Marketing Analytics & Key Performance Indicators
Posted by Ryan Nokes 7/14/09
(Part 3 of 6)
In our quest to apply actionable marketing analytics to corporate visions, we’ve discussed creating visions and then linking them to objectives. Now, we are going to show how to tie the objectives into specific, measurable, key performance indicators (KPIs).
In our last post, we decided that Ellemenopea.com could achieve their hypothetical vision of becoming the leaders in the vinyl wall art business with the following goals:
• Driving targeted website traffic
• Building brand awareness and loyalty
• Gathering competitive intelligence
Those goals are made actionable by linking them to something measurable. That’s what marketing analytics is all about. A key performance indicator includes a goal statement, a metric, a target, and a timeframe. KPIs are tied to the factors that drive long-term business success. This post will focus on Ellemenopea’s first hypothetical goal of increasing targeted website traffic to their site.
Site Traffic Metrics
Ellemenopea first decides to look at the competitive landscape, seeing how much traffic their site generates in comparison to other sites. This is the site traffic report for Ellemenopea and its competitors, using Compete.com data.
• Rightonthewalls.com (green) ranks #2 in Google’s natural search when the phrase “vinyl wall art” is typed in
- They have traffic at 11,500 visitors per month
• Vinylattraction.com (orange) ranks at #3 on Google
- They have monthly site traffic at 8,300
• Wallsneedlove.com (red) ranks #4 on Google
- They have traffic at 7,600 visitors per month
•Vinylwallart.com (blue) surprisingly trails in traffic even though they rank at #1 on Google
•Ellemenopea (yellow) only has around 500 visits per month
- They do not rank at all on Google, either in the natural or paid searches
To achieve their goal of driving targeted website traffic, they decide on 2 KPIs:
• Improve overall traffic share by increasing visits per month from 500 to 10,000 in six months
• Improve conversion rate by increases purchases per month from 2% of site visitors to 10% within six months
Let’s assume the following scenario:
Price = $20
Total Cost = $7
Profit per sale = $13
Profit Margin = 65%
500 visitors/month * 2% conversion rate = 10 visitors who buy
10 visitors * $13 in profit = $130 per month
In six months, if they achieve their goal, the equation changes to this:
10,000 visitors/month * 10% conversion rate = 1,000 purchasers/month
1,000 * $13 profit = $13,000/month
This transforms their business from making a profit of $1,560 per year to $156,000 per year. Suddenly, what was once a part-time side business/hobby has turned into a full-time enterprise with plenty of opportunity for further growth and expansion.
As Ellemenopea drives targeted website traffic as well the number of visitors who actually make purchases, then they not only improve their bottom-line, they also improve their brand loyalty and market position. These two metrics not only quantify what success looks like, it also creates a timeframe for realizing such results.
Linking It Together: Vision to Bottomline
As the owners of the site understand this and communicate it to anyone else on their staff, every action is then evaluated in these terms: will this action help increase traffic to our website or convert more visitors into buyers? If it does, they will do it. If they do not, they will avoid this action in favor of something more focused. This is exactly why marketing analytics is so important. It can mean the difference between a hobby and a successful business.
Part 4 of this series will discuss how to actually achieve these goals. We chose to focus this post on only one goal so we could examine it in depth.
If you are interested in learning how to flesh out the KPIs, let us know. Also, if there is anything that is working or isn’t working for you, let us know. We want to make this blog as useful to you as possible.