The Challenge of Using Micro-conversion Thinking to Manage

Campaign Results for Paid Search and Display

Daniel Loebl

AVP, Head of the Digital Center of Excellence for the Americas, AIG

You can reach me through LinkedIn

A quick disclaimer before we start

• This presentation does not represent or use ideas from AIG and/or information private to AIG. The opinions and information presented here are my own and do not represent any opinion or procedure of my employer.

The Topic for Today –KPI Selection for Business Value• Areas of Interest:

• Selecting the correct KPI to avoid falling into an “online marketing silo”

• Use business-relevant KPIs to show the value-contribution of your campaigns

• Enable you to justify your budget for the next business cycle

• Use relevant KPIs for creating a yearly strategy

Primary Use of KPIs

• To answer the question:

How is my business doing?

• The strategic answer to this question lies outside of the presentation of online marketing activity results.

How is my business going?

• Online marketers usually make statements like these:

• Business is doing great because:

• website visitors have increased from x to y per year.

• leads through the site have increased from x to y month to month.

• direct sales through the site have increased from x to y year over year.

• the website generated x number of calls this month vs. y number of calls last month.

• time on the site increased from x to y this year

• Click-through on our PPC ads increased from x to y this year

Do These KPIs Show Business-Value?

• Online Marketing KPIs usually value online activity and report on it as if it had intrinsic business value.

• Business value may not be determined by online activity monitors alone.

• How do we transform these KPIs into something that carries intrinsic business value?

The Two Questions that Guide Business Value

• How much money did search marketing contribute to the business, as a percentage of the total?

• Was the spend on search marketing profitable after expenses are taken into account (business expenses as well as campaign expenses)?

• The KPI that is likely to show the business value of your campaign is not a number, but a ratio.

Income Per Sale(or)Lead KPI Shows Business Value

Income brought in through the channel----------------------------------------------------

Number of sales gained through the channel

This KPI is on target because it is an index, not a number

• The KPI is treated like a stock-portfolio with elements that can be individually changed

• Measures the performance of the campaign within a business context, independent of web metrics

• Can be used as a base on which to optimize your campaign and plan for its future growth

• Provides an index that can be used to show the value the campaign brings to the business in any budget cycle

Income per Sale KPI for Strategy Generation

• The Income Per Sale KPI (IPS KPI)

• Provides a portfolio-framework to make strategic decisions about the status of your campaign and its progress

• Allows you to ask questions about the business elements of the campaign, and provides a context for web metrics to answer the questions.

• Your activity web metrics become Micro-Conversions on the way to the larger value-add KPI

• The KPI becomes the business-context that makes the web metrics relevant to business results.

A quick example of this model at work

• Assuming a web-based business with three products sold directly through a website without a phone bank

With “Activity” Thinking:

• Let’s push all products to make our sales numbers (# of sales KPI)

• Let’s spend money online to get people to the site (# of visitors)

• Let’s get qualified interested people (time on the site)

With KPI-Portfolio Thinking:

• Which of our products contributes to our KPI the most?

• What can we test to improve IPS KPI?

• Which of the products is most profitable for sales?

• How can we target the audiences that are most likely to increase the IPS KPI and remain profitable over the life of the customer?

The Companion KPI to Income Per Sale (IPS)

• The Income Per Sale KPI (IPS KPI) needs a profitability analysis to be useful overall

• A Profit Margin Calculator is used to determine whether the campaign results are profitable for the company (therefore bringing value in, not sucking it out).

• The Profit Margin Calculator (PMC) uses data from the entire business cycle: expenses, pricing, returns, etc. PMC results incorporate non-digital information, as well as the cost of the campaign itself.

The Challenge of This Model

• This model of thinking takes you away from your comfort zone as “search marketers” and brings you into a integral view of the business.

• It makes clear that understanding and communicating the performance of your campaign involves using metrics not directly derived from it, including its interaction with the other online marketing campaigns: Display and Organic.

• It focuses your efforts into two main goals that never change, and makes all other metrics into “steps along the way” to reach those goals.

The Benefits of Using IPS KPI and PMC

• You will have a clear index to justify your budget during the year and for the next budget cycle.

• You will gain understanding of the elements of the business that drain or add value from your campaigns, and with this knowledge, you can plan optimization strategy every year.

• You will gain a clear view of the status of the business, with all the other metrics as “micro-conversions” that feed the view, vs. thinking that the collection of metrics is the whole view.

• You will gain a portfolio strategy for improving your results.

• It transforms you into a marketer who is strategic, and can make a plan to get answers using your online resources.

• It puts you on a path to make improvements to the web presence overall that can be testedto see if they provide real value to the business over time.

Thank You

• Questions?

• Connect via LinkedIN for follow-ups