Good Behaviour

This is an article I wrote for issue 176 of .net magazine in the UK.

I used to be Head of Online Planning and Buying at a London based media buying agency. I was there for 3 years between 1999 and 2002. In my first year our nascent online media planning and buying department experienced a 1000% growth in billings and some growing pains. Of course overall spend was much lower then than it is now as online media was also in its infancy relatively speaking.

Then in 2001 things slowed dramatically. At the time, growth in online media had been fed by new internet start ups with lots of VC capital looking to advertise to help grow their businesses and drive inexorably towards IPO! Additionally it was driven by a growth in interest from mainstream advertisers looking to dip a toe in and check the temperature.

Advertising is often considered a bellwether of economic decline as it’s one of the first things to be cut from budgets as belts tighten and when the slow down came in 2001 billings pretty much flat lined in our corner of the online media world, but other channels fared worse.

Part of the reason why online advertising may have fared better is due to much greater levels of accountability compared with other forms of advertising. Now consider the level of accountability we have with web analytics.

Back then in the early “naughties” web analytics was barely a twinkle in a webmaster’s eye, now it is proudly sitting at the boardroom table.

Not only can web analytics bring even greater accountability to on and offline advertising (if set up correctly) but it also completely opens up the level of business accountability for the website itself. It can be used to drive growth and cut costs through improved efficiencies across the whole spectrum of online communication.

If we are truly staring down the barrel of worsening economic conditions, especially looking forward into 2009 then arguably the worst thing any organisation could do would be to cut its web analytics budget.

Back in January I was working with a client that operates in an industry that is itself suffering but the saving grace for this particular client was their new website which had proved a great success in the face of a generally poorer trading climate.

If economic conditions deteriorate web analytics and the insight that it provides should be safeguarded and pored over with even greater intensity in the same way that normal business reporting and results are.

In The Sunday Times (a leading Sunday newspaper in the UK) on 11^th Nov. 2007, there was a supplement devoted to the Customer Experience Awards 2007. On page 4 of the supplement there was an article written by Andrew Stone and based on work by David Jackson, the MD of Clicktools, a firm specialising in customer feedback. In it the article outlines the top 10 most important lessons for creating a positive customer experience. Whilst it doesn’t directly reference online it seems to me there are clear correlations to be drawn between the two.

With permission from The Sunday Times I am referencing David Jackson’s 10 lessons to draw these comparisons.

1. David Jackson: Three questions form the foundation of customer intelligence: Who are our chosen customers? What are their needs and expectations? How are we meeting their needs?

Online translation: Knowing your target audience is the central tenet of communication on or offline. Knowing what the needs and expectations of your audience is especially important online since the web is both a research medium and a sales and distribution medium. Therefore potential customers find it much easier to shop around if they don’t find exactly what they are looking for initially. Knowing if you are meeting those needs and expectations is first expressed in the Bounce Rate metric which is why it has become one of the flagship metrics in click-stream web analytics.

2. DJ: Understand how customers think.

Online translation: One of the advantages of doing business online is the relative ease with which customer insight can be gathered. There are many techniques for gathering insight online some of which have already been written about on this blog. Web analytics clickstream data, usability studies, online exit surveys, competitor data are just a few areas in which data can be gathered using existing technologies and, in most cases, without having to purloin unsuspecting members of the public who fall in to the relevant target segment.

3. DJ: Trust in your people.

Online translation:In web analysis, and especially click-stream analytics, it is important to give people their lead. It’s very hard to identify what visitors are thinking when they arrive on a site and while there are some fundamental performance indicators that should always be considered when looking at click-stream data, the analyst should always be allowed to disappear down rabbit holes to see what can be flushed out. You may be surprised by what you find out from your web insight team but you should always take it seriously until it can be reasonably refuted.

4. DJ: Work with people who believe in service excellence.

Online translation: Passion for a product or service and the way it’s delivered translates well and can help enormously in putting across a message online. This is all the more valuable on the web where the visitor / potential customer is in control. But, online where service excellence is translated through the web page, it’s important to remember that you design your site for your customers and not for yourself - an easy trap to fall into. So while it helps to have a passionate team it is important to make sure that belief and passion is channeled in the right direction.

5. DJ: Master the art of organisation

Online translation: It is critical to make sure there are strong lines of communication between the web insight team and all the key stakeholders. The first task is always to establish the objectives of the site in the eyes of the stakeholders, in doing so it will provide a clear goal to aim for. This will remove ambiguity and should result in better output internally and so a better experience for the customer. Additionally, mastering the art of organisation within the web insight team can be applied to the disparate techniques for gathering insight which need to be combined to provide a coherent impression of customer need - this as oppose to conducting research using techniques (mentioned in point 2) in isolation. Finally it is important that the insight can be translated into a clear set of actions that everybody involved can identify with.

6. DJ: Make the link to the bottom line

Online translation: This applies in the exactly the same way online as it does offline. In most cases it is standard theory online, in practice many are doing it but because the pace of change is so rapid it’s important to be able to identify as cleanly as possible the level of contribution an individual element will have. When reporting back on performance, filtering out noise from other concurrent efforts can often make proof harder to demonstrate.

7. DJ: Make everything a little better every day

Online translation: Never stop looking at how you can improve the customer experience online. Analysing your performance online isn’t a one-off exercise to be carried out every quarter, it should be an ongoing and iterative process. Some organisations may feel there is neither the time nor the budget to operate in this way so scaling the approach to fit the primary objective is important. Using dashboards which can be easily updated every week or two with the 5 most important performance indicators is the starting point for this. Making sure this is always tied to action that will improve the customer experience is the goal.

8. DJ: Understand that the future will be different

Online translation: I don’t think anybody in the online world has a problem with this, except that sometimes change and new technologies can be bought into with alarming ease and little thought as to how they will really help the customer. The current debate regarding web 2.0 technologies and content is a point in case.

9. DJ: Learn from your mistakes

Online translation: Make changes to the customer experience online but if they go wrong don’t go around wringing your hands and covering your back, learn from them and turn them to your advantage by making sure customers benefit from your learning.

10. DJ: Make things easier for customers

Online translation: This might almost come before #9 in that making life easier for customers online is all about ease of navigation and presentation of important information. This is where changes need to be made either to supporting technologies or to site design. Craig Menzies of Forrester research said during a recent speech in Barcelona that while so many tools and research technologies are available to online marketers, unless used to drive design changes that generate demonstrable improvements the insight they provide is really not much more than a form of customer voyeurism. In the pursuit of insight it’s important that we don’t loose sight of the actual goal.

Analysing performance of a web site is only as useful as the results it achieves. If insight isn’t acted upon and changes aren’t implemented then progress can’t be made and the analysis becomes nice but pointless.

Failing to act on insight that will yield results is probably a bit like panning gold, finding a rock with a rich seam in it and then being too knackered to break it up to gain access to the loot.

Time(ing) and money are often the reasons given for resistance to change. The advent of Google Analytics and shortly Microsoft’s Gatineau means that good quality web analytics data is available free of charge to all that want it. This removes part of the expense in acquiring visitor insight. Much of the remaining expense (depending on the methods used in doing the analysis) is down to resource both in conducting the analysis and implementing the changes.

Additionally, interest is normally around the actions rather than the insight, this is not surprising but it’s important to remember that unless the site is a mess its less likely that actions will present themselves without some level of quantitative and / or qualitative site analysis; a classic chicken and egg situation for many site owners but one which shouldn’t be difficult to resolve.

Before embarking a specific piece of analysis it is worth asking the question:

“If change is recommended, what financial and human resource is available to implement it?”

This should have two effects:

Firstly it will prevent money being wasted on an analysis from which no action can realistically be taken.

Secondly it will help concentrate the analysis on the areas where change can actually be effected. Again, this will help focus resource and avoid waste.

In a large organisation where resource is available timing may be an issue because changes to the site could be restricted to scheduled site update periods. There may also still be departmental budget issues which can act as constraints.

In small organisations that are more agile and where timing may be less of an issue budget availability could prevent action being taken especially if some changes are particularity expensive to implement.

In order to make sure that valuable resource is not wasted at the analysis stage, whatever the size of the organisation, it worth considering the following:

1. What are the objectives for the site? This is obvious but always the first thing to consider whatever your intentions.
2. Are there any specific areas that need to be investigated? Although it may be preferable “on paper” to start with a blank sheet and let the analysis guide the output, in practice it generally helps reduce cost and focus resource if there is already some idea of where the problem may lie. i.e. acquisition and retention, site stability, navigation, page design etc
3. Assuming there is neither time nor budget available to afford the luxury of using all available analytical techniques (quantitative, qualitative, competitor and so on), which one or combination is most likely to yield the desired results, how quickly can the insight be obtained and at what cost?
4. If changes need to be made who will make them? Consider the possibility of changes to the design, marketing and back end of the site and think about who will actually implement these changes. Check their schedules over the next few weeks to see if they have any available time.
5. Budget availability. This is perhaps more of an issue if any part of the process is outsourced to agencies or other suppliers but can still have an impact if not as some changes might involve buying in new or extra technologies.

Points 4 & 5 are the two main ones. Knowing these opperational parameters in advance should really help concentrate effort.

When the analysis is done it will still be necessary to run a cost benefit analysis to see what kind of revenue uplift can be expected, this is the final stage in persuading the FD - or whoever holds the purse-strings; but, knowing in advance if the resource if even available on all levels will avoid wasted effort in the first place.

Measuring conversion on an ecommerce site pretty much always involves establishing an overall site conversion rate. For most ecommerce sites this figure seems to hover around the 2% mark. Overall conversion rate seems like a hallowed metric – the one true “anchor metric” by which overall performance is measured. As a result there seems to be a slavishness regarding the site conversion figure. I think this can be misleading.

Firstly, to be clear, increasing the conversion rate is an excellent goal to aim for, but if it drops off it is worth considering two other performance metrics:

1. Total volume of sales
2. Cost per sale

What are overall sales doing? Are they increasing or decreasing?

Has there been a marked increase in marketing spend or spend in any other areas of acquisition?

Volume Vs conversion
As a rule, the more paid for (solicited) traffic driven to a site the greater the pressure the site is under to perform.

Demand generated traffic, by which I mean the likes of online display, tends to deliver visitors with lower levels of interest and a lower pre-disposition to take a desired action. It’s not surprising that this often has a negative impact on overall conversion. However, driving traffic to a site is crucial to growth for obvious reasons.

Affiliate marketing is a good case in point. Say an agreement is made between a client and an affiliate network (such as TradeDoubler or Commission Junction) with remuneration being established on a cost per sale basis, effectively the client’s acquisition (CPA) cost is fixed at a certain rate. The result is that the cost of driving the mix of volume and quality traffic is passed on to the affiliate network. The affiliate network’s strategy (to begin with) may be to drive a large volume of extremely low cost traffic, with the result that conversion goes down while sales volume is met and CPA is met.

Because the affiliate network is paid on every sale that is attributed to them they are incentivised to provide as many sales as possible at the lowest possible cost to them. There could also be an additional incentive if they reach a certain target volume in a given time period. In other words these combined conditions can give rise to a situation in which volume of sales increases while conversion rate falls.

I have seen instances reflecting this where conversion has taken a sudden dip while volume of sales remained steady; on further investigation it was traced to an increase in traffic which in turn was traced to one specific site in another country – a direct result of rogue affiliate action.

Cost per sale Vs conversion
In the case of an e-commerce site where the desired outcome is generally pretty simple by definition – sell something – all efforts can be said to contribute towards that one goal. Therefore all expenses incurred can be said to be as a result of pursuing that goal. It would be reasonable then to establish a cost per acquisition figure which should also act as a key performance indicator.

The issue becomes how to measure cost per acquisition and what to include in the cost of sales: advertising, site updates, internal labour costs, 3^rd party costs (professional services, systems etc), administration and so on.

The more included the higher the CPA. But, fixing the equation will at least allow the CPA to be used as a benchmark performance metric over time.

It seems to me that if sales are increasing and overall cost per acquisition is falling then performance can still be viewed positively despite a conversion rate which may also be suffering as a result.

By contrast, if the conversion rate is going up but sales are falling and cost per acquisition is increasing in part due to an expensive but highly targeted acquisition strategy which has a low yield then the increasing conversion rate can be misleading.

Doubtless this is all stating the obvious but it is done so in the aim for a more balanced perspective.