Measuring ROI

Dave Morgan had a great piece today on Online Spin about emerging trends among traditional brand advertisers, “These days, all marketers want measurable results related to sales objectives from their advertising and marketing expenditures, particularly online.”

Dave hits one nail on the head. ROI metrics and accountability are addictive. This kind of data seductively leaves the decision making to the return and takes the risk out of marketing investments. Unquestionably, advertisers will continue to strive for ROI measurability and online marketing is more appealing to ROI based decision makers.

Marketers who believe they can accurately quantify the impact of their online advertising, whether SEM or Brand, do so at their own risk. Every analytic system I have ever used is flawed; the assumptions and methodologies inherent in each approach creates measurement error.

One critical element to watch out for is that ROI for keyword search frequently appears as brand search.

• Customers will find you searching for keywords and then return searching for your brand or some variation/misspelling of the brand.
• Customers will find you on one computer and return via direct navigation or brand search from another computer to purchase.
• Customers will enter the URL’s in the search box instead of the address bar (perhaps as high as 15% of users) so direct navigation shows as brand search.
• Brand searches are frequently latent conversions from keyword searches.
• Depending on the cookie setting of your analytics system, you may or may not capture this first touch.
• Referrer data isn’t always preserved through caches and browsers. Firefox users on MSN, for example, will show up as direct searches instead of tagged with a natural search keyword.

I just finished a three month contract for a startup. Despite deploying sophisticated, redundant analytic systems (Google Analytics and ClickShift’s Statistical Bid Management, only half of the orders in the first three months were tracked and many were reported as direct navigation or searches for the brand.

You might expect this for a mature brand with a large repeat customer base, but it defies logic for a startup that was still only using CPC for marketing. Since we had a small data set, I was able to research the orders individually and attribute the source and term for each record in the customer table.

You wouldn’t want to try to repeat that method with 10,000 orders, but the result was a 200% increase in the reported ROI for the CPC campaign. Individually or combined, the analytics systems didn’t produce accurate enough data for decision making.

The only way to really understand ROI from each channel and search term is to find ways to get a customer to login as quickly as possible, while the referral data is as fresh and accurate as possible. Incorporate that referral/source data directly into the Customer_Id table and import all sales information into internal systems to produce the ROI measurement.

If you do not have an initial source associated with a customer record, make it a goal in every customer interaction (survery, customer service call, etc.) to obtain that information. This allows you to accurately attribute revenue to the marketing investment and track every additional touch point that generates a visit regardless of source, medium or computer. With that kind of data on hand, you have a baseline to begin to understand the value of each advertising channel. Then your ROI based decisions can be good ones.