an increasingly competitive B2B environment, growth through strategy is vital. Standing still and maintaining the status quo can be a death sentence for a business, so you need to be moving forward at all times.
But, how do you know what direction you’re moving? Or, whether you’re moving at all?
You need to measure it.
THE IMPORTANCE OF DATA ANALYSIS
What gets measured can be improved, the saying goes. So, modern businesses seem to measure everything.
These days, getting your hands on data is not the problem. Especially when considering ecommerce or digital marketing efforts, the problem may be too much data. Various automated solutions like Google Analytics run behind the scenes of nearly every website. And, more sophisticated programs are in place in most enterprises to capture every interaction across every digital touchpoint.
Your organization may invest a lot of time and resources into collecting and analyzing incredible amounts of data. You’ve tied your short- and long-term business goals to a host of KPIs and OKRs. And, decisions involving budgets, schedules, and the strategic aim of the entire enterprise may be swayed by the metrics informing those initiatives.
But, having access to this preponderance of data doesn’t automatically lead to strategic insights. Reliance on some of the most easily accessible data can lead to inaccurate conclusions and poor strategic decisions. And, regrettably, this is a trap many companies fall victim to.
THE LURE (AND THE TRAP) OF VANITY METRICS
For example, consider the ever-popular clickthrough rate (CTR).
When you create a digital campaign, the initial triggers you use to draw people in are usually social media links, display advertisements, or an email send. The goal of that outreach is to engage or intrigue your audience enough to want to know more, and that requires that they click the link. By dividing the total number of clicks by how many people saw the link, you arrive at the CTR.
Obviously, each time someone clicks through a given ad or social post, that’s a win. It tells you that the enticement you chose was compelling. A higher CTR can validate assumptions you’ve made about list segmentation, audience engagement, and persona creation. It’s also great for A/B testing and optimization of various top-level campaigns.
But, is CTR a metric your CEO or CFO cares about? Does it indicate whether a given campaign is successful from the standpoint of real business objectives?
Not at all.
It’s a vanity metric: a measurement that’s quick and easy to find and understand, and that might look good on the surface. And, it even has its place in low-level marketing analysis. But, it certainly shouldn’t be part of any high-level strategic decisions or performance analysis at the enterprise level.
Here are some other examples of easily accessible data that fall into the realm of vanity metrics:
- Website visitors/sessions/pageviews
- Social media followers
- Ad impressions
- Number of new leads
- Cost per lead
There are many more, as well. That doesn’t mean any of these measurements are worthless. In fact, all of them can be informative, and many can be instrumental in arriving at actionable insights. But, they don’t say enough on their own to justify the position of importance many marketing pros (and, sadly, even agencies and consultants) bestow upon them.
The bottom line is this: if the measurement you are analyzing cannot directly inform business-level strategic decision-making — ROI, customer lifetime value, profitability, and the like — it’s probably a vanity metric.
THE METRICS YOU SHOULD BE FOCUSING ON
So, what are some metrics you should be focusing on if you’re looking to move the needle toward strategic growth? The answer is going to differ somewhat for every organization based on specific circumstances and goals. However, generally speaking, these are some that we’ve found far too many companies overlooking:
While the balance sheet is rarely the only consideration, it has to be at the top of the list, or everything else becomes a null issue. Worthy financial metrics you should be considering include:
- Total revenue by channel – This should consist of both online and offline channels, with both segmented as narrowly as is practical.
- Cost per new order – Rather than focusing on the cost per lead, this vital metric pits lead generation and other acquisition costs against just those leads that converted to paying customers — a much more important figure.
- Cost per reactivation/returning customer – Generally speaking, it’s easier and cheaper to get a new order from an existing customer than it is to find a new customer. But, if you can’t identify the most cost-effective methods, you may be missing out.
- Average order value – Whether yours is an ecommerce model or not, the amount of each order can speak to many different online and offline factors. And, increasing that average order value should be a goal for just about every business.
- Average revenue per day (week, month) – By tracking revenue over time, you can start to make reasonably reliable assumptions about future sales, as well as the expected ROI of future initiatives.
These and other financial metrics speak to the heart of every business. And, understandably, are going to be the most impactful when reporting to the C-suite on marketing performance.
Without customers, revenue would disappear. So, it makes sense that you should be analyzing data that digs deeper into who your customers are, how they interact with your business, and the best ways to engage, delight, and retain them.
- Percentage of registered customers – How many of your customers have formalized the relationship by creating an account or otherwise supplying contact information? This isn’t a consideration in all B2B scenarios, but you can apply it to similar situations like wholesale or credit accounts, supplier exclusivity, and more.
- Bounce rate and time on site – In a vacuum, these are both classic vanity metrics. But, in connection with other, more sophisticated metrics regarding the customer relationship, these can be very helpful in determining how engaging a particular piece of content or promotion is.
- Conversion rate – This is another one that could easily be a vanity metric on its own. After all, there are ways to improve conversion rates without helping the business out at all. But, when conversion rates are calculated based on those customers and revenue outcomes that most effectively meet business objectives, they can be incredibly powerful.
- Lifetime value – In many ways, this is the quintessential metric for B2B organizations. But, beyond the number itself, it provides a valuable tracking method for the impact of continuous improvement programs.
- Returning vs. new customers – Whether or not the people visiting your website are new or returning — another commonly overemphasized figure — doesn’t matter much. But, when you’re talking about customers, it becomes a vital statistic. Closely related are the type, frequency, and value of orders placed by returning customers.
If anything can temporarily steal the top priority from financial considerations, it will be the acquisition and retention of optimal customers that are most likely to provide a long and profitable relationship.
One more category of often-overlooked essential metrics sheds light on inefficient or unnecessary internal processes and systems that are eating into profitability.
- Return rates – Once again, this figure means little on its own. But, when segmented intelligently and combined with other essential factors like which channels generated the order or how long the customer spent consuming product- or service-related content, it can shine a spotlight on waste and inefficiency across several business units.
- Cost to acquire and sell – This can be eye-opening when combined with routine research into cost-saving opportunities across the supply chain. And, when this measure proves to be at its lowest possible level, it moves the onus for optimization back into operations, marketing, sales, and service.
- Cost to serve – Many organizations spend far too much of their resources on time- and labor-intensive customer service activities that could easily be replaced by self-service options, automation, or something as simple as an updated FAQ page on the website. But, until you break the cost down on a per-customer basis, that waste may not become apparent.
There are many other metrics we could discuss in depth, some of which may be especially important to the unique goals and circumstances of your business. If you’re ready to move beyond the trap of vanity metrics, contact our Insights Team to discuss ways to alter your approach to data analysis.