Dressed for Success - Using the Right Metrics

This past week was pretty busy for me. Valentine’s Day, getting ready for a trip to New York this week (half pleasure, half business), and putting together a couple of plans for some clients desperate to grow, grow, GROW.

It started with Valentine’s Day and the fear that I wasn’t going to be able to do something – ANYTHING – special for my girlfriend. She has a night class at Berkeley and it was meeting that night until 9 p.m. or so. We ended up not doing anything and decided instead to have a terrific dinner at a very excellent restaurant in San Francisco on Thursday.

I’d heard about the place and had passed it dozens of times. It’s beautiful: an artfully weathered brick building surrounded by small trees dotted with tiny white lights. It was designed by an architect well known among people who pay attention to these kinds of things, and the chef, too, has an excellent reputation. An attractive facade, a compelling menu and a potent word-of-mouth reputation drew me in.

Once seated, I had a good chance to check out the menu more closely. I looked at the appetizers, the salads, the entrees, the wine list, and the prices. I settled on a pan-seared foie gras and poached pear slices with port sauce on a bed of green lentils, an arugula salad, and a stuffed squab. It was absolutely excellent. The wine was forgettable, but I felt that I had to get a bottle and spent the extra money on it. A marvelous dining experience that I have recommended – and will continue to recommend – to all I meet.

The dining experience I briefly describe above is analogous to an online buying experience. The attractive exterior and the things I’d heard about the place got me in the door, just like a banner with great creative featuring a compelling value proposition or a name I recognize tempts me to click through. In both cases I am responding to the call being proffered by the advertising and the reputation the name has built.

Perusing the menu is akin to going to the site and seeing in detail what is being offered. What items do I like? What items don’t I like? How much are those items that attract my attention? Do I want to try only one thing? A few things? Ancillary items? (Such as that bottle of wine.)

And then comes the order.

So how much is what I decide upon? Just how many dollars am I going to drop at this place? Will I end up spending enough to make the cost of drawing me in worthwhile to the company? Will I spend a lot more than that cost, or just a little?

All such considerations you should take into account when projecting or analyzing the back end of your online ad campaign.

The campaigns we looked at this week for some of my clients used the following metrics to help determine success. In my opinion, these are really all you need and are the most meaningful for advertisers.

Cost per Click (CPC)

This to me is the least meaningful metric if you are interested in moving product. But it is one of the most meaningful if you are simply trying to drive traffic.

If I’m selling widgets, how much it cost me to get you to my widget site is interesting, but if you buy nothing, I’m wasting my money. On the other hand, if I’m a publisher wanting to get my traffic numbers up for the purposes of selling ad space or positioning myself in the market as having a certain-sized audience, then CPC is a very important metric. Because many clients and agencies do not have the capability to garner more robust back-end data, this is the most common metric for determining success. Anything under a buck is usually a good place to be.

Cost per Pageview Generated

This metric is really only meaningful if the advertiser is a publisher. If my objective is to be the most read magazine catering to underwater basket weavers (my favorite super-niche target), then it isn’t simply one-time traffic I’m interested in, but how many pages a visitor sees.

This is also an important metric for publishers whose business model relies on ad revenue. I want to generate pages on which I can place advertising for less money than I can sell that advertising to others. What a good cost per pageview is depends upon what you can sell your advertising for.

Cost per Order

More and more, clients are finally starting to ask for this kind of analysis, and business objectives are being set by this metric. How much it cost me to get you in the door is really the best gauge of what my advertising is doing for my business. Not because it’s truly the most meaningful, but because it’s the simplest way to cross-tab ad spending with results.

When the data is read, what shakes out as winning and losing placements or ad units, directionally, indicates what is and isn’t working. Though you’d be surprised at how many clients or agencies do not have a way of collecting and reporting on this data, it is becoming more and more common to use it as an indicator of success or failure.

Advertising-to-Sales Ratio (A/S Ratio)

This is, in my view, the most compelling metric of all. An A/S ratio is a way of stating the relationship between the dollars spent in advertising and marketing, and the income thereby generated.

In traditional media, we used to include, when available, A/S ratio data as part of a comprehensive competitive spending report to reflect just how much it was costing advertisers in a given category to generate revenue. The problem with most available data in the offline space was that specific income could not be linked to specific marketing efforts.

Online, however, I can actually follow a click on a banner or text link all the way to the cash register and see how much it cost me to get each dollar spent there. If it cost me $.99 to draw in $1, I’m ahead of the game.

There are other, longer-term metrics to consider, most importantly lifetime value. But the ones I’ve outlined above can be used to determine the success of almost any campaign. And if you’re successful, you can go to that great restaurant and celebrate.