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Measuring ROI in a Web-Based World is More Than Meets the Eye

  • June 01 2002, 1:00am EDT
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Set Your Sites on Success with E-Business Performance Management KPIs

Today, e-business has become everyone's business. The Web is no longer an experiment, but a mainstream business strategy being leveraged for nearly every market-facing operation in most successful organizations. E- business initiatives require the same masterful management that sound business (no "e") demands in order to succeed. Just as in the offline world, strategic planning and tight execution are needed to achieve online business objectives. The single biggest obstacle preventing most companies from gaining a true payback from their e-business programs is the lack of closed-loop analysis to understand if, where, for whom and how Web programs are performing. Meaningful online analysis is based upon an understanding of strategy and an execution plan that enables measurement of key performance indicators (KPIs). These KPIs are different for nearly every e-business program, just as success metrics vary for offline business processes.

Lack of a universal, sharply defined, KPI-driven e-business measurement approach has sent many business and IT managers into a tailspin. While we've seen many early attempts to engage success metrics for the Web, many of these techniques were too rudimentary to provide much value or depth, let alone show return on investment (ROI). A new methodology is fast emerging that applies KPI business principles to Web-based analysis: e-business performance management (eBPM).

First-Generation KPIs – Hits and Clicks or Hits and Misses?

Desperate to demonstrate some form of payback from their e-business programs, IT and business executives have grasped at the traditional yardstick – capturing "hits and clicks" data. The problem is that wading through stacks of spreadsheets and reports showed little more than a shallow correlation to buying behavior built on assumptive guesswork.

Just as in offline business practices, there is no real one-size-fits-all approach to gauging online success. For example, many companies use average sale price as a measure of sales effectiveness. Would you use this same metric to judge the success of an online recruiting initiative? Of course not. Why is it then that the number of page views and number of unique visitors are the most common metrics used to measure the effectiveness of both sales enablement and recruiting content on most Web sites?

While the desired goal of Web- based sales and recruiting programs may be similar on the surface (e.g., to generate leads), they require unique and vastly different metrics by which to measure their effectiveness. An online sales enablement program that offers self-service information over the Web site, for example, might be measured not only by the number of leads, but by its ability to shorten cycle time and lower the total cost of sales. An online recruiting effort should be gauged not merely by the number of resumés it draws, but by the quality of qualified job candidates generated and the savings of time and money realized by human resources by not having to manually screen piles of resumés or hire a recruiter.

It is easy to become overwhelmed by the seemingly insurmountable amount of data that the Web produces – customer behavior, demographics, segmentation, preferences – but the Internet can also yield unprecedented opportunities to achieve real business value. When clickstream data is married with transaction, customer relationship management (CRM) or sales force automation data, that is far beyond what marketers usually have available in the offline world to measure and manage an initiative.

The Road to eBPM: Five Easy Steps

eBPM is the alignment of Web performance against overall business goals. It applies sound business offline management principles to the Web. Here are five simple steps to help you get there:

  1. Start with Strategy. What are the top- level goals of your company? Most company's corporate executives define overall strategic objectives every quarter or fiscal year. These might include driving down the cost of sales, increasing brand awareness, growing revenues or improving customer satisfaction ratings. You've got to be aware of these goals – even if it means scrawling them on notes slapped to the office wall. Embed them in your psyche so they become part of your mantra.
  2. See Success. Assess how your Web initiatives can support these corporate objectives. Who is the target of your next e- business campaign? Who will it serve? Who are the expected purchasers? Addressing these basic parameters at the outset of the initiative will build the foundation for the next step: defining success. One of the biggest mistakes many managers make is to launch a new online campaign or Web project without having first determined what constitutes success, not only for themselves, but for their colleagues and constituents. To envision success, you must be able to mutually agree on the end result, and it should be in tune with the company's strategy.
  3. Measure Early and Often. Now the real work of eBPM begins: measuring your success. If your e-marketing program were an offline initiative instead, how would you measure it? Would you apply the same success metrics to a print advertisement as a banner ad? Are you looking to drive 1,000 leads to your sales force or would it be more effective to generate 100 better- qualified leads? If the corporate strategy dictates a goal to drive the cost of sales down, you might be surprised to find that capturing 100 more highly qualified leads yields a better cost per customer acquisition. Establish what thresholds and tolerances will be used to monitor and manage your online promotions before you begin. Like all successful initiatives, you have to be willing to measure early and often. Knowing when to call it quits is sometimes your single smartest move.
  4. Design and Plan. With your definition of success in place, it is time to design and plan for it. Ideally, this should be done at the inception of every e-business initiative, not as an afterthought. When you know what success you'd like to achieve, will you be able to recognize it at key intervals along the way? What is the source of the information to measure your success? Some sources might include the Web server content itself. Caching servers and content delivery networks provide additional venues. Several different types of servers ranging from application, catalog, ad, media and personalization can yield tremendous insights. E- commerce transaction networks, content management systems and CRM systems and other enterprise systems that lurk "behind" your firewall can be equally valuable.
  5. Make it Real. Whether you are a business or IT manager, you will want to plan how best to access the information you need to measure success. Getting to the right data is the first half of the battle. Gathering it in a form that is actually usable for making sound, fast business decisions is the second. According to Merrill Lynch (March 6, 2001), "Clickstream data requires an enormous amount of pre-processing – somewhere between 60 to 95 percent of time is spent preparing data." When launching an e-business initiative, it is imperative that you plan how your vast data reserves not only will be mined and stored, but how the company's key decision-makers will be able to readily leverage this data to gain a strategic advantage.

Achieve eBPM Midstream with Interim Metrics

In an ideal world, KPIs to measure success would be clearly defined and embedded into the launch of every e-business initiative. The good news is that even if you did not plan for eBPM, you may be able to quickly recover through the use of some less tailored success metrics. While not designed specifically for your initiative, there are interim metrics that can offer a good "sum total" picture of success surrounding a specific e-business project. These interim metrics provide a sound stopgap measure as you begin revving up your site or enabling more business processes for the Web.

Here's a simple scenario to illustrate how using interim metrics can measure the success of a brand awareness campaign. Just as in the offline arena, the goals of building brand awareness via the Web are the same. Executives want people to be exposed to, understand and recall their company's business, products and services. A traditional approach to measuring brand awareness might be to do some pre- and post-focus group testing on people who saw your online ad versus those who did not. Did it improve their image of your company? Did it spur an increased recollection of your brand?

Of course, focus group testing may not always be practical or affordable. Another measure of awareness might be to analyze average dwell time on a particular piece of site content related to a brand promotion. You might also look at a second metric: a higher percentage of repeat visitors to this posted content. Third, you might probe to evaluate the division between home-based and corporate-based visitors. From these three interim metrics, you would be able to infer that more home- based visitors are exposed to your message because they enter through AOL, spend an average of 15 minutes on your sales page and visit your site at least two times weekly. Therefore, you could infer that their level of brand awareness is probably higher.

Using interim metrics exceeds the capabilities of a simple hits-and-clicks methodology by allowing you to make some educated deductions to evaluate your success.

eBPM KPIs at Work in the Real World

However, to really hit the bull's eye with laser-sharp precision, KPI-based metrics must be tied to a certain piece of data in your program that is specific and measurable, such as online customer behavior. Let's take a closer look at a scenario where KPI-based metrics can readily be put into play – evaluating the content effectiveness of a Web site. Assume your company – a major banking and financial institution – just completed a major site redesign. The overall goal was to provide an enlightened online experience for visitors and to drive specific behaviors. Some of the site content was designed to motivate visitors to provide your bank with information about themselves through opt-in registration. Other content was created to educate visitors about the bank's unique services. Some specific KPIs you could use to assess whether you really met your online objectives include:

  • Page dwell-time-duration analysis: What was the average "dwell time" a visitor spent looking at certain pages on your site? In the case of an opt-in scenario, a low page dwell time may be desirable. The longer a visitor is "distracted" from the conversion event, the more likely he/she will abandon. However, for more education-oriented content, a longer dwell time is desirable to ensure adequate absorption of the information.
  • Visitor behavior content conversion analysis: Did visitors complete the "call to action" determined by specific pieces of site content? It is not enough just to see that visitors traveled to a specific page. You need to determine if the material was presented in a way that prompted them to complete a conversion – whether that is registering through an opt-in survey, downloading rate information or signing up for a free financial seminar.
  • Abandonment analysis: Abandon-ment analysis is a companion to conversion analysis. You need to pay close attention to which content items are de-motivating or even driving visitors away from completing a desired action. If conversions aren't happening, eBPM can help you pinpoint potential reasons for abandonment – e.g., wrong promotional message, page error, long download time – so that corrective action can be taken.
  • Common paths analysis: How did visitors actually get to your site? Knowing which search engines, referral sites or offline channels led them to you lends great insight into where you need to fine-tune messaging, optimize site structure/design and, in general, focus promotional spending to drive a higher conversion rate.

Today's busy executives know that masterful management of the Web applies the smart business practices of the offline world to the online world. Even if you didn't plan for it, you can take advantage of interim metrics to build a bridge to full-fledged eBPM. To succeed, you must be prepared to tie e- business investments to your strategic company goals and embrace the power of eBPM from the start.

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