In this column, I’ve discussed a number of methods for analyzing customer data, from RFM to logistic regression. My cohort Melaney Smith has also offered advice on customer data analysis, writing on such detailed concepts as building a yield model and learning SQL. I feel confident you have found these columns beneficial and they address your own customer data analysis concerns. That said, a number of ClickZ readers have voiced a desire to read about day-to-day customer analysis. More specifically, they ask about operational metrics marketers should use on a daily basis to measure the success of their Web-based business. This column is for those readers.
A while back, I attended a workshop for interactive marketers. The featured speaker was Jim Novo, a consultant with a plethora of direct and interactive marketing experience working on behalf of companies such as Cellular One, MBNA, and Comcast. Jim’s presentation centered on concepts from a book he wrote in conjunction with ClickZ columnist Bryan Eisenberg, “The Marketer’s Common Sense Guide to E-Metrics.” I’ve read the book and digested the presentation. This week, I’ll introduce a few topics Jim covers.
This quick-read workbook is a useful tool readers can use to calculate 22 of the most important metrics for interactive marketers, including visitor engagement index; scanning visitor index; order acquisition gap, and the ever-popular return on investment (ROI). Included with each metric is a definition of the metric written in plain English, a list of data that needs to be captured to calculate the metric, a mathematical formula to calculate the metric, and an explanation of how to use the resulting metric to improve the operations of the underlying business. Any marketer getting started in Web analytics could use the workbook to develop a set of daily or weekly reports to provide insight into the health of a Web-based business. These reports could then be used to identify areas of weakness and opportunities for improvement.
Jim’s presentation focused on a concept called the “leaky bucket,” which draws an analogy between a commerce site and a leaky bucket. The aggregate number of consumers who visit a Web site make up a full bucket. As users navigate through the site to find specific product categories, select individual products, and complete the purchase process, some invariably leave. Those consumers are analogous to water dripping out of a leaky bucket. Hopefully, the leak is a drip, not a constant stream.
The important takeaway from the leaky bucket analogy is too many marketers define success in terms of the number of consumers who take a desired action: a purchase, subscription, or registration. These are referred to as macroactions. To accomplish the macroaction, each consumer who enters the Web site must first complete a series of microactions. Microactions include arriving at the home page, searching for a product category, identifying a specific product to purchase, adding the product to the shopping cart, and completing the purchase process.
Marketers should focus on the microactions to determine exactly where leaks are and focus their efforts on plugging the holes. By focusing on microactions, a marketer can identify specific problem areas and make beneficial changes. Illustratively, if a marketer finds a significant number of consumers leak after the product is placed in the shopping cart but before the purchase process has been completed, there’s obviously a problem that needs to be identified and addressed. If the marketer focuses solely on macroactions, he may know performance is dismal but doesn’t have a clue as to where he fails to meet consumer expectations.
The book provides a concise capsule of the fundamental metrics marketers need to analyze a Web business. If you’re getting an online business started and want to learn what data you need to capture and which metrics are valuable to improving your business, I recommend this book as a resource for learning the basic block and tackle of Web analytics.
Mark is off this week. Today’s column ran earlier on ClickZ.
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