Welcome to Inside Metrics! In these Metric Guides I’ll show you the key performance indicators you need to track, but more importantly, I’ll show you how to use them to improve your business and make better decisions.
In this Guide, The Four Basic Secrets to Leveraging Your Numbers, we’ll start the series with a few fundamental secrets to building a reporting infrastructure that you can really leverage. There are four in all:
- Have a clear, actionable purpose behind every metric.
- To think like a marketer, obsess about drivers – not total numbers.
- Benchmark your marketing drivers in these three ways (below).
- Align marketing, finance and operations metrics at the outset.
1. Have a clear, actionable purpose behind every metric.
In order to make money from a metric, you need to have a clear vision of why you are tracking it. This objective will then guide you in what to do with the number once you have it in hand. The key question to ask when deciding what you will track is, how will I use this statistic, and is that likely to improve the business? If you don’t have a good answer, you shouldn’t be wasting time tracking it. Here are four basic sample objectives for tracking something:
a) Assessing Performance – Here you’re asking yourself about the effectiveness of your marketing. For example, “Am I meeting my goals for improving my performance over time?” Or “If I’m up or down, is it because I’m doing things right or because the entire industry is up or down?” This usually means trends in the higher-level key ratios of your marketing.
b) Understanding Performance – Here you’re looking for broad answers to changes in the larger summary metrics of your business. You’re trying to understand, when looking at summary numbers, what’s fundamentally driving them so that you can enhance or leverage that driver. Usually you’re simply trying to initially determine whether changes are due to volume (for example, more email names) vs. rate (net conversion rate). Drilling down into delivery rates, open rates, click-throughs, payment page hits and so on isn’t relevant for this objective.
c) Improving Performance – Here you’re turning to your detailed, in-depth metrics to tell you where you have the best opportunities for improving your marketing. “Should I focus on my landing page or my payment page? My subject line and email creative or on my conversion page?” They’re also a clue to places where you can borrow practices from one place and use them in another (for example, trying a strong-performing subject line theme as a landing page headline).
d) Planning Performance – Here your goal is to set accurate, attainable objectives to improve your business for the future. If you’ve done a good job creating and analyzing metrics from (a), (b) and (c), then this one’s a snap. Be sure however to note the last practice in this Guide about aligning systems and reports.
2. To build a business, obsess about its drivers – not its outcomes.
You want to build a big tree? Then you’re going to have to get your hands dirty and dig deeper. This is because, if you want to improve your business, the “what” (the outcome metric itself) isn’t what matters. What matters is the “why” behind that number. So you’re going to have to develop an obsession with ratios – key performance indicators – as opposed to the summary numbers which have been your focus as a business owner.
For example, you might say, “Our SEM program is very strong because it’s our highest-producing channel.” That production might be driven by either exposure volume or by conversion rate. To improve the business, you need to know which one before you act.
As a business owner, you care most about the total number. But to be a marketer, you’re going to have to care about the metric ratios behind that number.
3. Benchmark those drivers against time, goals and industry trends.
First of all, track your performance drivers over time, not just your summary total performance. Here’s an example of why.
Let’s say your business looks strong, with solid increases in subscribers every year. Good for you. But let’s look under the hood at the drivers of this performance. Ah. Interesting. What’s really happening is that industry growth is producing more site volume yet a lower-quality prospect as the universe penetration increases — and thus your conversion rate’s dropping.
In this example, if you’re only benchmarking total performance year-over-year, you’re cluelessly headed for the rocks. Once the industry growth runs out, so will your business growth, because you’ve got a crummy conversion process that’s masked by high traffic. Still feeling special? The potential buyer of your business doesn’t see it that way.
Second, you should also have target driver performance benchmarks. These help you maintain the stability of your business, fly your jet to a higher altitude and plan revenue, expenses, product production and so on. But most importantly, they enable you to set a shared expectation for personal and business performance for you and your team. Guess what? When you agree on a goal with someone, most folks will try to attain it. And when you incentivize them, they definitely will.
Share these goals and performance against them openly with your team. Concerned about confidentiality? Then use indexes (or if you’re an uptight perfectionist, “indices”). If last year’s email open rate was an index of 100, this year’s email open rate is indexing a 123 vs. last year’s baseline of 100. Share that with everyone.
Thirdly, benchmark your performance against the industry. Your top objective is to compare your performance trends vs. industry trends. If your numbers are trending up or down, you need to know whether it’s because of something you’re doing or because the market itself is changing.
Comparing absolute numbers is also valuable, and we’re all obsessed with how we compare to others. But this is challenging because every industry segment and reporting sample is different, and metric definitions often vary from place to place. I’ll provide some broad ranges in these Guides. But for detailed benchmarks as a subscription-driven website, your best bet is to use averages gathered from sites like yours, such as those provided in the Subscription Inside Benchmark Reports.
4. Align marketing, finance and operations metrics at the start.
This sounds completely unnecessary – until your life goes to Hell when you realize that the corridors and stairwells inside of your beautiful skyscraper are an unnavigable maze because you didn’t get things organized properly at the start.
Specifically, for smooth and effective analysis, you need to establish matching, shared definitions for each metric across all of your reporting systems and dashboards (typically marketing, finance and operations). Otherwise, instead of pursuing the leverageable activities described in these Inside Guides, your time will be wasted trying to reconcile confusing mis-matched answers.
The even bigger issue is that, once the problem’s emerged, reconciling and aligning the systems is like trying to untangle your six year-old daughter’s hair after forgetting to brush it for a month. Painful, inefficient and reeeeally annoying for everyone involved.
So that’s it. Four fundamentals to leverage your marketing metrics. Now let’s move onward to the next Guide, “Big Picture Reports” and continue to make your business more effective
Bill Baird, our INSIDER Guide to Inside Metrics, is a leading Internet subscription marketing advisor, specializing in insightful metrics and marketing practices to help subscription-driven online properties convert and retain more visitors and customers. His clients have included AmericanGreetings.com, Consumer Reports Online, Socrates.com, Edweek.org, Merriam-Webster.com, The Motley Fool and numerous others. He is a contributor to numerous industry trade magazines and websites, as well as a popular speaker for a variety of web marketing trade organizations. (Read Bill’s full Bio)
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