I am confident that most local small businesses don’t measure their marketing in any meaningful way. And I don’t believe it’s simply due to a lack of know how when it comes to web analytics and marketing technology, even though that seems to be a go-to scape goat for most small business owners. I believe that most don’t measure their marketing because they don’t have clearly defined business goals.
Measuring and analyzing comes naturally to most of us. It’s how we find the fastest route to work. We have studied the numbers and realize that Route A is better than Route B even though Route A might be a shorter physical distance. We might even segment our data based on time of day. Route A might be faster before 8am, but at 8:30 there is a line of parents at the school on Route A. We also analyze our ROI when we go out to eat. While Option A might be taste better and even be cheaper, Option B is healthier and doesn’t make us feel horrible for the rest of the evening. Dieting in general requires a whole lot of measuring and analysis that is relatively easy to understand despite its difficulty to execute. We grasp and utilize these analytics because in these cases we have goals. The goals we set ourselves (getting to work on time, losing weight, etc) compel us to measure and analyze things. Even my 11 year old son and 13 year old step son use measurement and analytics every day while playing Fortnite. They know that the lower the number of live competitors gets, the closer they are to their goal of a Victory Royale. They are also astute enough to contextualize the data and they know that even though I consistently get #2 or #3 in a game it does not necessarily mean I am good. They know that since I have never had a Victory Royale, I am just a good hider and can survive long enough until I am forced into a fight. At which point I usually begin smashing the buttons and hoping for the best.
The point is: goals drive the urgency of analytics. Without clear goals our motivation to measure things is virtually non-existent. It would be like measuring how long it takes to get to a destination that is yet to be determined. That’s why small businesses wind up putting too much emphasis on the vanity metrics of Facebook likes and general web traffic. It’s like counting all the cows we see out the window on our trip to “who knows where?”.
So, before we can know what to measure or how to measure it, the first question every business owner needs to ask is, “what are our goals?”, or in the language of my kids, “What would make a Victory Royale for your business?”.
Whether you’re just starting out or you are a seasoned business owner, setting goals for your business can be intimidating at best and feel like you are pulling numbers out of thin air at worst. A great framework to use when setting goals for your business is to make them SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. Now, if you are well-versed in what SMART goals are, feel free to jump to the next section, but for the rest of you, let’s dig in a little and dissect the anatomy of a SMART goal:
- Specific: It’s important to make your goal as specific as possible. Vague goals allow for more inefficiency in your marketing. Hitting the bullseye might be harder, but it’s also more profitable. “Increasing sales next year” is a vague goal. “Increasing sales of Product X by 20% by July” is a specific goal.
- Measurable: It goes without saying that if you want to measure something it needs to be measurable. Whether it’s sales, leads, or revenue, whatever you want to measure needs to be quantifiable. You must be able to count it.
- Achievable: Setting a realistic goal helps you determine whether your marketing was actually a success or not. Increasing sales of Product X by 20% might still be a success for the business even if your goal was 50%.
- Relevant: While having a Facebook video go viral might get you a million views, getting a million views might not translate into more sales. Your goals should be relevant to the ultimate vision of the business.
- Time-Bound: If the goal isn’t time-bound then it becomes more difficult to measure. If the number is too low then you might be tempted to extend the measurement period. If it is high over a short period it might be tempting to an early and misleading conclusion.
The wisdom to figure out the right goals gets easier the longer you measure them. If you know you increased sales of a particular product 15% last year, then it might be safe to say you can increase it another 15 or even 20% in the coming year. However, if it only increased 2% last year then a 20% increase becomes a lot less probable, and you won’t know the difference if you haven’t been measuring.
Once you have your goal set you can then find the fastest route to your destination.
Measure the Right Things
What you need to measure is partly determined by your goals. We call the things that are important to measure Key Performance Indicators, or KPIs. These are the things that we can look at to determine the health of a business. While some KPIs like cash flow, inventory turnover, and costs of goods sold need to be tracked by every business, other KPIs will vary from industry to industry.
Some metrics that are fairly easy to measure and that are at your disposal include:
- Search Engine Traffic
- Google Ads Metrics (Cost per click, Cost per action, Cost per lead)
- Number of Calls from various sources
- Engagement Rate of social media posts
- Open Rate and Click Thru Rate of Email Campaigns
- Coupon Usage
- Branded Searches
- Market Share
- Your Google My Business traffic
- Gross Revenue
- Sales per Product/Service
- Customer Retention
If you are investing your marketing budget in Google Ads then you will want to measure things like your Cost per Lead. This might involve having a tracking number on your site that tracks phone calls or form submissions after someone has clicked on your ad. You will also want to track how many of those leads become customers.
If you are paying someone to manage your Search Engine Optimization then you will definitely want to be educated on how to interpret Google Analytics. If you compare your organic traffic from this year with the previous year and it hasn’t went up, then you might consider firing your SEO.
If you are doing a lot of offline advertising in the form of billboards, newspaper ads, or direct mailers, then you have a few options to track their effectiveness. You can use tracking numbers that are assigned to your different ads. You can also use custom tracking URLs that aren’t simply your main domain name to see how much traffic comes from the ad. Typically offline ads are great for brand awareness. One easy way to measure your brand awareness is to track how often people are searching for your business by name. If the number of branded searches increases from month to month then customers are becoming more aware of your business.
Your Marketing Will Fail
Hopefully, not all the time, but if you do enough marketing then you are going to fail sometimes. The important thing to keep in mind is that even your failure can inform your future marketing and help you do it better. However, sometimes what appears to be a failure might be a lack of context. Some of your KPIs will lag. That means that the true impact of your marketing on a KPI will not be felt immediately. For instance, if you are hoping to increase the sales of Product X, and Product X is relatively expensive and complex, then you might have a few months of brand awareness, education, and consideration before someone finally decides to buy. And while the number of sales might lag behind, there will also be leading KPIs that can help you determine if you are heading in the right direction. This can be things like the open and click thru rates of an email about Product X, or the average length of time on Product X’s landing page. If any of those things are low then it’s an indication that something in your marketing needs to be changed.
“Top companies don’t just look at their metrics as numbers. They look at their metrics as opportunities to ask more questions.” – Neil Hoyne, Global Head of Customer Analytics, Google
Understanding and analyzing your metrics is where you will need to utilize the most important tool in your marketing toolbox, the human brain. At the time that I am writing this article no one has crafted a marketing software that can analyze the value of all your marketing. There are several platforms that can give you all sorts of metrics, but only a human being can understand how those numbers relate to the story of your business. Some questions you should ask are:
- Do I really know what this metric means? One really simple example of the importance of this question is the conversion rate on your site. If the conversion rate is low then it might point to a bad landing page design. However, it could also point to flaws in the product or service itself. Keep your mind open to what a metric is actually telling you.
- What could influence this metric and how? Are there things happening in the life of your business or community that might be skewing the metric one way or another? What resources are affecting performance? Have you had staffing turnover, new onboards, productivity crunches, or financial stalls?
Ultimately, when it comes to your marketing, the ultimate question you will need to ask is whether or not a marketing investment has a good Return on Investment (ROI). To calculate the ROI of your marketing you can use this formula:
Marketing ROI (%) = [(Revenue return – Marketing spend) / Marketing spend] * 100
The higher the percentage the better. It can be hard to calculate the revenue returned by a particular marketing campaign, but can become easier the more you measure.
Making Your Data Work for Your Goals
Tracking your marketing will take some time and effort. Having all the numbers in an easy to access format will help reduce the time involved. Rather than logging into Google Analytics, Ads, Facebook, Instagram, and other accounts to see data, analytics dashboards allow all the data to be displayed in an easy to access format. But even if you can access your numbers easily, it’s important to manually track the most important metrics. Using a spreadsheet to do this can help. One of the biggest benefits of manually tracking some of your numbers in a spreadsheet is that it forces you to interact with and comprehend the data. Your data exists. It’s up to you to convert it to usable analytics that drive and inform your business decisions and help you determine the best route to your business goals.