Metrics seem to be an obvious component of any SEM program. Unfortunately, it is too easy to set up quick metrics and call it a day. Some of the more common ones are:
-Click through rate (CTR)
-Cost per click (CPC)
-Impressions
-Page views
-Time spent
Some often talked about but seldom used, I mean truly used are:
-Conversions
-Cost per Sale
-Margin
-Units per Sale
-Revenue
In short, metrics tied to real ROI.
It's funny, but I have been in conversations with heads of marketing and advertising for some large companies. They pushed us as an agency to prove the ROI of our program, which we were perfectly willing to do (this was off-line). We could set up unique tracking right into the store and online. They would simply have to provide sales related to the tracking. This is when they balked. Despite all the talk of ROI, most companies are not set up to truly track sales-to-efforts.
With search, we should be able to close the sales-to-effort gap. The preferred Methods are the direct methods. These include attaching source information to each visitor and tracking where they go and what they buy.
While every company is about the sale, not all online activity is. So the question to address is, "why are you doing search advertising?" Somewhere your activity online is expected create or assist in a sale. Are email newsletter subscribers your target? How about inquiries or phone calls (click to call on site, or track-able phone number)? If you can only get as far us measuring visits, then nail down specific pages, or page views or time spent which tie as closely as possible to the sale.
Then know the percent who buy and the average amount of purchases or life time value.
You must also figure SEM's role in generating the sale. Ask, "if we weren't doing SEM how many of these sale would have come any way?" And.. . "If we didn't have radio, direct mail, display or other Brand and promotional marketing, how many sales would SEM miss as a result?" Both are extremely difficult to answer. But both should evoke a line of thinking that helps define the metrics that are as close as possible to real ROI.
The ultimate goal here is to define your activities in terms of revenue generated or margin contributed rather than on some cost basis. Below are some scenarios based on direct sales and email newsletter subscriptions. These may reflect closely what your program is, or they may not. The point here is to let these help you figure a way to set metrics that truly show the value of your efforts.
The closer you can come to isolating your efforts and focus on your margin the better. But, we all know there are other factors, so you will avoid issues if your metrics account for these up front. If you have a good analytics group, they can help you out here. If not, build a consensus among other stakeholders in marketing, advertising and sales. Some methods are Unique sale - answering the question about how many sales does SEM generate that would not happen without it; Assigned Value which provides the amount, or value other media have on each sale, and the indirect where the action is not a sale, but will lead to sales.
Most likely, these will be estimates. But, if you continually monitor these assumptions, you can keep these numbers close to reality and show real value.
Beyond the ability to show the value of what you do, developing a margin based approach can open a different risk paradigm that allows you to find more opportunities. A while back I went off on the whole risk thing.
After you figure the metrics, the next step is setting up your tracking… more to come.
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