Commentary
Are You Using The Right Metrics?
- by Loren McDonald , Op-Ed Contributor, May 21, 2009
In these days of tight marketing budgets, you must rely on relevant and accurate reporting to stay on top of your email program's performance and defend your company resources. You need to know the four basic strategies to measure performance as well as the metrics that measure correctly.
The scalpel is handy, after all, but you wouldn't use it to carve a turkey. If you choose the wrong metric, you could overlook major problems that imperil performance or email's significant contributions to your company's performance.
Step One: Understand Process vs. Output Metrics
I like to classify measurement tools into two general categories:
Process metrics are diagnostic in nature and should be tracked over time to determine how individual elements of your email program are contributing to overall success. These are some email process metrics and what they measure:
- Open rate: Subject line effectiveness, trust and brand strength.
- Bounce rate: List hygiene and opt-in process.
- Spam complaint rate: Relevance, trust and opt-out ease.
- Unsubscribe rate: Relevance, customer engagement and delivery on expectations.
- Click-through rate: Relevance, offer and content quality, design and engagement.
- Delivery rate: List-building practices, list hygiene and ability to follow deliverability best practices.
- Forward/Share rate: Subscriber interest and viral nature of offer/content.
- List churn: Effectiveness at managing combined churn factors-bounces, spam complaints and unsubscribes.
- Engagement/Activity: Ability to keep subscribers engaged over time.
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Output metrics measure your email program's performance against your company's strategic marketing and business goals, including:
- Revenue: Total revenue generated from your program over a given time period.
- Cost savings: Money saved by using email over higher-cost communications channels.
- Share of wallet: Use of email to increase greater share of customer spend.
- Customer retention: Use of email to minimize customer defection.
- Leads generated: Number of leads generated via email program.
Step Two: Determine Your Measurement Strategy and Choose the Right Metrics
These four approaches give you a basic understanding of where to employ measurement, along with the right metrics for the job:
1. Message/Diagnostics
Use: This approach answers the basic questions "How did our last email message perform?" and "Did we meet our short-term or campaign goals?" It also helps you identify issues that may be causing reduced email performance, such as blocking or bulk-folder filtering at ISPs or high list churn.
Metrics: Open rate, click-through rate, bounce rate, spam-complaint rate, delivery rate, engagement rate, unsubscribe rate.
2. Actionable Insights
Use: Here, you can use various metrics to understand your customers' behavior by testing and analyzing segments of your list based on demographics, geography, past buying behavior, action on emails, list source, etc. For example, analysis by gender and age might reveal that women between the ages of 18 and 35 have the highest click-through rates on average, creating an opportunity for greater targeting and personalization to increase conversions.
Metrics: Open rate, click-through rate, conversion rate, forward/share rate, etc.
3. Benchmarking
Use: Compare your email program to your peers and to your own past performance to see how your email metrics stack up, or to look for trends. This is probably where most marketers currently spend a lot of their time, but the other three uses of metrics will provide greater benefits to your program.
Metrics: Open rate, click rate, forward/share rate, unsubscribe rate, bounce rate, conversion rate, etc.
4. Company Goals
Use: These metrics measure how your email program is delivering against your overall marketing and company goals. Of the four strategies listed here, this is the one that will best help you demonstrate email's value to your company.
Metrics: Revenue, cost savings/improved margins, share of wallet, customer retention, leads generated, etc.
Think Beyond Email
For email to grab increased management mindshare and resources, marketers need to think outside of the box and beyond the purview of opens and clicks. Think real business impact and helping solve some of your company's most-strategic issues.
Work with other departments to collect data that measures email's impact. For example, email can reduce call-center expenses by providing educational content, FAQs, operating instructions, contact information and procedures, payment reminders and other information, all of which can reduce your customers' need to call support for help.
When you expand your measurement horizon beyond benchmarking to include diagnostics, actionable insights and progress toward business goals, and when you work with other departments to measure impact and influence, you get a real sense of your email program's performance, which you can communicate to your senior management. That's your best possible defense for your marketing resources.
Until next time, take it up a notch!
Interesting overview Loren, I especially like the process vs. output metrics. However I would go one step further.
Process metrics is getting your messages to the inbox, essentially all your deliverability numbers that have to do with bounces and the folder the messages end up in (i.e. spam)
Engagement metrics are everything else you have in that section such as opens, clicks, unsubscribes and spam complaints.
Output metrics are lead by revenue per email and followed by your other metrics in that category.
In the end what can't be measured can't be managed
Hey Loren,
I like how you've deliniated different applications of email metrics. The data is still the same, it's just how you use it and what you use it for.
John,
Well a key point is to actually think about emails impact, well beyond email. For example, Silverpop has a client in the auto loan business and they are finding that using email for payment reminders, etc. is reducing calls to their call center - and email costs them 1/60th of the cost to service that call to the call center.
These are they types of metrics that get the C-Suite interested!
Hey Loren,
I think that billing and payment reminders would probably have more impact on postal costs than call center costs.
That doesn't discount that the right messaging can reduce some costs to a call center. On the flip side, sheduled broadcast messages containing a toll-free number can also increase call center costs.
One costs money and one makes money. And it's not a bad thing to track the revenue/volume of phoned in sales generated by an email broadcast (or even on-going programs).
Often the call center may indentify problems with service and support messaging due to the impact those messages have on a call center. If lost password requests are delivered by email, and the call center charts an increase in lost password calls, something is broken. Those kinds of broken messages will impact call center SLAs.
Email can also have an impact on credit card charge-backs, especially for paid subscription sites. Being unable to deliver a subscription product - or even a receipt in some cases - can have the subscriber charging back the purchase (maybe even after a couple of calls to the call center). The result is the company losing the sale, paying a direct penalty for losing the sale, and perhaps even increased processing fees based on the number of charge-backs.
This is not uncommon when an organization deploys promotion and transactional/post-transactional (service/support) messages from the same IP, or someone in marketing plays fast and loose with the parsing of what are "transaction/post-trans/service/support" messages in favor of more aggressive marketing where it shouldn't be.
And just for fun while I'm here; "Process" eliminating non-responders making up 10% of a 5,000 subscriber list that averages a 20% conversion magically increases the "Output" conversion to 22.5%. As I mentioned before, the data is the same, it's just how you use it.... :)
Good article. Very helpful in clarifying reporting metrics to others in my agency.
Results metrics are the ultimate proof of value but you make an excellent point to tie this to organization wide goals. What good are leads if the sales department doesn't follow up? And if they don't, what issues do they have with the leads? Maybe they could teach your department something you don't know about the overall sales and marketing process. Excellent article with lots of insight into the processes.