If you’re like me, immersing yourself in data can provide a feeling of comfort and a sense of control, particularly in uncertain times. Lately, I’ve found myself refreshing the Johns Hopkins coronavirus website multiple times a day, or playing with the interactive charts on the highly informational Our World In Data website.
Data can also be a critical tool to inform key decisions in our lives, in our world, and in our businesses. Over the coming months, it will be imperative for our government leaders, healthcare experts and all of us as individuals to rely on sound data to keep both our communities and economy as healthy as possible.
What lessons can current events lend to marketers?
Preparedness: Adopting Sound Analytics Fundamentals
When business is booming, issues with your analytics platform installation can be mildly frustrating. However, bad data can be disastrous to your business in downturns and quickly shifting markets. Do you see anomalies in your traffic metrics, marketing channel data, or conversion reporting? Is your analytics configuration delivering data consistently? Without solid data underlying decisions, you’re unable to make business decisions with confidence.
In our experience, over 80% of web analytics installations have significant flaws. If you might fall into this category, get an analytics health check now.
Flexibility: Managing to Uncertainty
In the past few weeks, demand across business sectors has fluctuated greatly. Demand for home office essentials is up. The travel and hospitality industries are down. Web conferencing software is up. The restaurant industry is essentially shut down. At-home entertainment and streaming services are up. Shirts are up while pants are down.
The coming months are also uncertain as we head into a likely recession. As marketers, keep your budgets and marketing strategies nimble. Watch your online demand closely, day by day, and react accordingly. Consider reallocating funds across months to align to expected demand growth later in the year.
Economics: Forecasting Budget Impacts
“Marginal Rate of Return”. This is one of the most important, but also most overlooked, marketing KPIs.
Invariably, nearly every marketing channel has diminishing returns. The more you spend, the less impactful the last dollar of spend is. Many companies fall into the trap of managing their marketing spend to averages, not to the margins.
In a booming economy, the risks can be relatively low as you push the boundaries through new marketing investment. However, when business tightens and you’re required to reduce budget, where are you going to pull from? And how are you going to know the impact to your business? Is the last $100,000 of paid media spend within a million dollar budget more impactful than a certain key piece of technology investment?
Consider this simple example. As aggregate spend grows from left to right up to $500k, total marketing revenue hits $2M. Average rate of return (AROR) starts at 15:1, and remains at 4:1 at full budget consumption. However, marginal rate of return (MROR) reflects the return on the last dollar spent, and in this example, drops below 1:1 past an investment of $350k. In other words, the last $150k of spend is only producing $80k of revenue.
Don’t fall into the “averages” trap. It’s important to always know where the revenue trajectory flattens to an MROR that’s below the threshold for your business. What does your diminishing returns curve look like across each of your marketing initiatives, and how will that help shape your budget allocations?
Interdependence: Understanding Cross-Channel Behaviors
With the analytics foundation in place and a grasp on marginal returns, it’s time to tackle the interconnected relationships between marketing channels. What is the impact of your radio advertising to your paid media campaigns? What role is your social marketing playing in the discovery of and engagement with your brand? And how do you apply revenue credit back to these channels fairly?
Consumers almost always touch more than one channel on the way to a conversion. Some channels act primarily as Introducers, others as Influencers, and still others as Closers. Understanding what role channels play, and how they relate to one another, is a key element to making the right budget allocations.
Typically, enterprise marketers use Multi-Touch Attribution (MTA) solutions to track every consumer touchpoint along their conversion path and apply statistical modeling to show the relative contribution to each order. In this way you can see that for a $100 purchase, SEO should receive $25 credit, paid media should receive $40 credit, and email should receive $35 credit.
In aggregate, those credits against total converted revenue can be transformed into a view of incrementality. For example, of all paid media revenue tracked, perhaps 60% of that revenue should be considered incremental. Or perhaps one affiliate partner’s revenue is proven to be 80% incremental while another’s was only 30%. Understanding the incremental benefit through this new metric will generate the most accurate picture of relative channel value.
Putting It All Together
It is now more important than ever for marketers to use the data at their disposal to make the best and most informed decisions for the most favorable business outcomes. By ensuring a sound analytics platform installation, keeping your marketing budgets and strategies nimble, considering marginal rate of return and understanding cross-channel behaviors, you can make your marketing dollars work harder for you during these unprecedented times.