Moving Metrics From Volume to Value

To really gauge the success of your marketing programs, try narrowing your measurement focus.

In the quest for ROI, marketers instead are discovering TMI: too much information.

Advances in Web analytics, business intelligence, and data integration technologies have given marketers an abundance of data points to measure the performance of their programs. That overload has caused the challenge for many marketers to evolve from "What can we measure?" to "What should we be measuring?" This shift requires a rethinking of the measurement models themselves.

"Lots of people are drowning in data," says David Reibstein, the William Woodside professor of marketing at Wharton School of Business and comanaging partner at MarketingNPV, a marketing consultancy. "Determining how to use it in an intelligent way makes the difference."

One company that has re-created its marketing measurement models to conquer its data overload is VistaPrint, an online retailer that provides graphic design services and custom print products to small businesses. "There's so much data you can look at; the key is knowing where to focus," says Trynka Shineman, senior vice president of North American marketing. "There is still a lot of data that we're not using. But we have systematized how we measure performance."

Marketers like Shineman are relying less on pure diagnostics (leads, click-throughs, page views, and the like) and focusing instead on performance-related measurements, especially those that help to solve an old problem: determining the value of a customer. "We're seeing a shift from volume to value," says Jim Lenskold, president of marketing consultancy Lenskold Group and author of Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability. "Forget that you're bringing in 100 customers a week-are those 100 bringing in good value?"

VistaPrint has increased its focus on customer metrics, such as 12-month contribution to margin value, which tallies revenue from customers during their first year minus the cost of goods sold and acquisition costs. "That metric is getting more visibility within the company," Shineman says. "It lets us make smarter tradeoffs against marketing spend." Other customer-focused metrics include the cost of customer acquisition, the percentage of customers who make a second purchase, and the frequency of returning customers.

"We have dashboards on channels and products and the Web site, but customer metrics are not as visible across the organization," Shineman explains. "We are working on a single, more consistent view of the customer."

Good customer metrics, including a reliable customer lifetime value (CLV) metric, remain elusive, experts agree. "Very few companies are using customer lifetime value as the economic driver behind their strategy," says Ken Dec, chief measurement officer and director of strategic planning for Partners + Simons, a marketing services agency. "You want your marketing investments to be guided by the value you are creating-both as a whole and customer by customer."

An important yet often overlooked element of CLV is "share of customer" or "share of requirements"-the percentage of business that customers do with you versus with your competitors. This metric, Reibstein explains, shows the depth of penetration with a particular customer, which is critical in determining the long-term potential of that customer.

Another loyalty metric that's gaining traction is the Net Promoter Score (NPS), pioneered by Fred Reichheld in his book The Ultimate Question. NPS measures the difference between the percentage of customers who are likely to recommend your company or products (promoters) and those who are unlikely to do so (detractors).

In that influencer vein, marketers also are looking at ways to measure emerging forms of online social media, including the things customers are saying about their brand or products in blogs, comment fields, product reviews, or user forums. Lenskold, however, cautions marketers against being carried away with creating metrics du jour for current trends. Measuring social media, he contends, should be no different than the methods used for other media: The metrics must link back to business performance.

"In order to make the new media metrics relevant, you have to try to tie all online activity into business metrics," Lenskold says. "The mix will evolve-that's a given-and it will change faster than in the past. But the worst thing you can do is become wedded to metrics that will be less relevant a year from now."