So you are a small business owner and you finally got your website up and you set up your Google Analytics account. However, after a week of collecting data you opened up your GA tools and emerged four hours later feeling overwhelmed and wondering, “Where do I start?!” One of the major pitfalls analyst fall into is that they get lost in all of the metrics. IT does not have to be this way. You too can turn a bunch of metrics into a mosaic. Avinash Kaushik presents a model to help every analyst turn their website into a work of art through his Digital Marketing & Measurement Model.
The Digital Marketing & Measurement Model consists of five basic steps: an analyst needs to identify the business objectives, goals of the objectives, the Key Performance Indicators (KPI), targets, and the valuable segments for analysis. This blog post will focus primarily on the third step, identifying KPIs, as this is where managers start relying on Ninjas and their nunchucks.
Steps 1 & 2: Identify the Business Objectives and Goals for Each Objective
Before you open your GA account, you need to stop and think about where you are going. It does not matter what road you travel if you don’t have a destination. Senior level executives will direct this conversation. Management will also decide what the goals will be to help the site or campaign get meet the business objectives. According to Kaushik this is the one time where it is a good thing to be DUMB, that is your objectives should be Doable Understandable, Manageable, and Beneficial. Your business objectives must reflect why you are doing what you are doing. Once the objectives are outlined then it is time to identify the goals for each objective.
Accomplishing your goals should take you one step closer to your objectives. This too can be tricky. For example, if you want to lose weight there are two strategies to take. One strategy would be just to diet and just make sure you burn more calories than you take in for a relatively short period of time. Minimal calorie intake would be one goal. Another strategy would be to simply start eliminating bad dietary habits one at a time over a lifetime. For example one could set the goal to stop eating carbs late at night or in front of the TV. Both goals will help you to lose weight. However, only one of these goals will most likely result in long term success. By engaging in a discussion with different stakeholders you will be able to determine effective and realistic business objectives and goals.
Step 3: Identify the Key Performance Indicators
This is where you get to bring out your weapon of choice as an action hero or ninja. Your job is to cut out the simple metrics and pull out the right KPI. When it comes to KPIs, you need more than just metrics. Metrics are just numbers – counts or ratios. Don’t get me wrong. Metrics are important. They provide some contextual information and serve as baseline data for your website or blog. In fact, Avinash suggests there are basic primitive metrics every analyst needs to become familiar with first on their website: visits, bounce rate, page views, pages/visits, average time on site % new visits and sources of traffic (Kaushik 2009). However, just knowing these numbers and working to increase them does not necessarily translate into profit or progress.
Key Performance Indictors (KPIs) are metrics. However, these metrics help you understand your business objectives (Kaushik 2009). Thinking of potential KPIs is not so difficult. Here are a few examples:
- Checkout Conversion Rate
- Order Conversion Rate
- Buyer Conversion Rate
- Checkout Initiation Rate
- Product Browse to Cart Add Ratio
- Category Browse to Cart Add Ratio
- Product Browse to Buy Ratios
- Shopping Cart Addition
- Percent of Visitors Using Search
- Search Yield Rate
- Customer Satisfaction Score
The difficult part is actually determining which KPI’s best represent your business objectives. As DA and analysts have matured it has become clear that not all KPI’s measure what we think it measures. For example, During the early stages most analysts obsessed about Conversion Rate Optimization. The idea was increased conversion = increased profit. This however, does not always prove true. In his blog post Case Study: Why you should Stop Optimizing for Conversion Rate Sharma, uses the following table to illustrate this point:
This company saw a 67% increase in conversion while experiencing a 33% decrease in product revenue. How could this happen!?! The average order value decreased. This seems simple enough but many businesses continue to make this mistake. A couple of months ago a guest speaker from a well-known ecommerce company described how they fell for this same exact mistake. They decided their goal was to increase profit by increasing sales. So they designed a promotion to help increase their sales. To do this they released a special BOGO promotion. As a result they increased sales but they also lost revenue over the next quarter because they cannibalized their sales. They ended up “shooting themselves in the foot” because they were using the wrong metric as their KPI.
To help his readers avoid this pitfall, Kaushik has created guidelines for determining the best KPI for a business.
The Eight Avinash Rules for Entering KPI Heaven:
- Start simple, start direct, and please start with Outcomes!
- Leverage metrics that identify success for areas where you spend the largest efforts.
- Wean your Marketers off the "one night stand" mentality, do pan session analysis.
- If you can't segment a Key Performance Indicator, you have picked the wrong one.
- Even "brand" and "site usage" can be measured, Loyalty rocks!
- If your short list of KPI's don't include a couple that report customer voice directly then you will Never be as successful as you should be.
- Using KPI's that can tie back to the "old world" and "traditional metrics" and help you bring people to the current age.
- Not using Competitive Intelligence KPI's can be considered a crime against humanity!
Determining which KPIs to monitor and how to relay the information to your team members is where you, the analyst, gets to flex your muscles.
Steps 4 and 5: Identify the Targets and Identify Segments for Analysis
These next steps also require engaging in discussions with other team members. The people eager to help you set your targets include management, clients, and even your finance guys. How are you going to know whether or not your KPIs measurements are reflecting positive or negative changes? You need to set targets in order to hold the campaign or website accountable.
The market researcher in me gets way excited when I hear the word segmentation. This is where you can learn about different groups within your customer base. However, again, as with many of the GA metrics you can go a million different directions. As it was critical to talk with your executives and other managers about your business objectives, goals, and targets it is also important to talk to them about what are the most important segments to focus on. Once you understand your primary customer you can start tailoring your website or campaign to meet their needs better. This will potentially result in higher customer acquisition and loyalty among other things.
By following the Digital Marketing & Digital Measurement Model you have developed a structure that will allow you to jump into Google Analytics as an analyst. Because you already know what you are looking for you no longer feel overwhelmed by all the possibilities. Instead you have confidence and know exactly what information you are looking for. AS you continue to learn from your KPIs and make this process iterative you will find that your website that was once pretty good has evolved into a profitable work of art.