Marketing Analytics

Today’s Wall Street Journal had the following comment by Colleen DeCourcy, chief digital officer at Omnicom’s TBWA:

“Banner ads will be the new junk mail.  More and more, reputable companies won’t be buying up the space around the Web sites you visit.  Clicking these ads will become less and less legitimate as brands will endeavor to do things that add more value to you in the social-media and customer-service space.”

SodaHead.com seems to be the exception to the conventional wisdom that click through rates for banner ads are low.  SodaHead is an online community and according to a Wall Street Journal article a few weeks ago, “SodaHead ads enjoy click and conversion rates of as much as 10 times the industry average.”  As I wrote in an earlier post, click through rates for banner ads are typically much less than 1%.  The click through rate refers to the number of times a banner ad was clicked.  For example, if a banner ad was displayed 100 times and it was clicked on once, the click through rate would be 1%.

There are several ways that you can try to increase the likely click through rate.  You can optimize placement by displaying your banner ad on a website with synergy.  Alternatively, you can use rich media to make the ad more noticeable and engaging.  Personalization is also likely to increase clicks.  So how does SodaHead do it?  They ask provocative questions and engage viewers by asking for their opinions.

Though SodaHead has a high click through rate, what is their return on investment (ROI)?  My question remains.  What is the value of a banner ad?  As the Wall Street Journal article points out, SodaHead has yet to make money.

Most of what I have written this year about e-mail marketing has been complaints.  So these are my New Year’s resolutions for e-mail marketers:

1.  Target your e-mails.  Resist the temptation to blast everyone on your list regardless of whether they will be interested in what you have to say.  A good e-mail is timely and relevant.  If you send out too many e-mails, your recipients will report your e-mails as spam, hurting your reputation and possibly your ability to send e-mails in the future. 

2.  Send trigger emails.  I am a big fan of Barnes and Noble.  I love purchasing books on-line and they make it so easy for me.  For example, their website indicates how quickly each book typically ships.  When I place an order, I receive confirmation almost instantaneously and then am kept abreast of the shipping status of my order.  I love knowing exactly where my books are and when I can expect to receive them.  As a result, I appreciate trigger emails and expect them to be timely.  If I sign up for a new service on-line, I expect to receive a welcome e-mail within 24 hours, if not sooner.  I am amazed and disappointed by organizations that do not send trigger emails as they are important for reinforcing the relationship and offer an up-sell or cross-sell opportunity. 

3.  Create a preference center and follow it.  Allow subscribers to determine the frequency, content and even form of communication.   DailyLit is a great example I wrote about.  DailyLit allows subscribers to choose the amount of text they receive, the frequency and timing of communication and whether users receive emails or RSS feeds.  Thus, their communication is more likely to be read.

4.  Create your emails with image blocking in mind.  I wrote about image blocking in one post and then had to resist doing it again and again as I received more and more e-mails that clearly were not designed for e-mail providers who automatically blocked images.

5.  Reactivate or eliminate inactive e-mail subscribers.  As I noted in an earlier post, it is nice to be asked if you want to continue to receive emails from an organization.  This gentle reminder reengaged me and reestablished a relationship.  Alternatively, marketers could create a formal reactivation campaign as part of their campaign cycle. 

6.  Measure your campaigns and continuously learn.  I believe strongly in testing and measurement, comparing campaigns to benchmark rates or past campaigns, and determining the return on investment (ROI) of campaigns.  In the end, everyone one wants to know what worked, what did not work and whether the campaign was successful.  If you are interested, past posts have provided sources for e-mail metrics and a discussion of A/B testing. 

Happy New Year!

Social media is a hot topic this year and it is likely to remain a hot topic in 2009.  I even found myself talking about it over dinner last night.  That is what happens when two marketers get together for dinner and a movie.  Somehow we end up talking shop.

So you may yawn when I say that I have suggested to a client that she develop an internal blog.  However, it can help her achieve her goals by educating users about an internal resource, disseminating information about enhancements to the system, and reducing calls to the internal help desk by building a community of users that learn from each other.  Believe it or not, there are companies that do not have blogs yet.  I can understand their hesitation.  Blogs result in a loss of control as the blog may move in unintended or undesirable directions.  Further, it can inspire resistance from managers.  There is also the additional work involved as it requires that staff monitor the site and address questions or criticisms at a minimum.    They will probably need to write posts.  Blogs are a lot of work.  Ron Shevlin in his blog states, “a helluva lot of time and effort” went into creating his posts.  (In the interest of full disclosure, I had the pleasure of working with Ron a few years ago.)

To be successful, the blog must focus on what users care about;  it must be about their needs rather than the needs of the company to have credibility and gain acceptance.  If it does so, it will develop a devoted audience.  Again to use Ron’s blog as an example, his post announcing the end of his blog has 55 comments as I write this.  This was after just writing his blog for two years.    I too will miss Ron’s thoughtful posts.

If there is a silver lining to this recession for marketers, it may be the focus on analysis and measurable results.  With every marketing dollar being scrutinized and questions being asked about return on marketing investment, every  tactic is being reevaluated.  For a long time, I have questioned the value of web banners.  They are easy to ignore and, as a result, have lower response rates than other marketing vehicles.  Advocates justify the low response rates by pointing to their relative low cost.  Others say that rich media will breath life into banner ads but I remain unconvinced.

Recent articles make me think I am not the only one.  Mike Shields of Mediaweek wrote about display ads a few weeks ago.  He quoted Greg March of Wieden + Kennedy as saying “Advertisers want to deliver impact, and I don’t think the impact for these ads is always that strong.”  Shields wrote that “click-through rates for banner [ads] rarely approach 1 percent”.  I have seen much smaller rates than that.

A recent BtoB special report on 2009 marketing plans, found that 30.6% of B2B marketers surveyed were planning on increasing their spending on banners.  This sounds promising except that other online tactics had higher growth percentages:  email 68.3%, search 50.0%, web-casting 42.9%, web site development 66.3%, and social media 46.6%. 

With new tools, analysts may be able to measure the impact of online ad campaigns, taking into account every ad served up to the user regardless of whether or not she clicks on it.  Hopefully we will soon be able to answer the question, what is the value of a banner ad?

You probably already know that but, in this case, the United State Postal Service has announced that it will be raising its shipping rates on January 18, 2009.  There is a link on the home page of usps.com with the new shipping rates.  

Any price changes related to mailing services, which includes stamps, will be announced in February 2009 and will go into effect in May 2009, according to the USPS website.

Tangyslice had a recent post about customer retention metrics.  To his list, I would add lifetime value.  There are many ways to calculate lifetime value but let me tell you about one way I have calculated it.

A cellular phone company was losing customers due to churn and wanted help to retain their most profitable ones.  In other words, they wanted to know the future value of their customers.  With a lifetime value model, the company could increase ROI through targeted retention and provide one-to-one marketing.

In the cellular phone industry, most customers sign up for two year contracts.  However, some customers default on their contract and others continue their service even when the contract ends.   Thus, the lifetime value model in this example consists of two parts: 

1. survival analysis which predicts survival probability, the likelihood that a customer will remain a customer
2. financial data that include revenue and costs used to determine future customer profit

The first step was estimating the tenure of each customer.   A proportional hazards model or baseline hazards model can be used to estimate tenure.  Once the tenure is determined, the next step is estimating the future value based on past average monthly spending by the customer and the cellular phone company’s costs.

The formula calculates the discounted profit.  In the calculation above, i= the cost of capital and the terminal value is an estimate of the revenue beyond the 36th month of tenure. 

Does this bring back nightmares from Finance and calculating the discounted present value  of cash flow?  The same advice applies.   Be very careful how you calculate the terminal value because it can account for a large percentage of a customer’s estimated value.

Recently I received an e-mail from a local art gallery that was updating its subscriber list.  They sent me a brief e-mail letting me know that they were moving their e-mail list over to a new host and, due to its strict anti-spam policies, they asked that I confirm my desire to subscribe and receive periodic e-mails from them.  All I needed to do was click on an embedded URL to verify my subscription.  If I chose not to subscribe, I had to do nothing.  Ignoring this request would result in my deletion from their e-mail list.

This was a great e-mail, because it …

1. was short and to the point
2. made it extremely easy for me to re-subscribe by including the URL in the e-mail
3. followed best practices by asking for me to opt-in (it is best practices to ask consumers to opt-in but for businesses, it is more common to ask them to opt-out)

Consider asking consumers to opt-in.  The quantity of e-mail addresses in your subscription list will diminish but your list will be the better for it.  Only those engaged and interested in your products and services will remain. 

A few years ago I was presenting the results of a B2B customer survey.  It provided surprising insight into how customers were using a service provided by my client.  The survey was a great success, enabling us to refine campaign creative and messaging, build campaigns on the insight and compare self-reported usage to actual usage.  What was the first question I was asked at the end of the presentation?  What was the Net Promoter Score?  

Frederick Reichheld wrote about the Net Promoter Score (NPS) in Harvard Business Review in 2003.  It has spawned an industry complete with a website, certification courses, conferences and papers for and against the methodology.  The basic idea behind NPS is that growth by an organization, brand, or product is correlated with the percentage of its customers who would recommend them.  

Per the HBR article, it requires the following survey question to be asked: “How likely is it that you would recommend [brand or company X] to a friend or colleague?”  The possible responses should range from zero to ten.  Zero means not at all likely to recommend.  Five is neutral.  Ten means extremely likely to recommend. 

This is where my friend’s survey question went wrong.  As per my earlier post, both of the NPS questions used a scale from 1 to 10.  With an even numbered scale (in this case 10 choices), there is no true midpoint.  In addition, I noted affect of the words used to describe endpoints of the scale earlier. 

While many marketers I know have heard of NPS, they are less familar with the research challenging the NPS methodology.  If you are interested in learning more, here is a recent article from Quirk’s Marketing Research Review available from Business Over Broadway.

The Net Promoter Score (NPS) means many things to many marketers but it starts with a single survey question about the interviewee’s likelihood to recommend an organization, product, service, etc.  To calculate NPS, you subtract the percentage of detractors from the percentage of promoters.  The idea was first published in Harvard Business Review but you may have read about it in Advertising Age, Journal of Marketing or any number of publications. 

A friend asked for my thoughts about NPS recently because he was getting two different results for NPS depending on how he asked the question.  One question asked, “On a scale of 1-10, how likely is it that you would recommend company X to a friend or colleague?”  The scale ran from 1 (Not likely) to 10 (Very likely) with 5 described as Neutral.  The scale on the second question went from 1 (Definitely would not recommend) to 10 (Definitely would recommend).   No qualifiers were given for numbers 2 to 9 on the scale.

I correctly guessed which question produced higher results.  Can you?  In my next post I will write more about NPS because both questions were wrong. 

However, I would like to focus on the art of writing survey questions.  The only difference between the two questions are the scales used.   The second scale was more extreme than the first.  “Definitely would not recommend” is much stronger language than ”Not likely”.  The first scale also highlighted position 5 by using the word ”Neutral” instead of the number.  All the other positions on the scale had numbers.  This had three consequences.  First, this made it appear that 5 was the midpoint.  However, On a scale from 1 to 10, the midpoint would be 5.5.  Second, by replacing the number 5 with a label, it calls attention to the middle of the scale and could skew answers as a result.  Third, position 5 should not have been described as neutral when in fact a 5 is considered a detractor according to the published methodology. 

This real life example reiterates how difficult it can be to write good survey questions.  How you ask the question can determine the answers you will receive.