Measuring Growth for Online Businesses
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
If you are a fan of Mad Men, you know the story. The escapades of flamboyant advertising executives, the smoke-filled rooms, the risque workplace banter, the steady and generous flow of hard liquor.
It’s the quintessential, unadulterated portrayal of advertising in 1960's America. And a damn good one at that. Compared to today’s ultra-PC workplaces, where even the mildest off-color comment delivers you to the chopping boards of human resources, Mad Men feels like a refreshing throwback to looser times.
But while we all may find moments to channel our inner Don Draper, there’s a central question at play. Namely, how in the world did they ever get away with this behavior? In what world could constant inebriation and a productive company coexist?
Or really, even more than their behavior, how did they know what they were doing was working? Or whether it was working, period?
The quote I led with is illustrative. Its ethos is on point even while its origin is unknown (though spuriously attributed to marketing pioneer John Wanamaker).
The collective attitude toward marketing and advertising was that it just couldn’t be understood that well. It was a shot in the dark that worked. Put up a flashy billboard in Times Square or create a radio ad with a catchy jingle and do your best to persuade as many people as possible to buy your product. Or talk about you. Or even know about you.
And since there wasn’t a prayer of optimizing your ad spend, might as well just throw a bunch of money at your agency and call it day. Absent of any intention to take a rigorous look at where your dollars go, you’re okay with the good ol’ boys who are sloppy at work but get the job done through their networks.
Lo and behold, your advertising causes sales go up. Who cares how or why? It’s time to party.
To some degree this is an exaggeration, but only because no company would ever be so blunt in their outlook towards marketing. In fact, they probably wouldn’t even admit the half-wasted ad spend. After all, they might argue, sales isn’t the only way to measure your marketing; “we’re looking to build awareness.”
Fast forward to today and advertising is a completely different ballgame.Total US Digital advertising hit a high of $60 billion in 2015, up 20% from the year from before. This is significant because it introduces the factor of accountability, and we can now attribute digital sales to their respective marketing channels.
The scenes from Mad Men are increasingly rare in real life, partly because it’s no longer valid to say that you can’t tell how well your marketing is working. We now have tools to track our success, from standard coupon codes to Google Analytics, Kissmetrics, and more. And we can zoom into segments and cohorts to get detailed about which parts of our marketing are working and why.
And while awareness is not defunct, it’s also not sufficient. Marketing technology is now good enough that most companies should not be paying for visibility alone. Tracking has gotten really good, and it’s time to take advantage.
And beyond that, you could have the most accurate tracking and reporting, but it would be useless if you didn’t know how to make forward-looking decisions with it.
For a business with a limited resources, tracking and accountability is a beautiful thing. With greater visibility into your growth programs, you can make exponentially better decisions about the way that you allocate your advertising dollars. But on the other hand, you are now forced to concentrate and think hard about what your real growth goals are.
From a sober perspective, your marketing goals should be exclusively focused on what actually drives revenue. In growth marketing, we talk about vanity metrics versus key performance indicators (KPIs). Vanity metrics are stats that aren’t clearly driving sales, whereas KPIs are statistically proven to advance your revenue targets.
For most companies at most times, paying for awareness, impressions, or “eyeballs” are not good uses of your money. It’s never a bad thing for someone to know about your produce or service, but at their essence, these goals are vanity metrics.
On the other hand, email addresses captured, phone numbers of leads locked down, and unique referral codes used are all clearly associated with the end goal of conversion. This is where online businesses should primarily focus their efforts.
When we quantify our success, we have a better way to know exactly what return we’re getting with our money. And we can develop better way to achieve the growth that we need.
There is no longer a blank check in advertising. The performance of marketers can be scrutinized and tracked. And the fading of the reckless Mad Men-style agency is symbolic because workplace chaos cannot coexist with visibility and professional accountability.
From the perspective of the CEO of an online business, it has never been easier to strategize for digital growth. If you are willing to put in the effort, you can know exactly how and why your ad spend is increasing your revenue.
Are you still wasting half of your money on vanity metrics and un-trackable advertising?
Measure your growth. Focus on what matters. It’s 2016 and we can do a better job.