Mike Moran teaches the ROI formula (gain minus cost divided by cost) and how to track it across channels using URL codes, segmentation, and attribution rules. He covers transactional ROI per sale and relational ROI over a customer's lifetime using Customer Lifetime Value. The key is continuous testing and linking web analytics to CRM systems to measure what actually converts.
Chapters
Hi, this is Mike Moran. Welcome to Lesson 8 of our series on web analytics. This lesson is on tracking return on investment, or ROI. For those of you who don't know me, I'm the author of Do It Wrong Quickly, a book on the way web marketing is based on direct marketing. And that book has an awful lot of material in it on tracking return on investment, as does Search Engine Marketing Incorporated. It's in its second edition now, and it applies these same kinds of theories to search marketing. So I'm one of the instructors in this course along with Dr. Pawa. So let's just get into it. What is return on investment and how do we use web analytics to help us track it? That's what we're going to attack in this lesson. So return on investment is really the main thing that you need to focus on as you look at web analytics. So there'll be lots of reasons for you to look at all sorts of different web metrics. So anybody who's gotten this far in the course knows that there's Metrics like page views, visits, unique visitors— they go on and on. You can constantly look at more numbers. There's more things that get spit out by your web analytics program every day, but ROI needs to be your main number. That needs to be what you focus everything you do around. So let's look at what return on investment is. At its simplest level, ROI is the gain that you achieve from some action minus the cost divided by the cost. So If it costs you $5 to do something, but you gain $10 by doing it, the return on investment would be 10 minus 5, which is 5, over 5, which is 100%. So that's how you calculate return on investment. And a 100% return on investment would be quite remarkable and a, and a great investment. Typically, you see return on investment to be a lot smaller than that, but it depends on the business whether 10% return on investment or 30% return on investment is what you're shooting for. Because one of the reasons for calculating return on investment is to be able to compare the action that you want to take or that you have taken against other ways that you could have used that same investment. Because what you're really looking to do to maximize profitability in any company is to make the investments that will produce the highest return. So by being able to project return on investment and compare different ROI projections against each other, it helps you compare taking different actions. And by being able to measure return on investment after you've taken an action, that helps you recognize whether the projections that you're making are accurate, and it helps you adjust them in the future. So all of this comes from direct marketing principles. So all the things we talked about in earlier lessons, those are all things that you can understand Through a direct marketing lens. And what we really are looking to do is to, is to actually measure return on investment in 2 different ways. The way that most companies look at return on investment is transactional. So every single transaction is measured individually. So if you have the same customer that buys 15 things, The analysis of return on investment would actually be done 15 times. So for each of those purchases, what precipitated that purchase, what was the investment, and that purchase value would be considered the return. There's another kind of return on investment calculation that is done far less commonly, but which I believe is going to be done far more in the future. And that's relational return on investment, where you're really measuring the return on investment not in terms of individual transactions, but in terms of customer acquisition. So every customer is actually a return because there is a value, an expected value, over the lifetime of that customer. For whatever work you needed to do to acquire that customer. Now, both of these things work together. You don't necessarily want to look at either of these all by themselves. Obviously, acquiring a new customer, you can impute, has value by adding up all of the individual transactions that customer will make. But it's also true that there are marketing investments that you can make that will cause existing customers to buy more than they would have. And so, but to understand how to acquire new customers, relational ROI makes a lot of sense. To understand how to cause existing customers to buy more, or to buy higher value items, or items with higher profit, or to buy in more quantity, or to make more transactions, any of those things are equivalent to driving more revenue from the same customer. For that transactional ROI might make sense. So it depends on where your investment is directed, if it's invested— if it's directed at acquiring a new customer or if it's directed at extracting more transactions out of existing customers. So let's review some of the things that we've looked at in prior lessons. One of the things we want to think about as we're understanding return on investment is we need to construct our understanding of return on investment from the metrics that our analytic system actually collects. So there is no web analytics system that lets you fire it up, go to a dashboard, and have it spit out, here is your return on investment. It's not the way they work. We're going to need to have systems that use the numbers that are in the web analytics system in order to calculate return on investment. So let's think about the kinds of numbers that we need. So we need to look at the numbers that show us whether they saw a certain marketing tactic. So I'd like to call those impressions. And even though impressions has a specific technical meaning within web analytics system, it usually refers refers to a banner ad that's been shown. I would like us to broaden it and to think about what we're really looking for is all of these kinds of actions that are listed here. If an email was opened, if a banner was displayed, if a page or other document was shown on the screen, all of those things are an impression. What we really are trying to figure out is Did the marketing message actually hit a prospective customer's eye? Did they see it? We also want to know if that particular marketing message caused them to go deeper into the experience. So what kind of action did they take, which we'll call selections? So did they click on it? Did they mouse over it and have it show some more information? In other words, did they choose this message? So first we want to know if they saw it, then we want to know if they chose it, then we last we want to know if they bought it. Now buying can be a little tricky, so if you have an e-commerce site, there's all sorts of ways for you to check to see whether things were put in the shopping cart, were they actually checked out. So you can actually do that using the web analytics system. But if your online conversion is that they filled out a contact form or they clicked on the store locator or they called you on the phone, those things are a little harder to actually figure out Whether something was sold or not. And we've talked about these things in prior lessons, so it shouldn't be a big surprise. But understanding whether they actually bought something or not, online or offline, is a big part of how you're going to calculate your return on investment. Because if we think about how we calculate transactional return on investment, it requires us to be able to follow all the way through to the revenue Based on whatever the cost of that tactic was. So if we go back and think about what the calculation is for return on investment, it's basically gain minus cost. Well, in this case, for marketing, gain is the revenue that's directly attributable to the marketing tactic. And so how do we understand how to do gain minus cost? And what if we cannot— Calculate what the gain is. So that's really what the difficulty is. And that's what we have to really think through. How do we do that? And so let's think about all of these 3 kinds of measurements. So did they see the message? Did they go deeper into that message? And then can we tie back that they actually bought from that message? So we've talked in the past about identifying your web conversions, and we're reprising this slide so that you can remember what those kinds of conversions are. And we've also gone over how you can tie these web conversions to actual offline sales, and we won't rehash that in this lesson. But one thing you need to think about when you're trying to tie things back to return on investment is that every business may have a different model for how much credit they're going to give to any particular marketing tactic. So for each of these conversions, there's a concept of attribution. And attribution basically means what percentage of the credit for that purchase is being given to different marketing tactics. You could imagine a situation in which someone is mailed a paper catalog, they then go to the website, and from the website they decide that they're going to buy something. It doesn't make sense for you to give 100% of the credit to the website. For that conversion when the catalog is what sprang that. So there are systems called matchback systems that actually calculate what the right attribution is based on rules that you give it. And these are things that you're able to do. And every business is going to have a different way of attributing things. I remember there was one business that did an awful lot of television advertising. And what they used to do is they knew that when they did a television ad, people were going to search for their product by its brand name. They also knew that people were going to do searches for their products using generic names. And what they decided to do is they gave credit to their search marketing tactic for the generic names, but they gave credit to their TV and radio advertising for the brand name searches. And that was their attribution rule. It was a very simple one, but you need to think about attributions for all of these conversions. Which of these conversions and which marketing tactics will get credit depending on how people come to your website? And the reason I'm bringing that up is not because it really changes your return on investment calculation, because it doesn't, but it does change for which tactic you're allowing the credit. And you're giving that return on investment credit to. And so you do need to think about attribution in that way as you look at each of these kinds of conversions. So let's recall again how you use visitor and conversion metrics. So we've shown these before, but you get a certain number of visitors who come to your site And this could be every day, every month, every hour, every minute, doesn't really matter. And you can count how many of them actually choose one of those conversions, and then you know what your conversion rate is. And what you do at that point is you may invest in improving the conversion rate by making things more persuasive. And so in the past we've talked about this as, as visitors to your website, which it can be, but you can also think of these as impressions to your marketing message. How many people saw the message and then how many of those actually clicked through and converted? So even though we're using the term visitors here, which would make sense in the context of a website, you can also use impressions here and put any marketing tactic under the microscope in this exact same way. So by improving the persuasion of that marketing tactic— maybe it might be by improving the offer, changing the copy, or possibly changing the image— any of those things can improve the conversion rate and increase your conversions. Likewise, if you have a really good email campaign sending it to twice as many people would also be helpful. And so with any of these marketing tactics, you can improve the number of impressions that you have. For a website, you think of increasing your traffic to the website. But for each marketing tactic you're trying to calculate ROI for, it means increasing the number of people that see that message. And best of all is when you do both. When you can increase the number of people that see your marketing message and you also make it more persuasive. So if you double both of those numbers, then you've quadrupled your conversions. And so that's, that's really what you want to think through as you're thinking about ROI. What you want to think about is ROI is not this static thing that you convert. It's something that you calculate. What it is, is it's something that you use to make decisions on. So if you could understand what the return on investment is for each kind of marketing tactic, and you could actually watch as you make changes and you adjust it and you see the return on investment improve, and you also are using it to decide how much money you're going to allocate for different marketing tactics based on what their return on investment is, that's how you really use this metric. And so the reason we're starting a little slow here and saying let's go back and think through some of the metrics we've seen before is because we want to really reinforce that these metrics are the basis for how you calculate ROI in a— at a transactional level. And by being able to calculate that transactional level, that allows you to use return on investment as a tool to improve the return on investment of any marketing tactic over time and to be able to compare different marketing tactics against each other to make investment decisions going forward as to which tactics you're going to put more money into. And we also want to keep in mind that the way we calculate conversion rate might be different from one business to another. So if you're a car company, you calculate your conversion rate by dividing the number of conversions by the unique visitors because many, many visits may precede an actual purchase. But if you are a company that has many repeat visits that each could have their own purchases, like Amazon, then you should divide by visits for your conversion rate because every particular visit to the website could be a purchase. This makes the same amount of sense when you're looking at it from a marketing tactic point of view. So if you're sending out emails to people, if you're selling a car and you send out 10 emails to the same person after a few months, you don't divide your conversion rate for the email based on how many emails you sent out, but you divide it based on how many people you sent the email to. So I'm repeating this slide that we used earlier because we were talking about it in terms of website visits and visitors, but you need to apply the same logic to all of your marketing messages. Are you dividing by people or by the instance of the message, by the impression? So is it the impression or is it the people? That's what you really need to think through. And every business makes a different decision. The good news is whatever decision you make, as long as you keep it consistent, you'll be able to then measure the trend in your conversion rate regardless of whether you've divided by impressions or by people. We also want to keep in mind the web conversion cycle. So let's review again that each different business might have a different set of steps that start from having someone be a prospect And have them work all the way through to making a purchase. And they may have steps that follow making a purchase that can bring them around again. When we're thinking about transactional ROI, we're only thinking about the steps that let them go through learn, shop, buy, or whatever the equivalents of those are for your business, which we reviewed in the earlier lesson. And so we can look at each of those things as being areas in in which we can understand how to raise the conversion rate from one step to the next. And each of those comes back to return on investment because we can start to understand what the return on investment is for updating the process in each step. So we don't have to look at this as merely one large return on one big investment, much the way that when we looked at mini conversion rates in the earlier lesson. We looked at what's the conversion rate between learn and shop and between shop and buy, not just the overall conversion rate of what's a conversion rate of a prospect going to buy. With return on investment, you can do the exact same thing. You can segment your return on investment so that you can understand what the investment is to improve the mini conversion rate of going between learn and shop And then you can see what the return is on the overall investment. And so by looking at these things granularly, it helps you improve them more, but it also lets you look at the return on investment for each individual action, not just the whole thing. So let's think through what we've called in the past the first mini conversion, which is going from a marketing tactic to coming to the website. So you can think of the website as a marketing tactic that you want to measure as well. But for each of these tactics that bring you to the site, they can all be separately measured. So for TV ads, you might need to think through how you're going to measure that someone looked at a TV ad and came to the site. So sometimes we had that client that I talked about earlier, they said anytime someone did a brand search, that recognized their TV and radio ads. And so you need to think through for your own business how you're going to do that. You might be advertising something that people wouldn't normally search on unless they had seen the ad. There are all sorts of ways to measure this, but you have to think through how you're going to do it for your business. We've already talked about in the past how you can measure Google and other search engines coming to your site. So that you can do based on search referrals, where you can see that that's the site that they're coming from. You can even do it based on the keywords that they use and segment it even at that level. If you use email, you can put links in them that allow you to identify that they came from that place. And we're gonna look in much more detail about how those things can work. So how you can put embed links in other places, because that's how most marketing tactics are going to work, that allow you to then identify that they came to your site from that tactic. So one of the most important ways for you to track your campaigns is to use a technique called a tracking code. So each of these campaigns that you're using, each of these marketing tactics, whether it's display ads, email, social media, they can all use tracking codes. And we're going to show you exactly how you implement that. Basically, anything where you are creating the content and are embedding a link in that content that brings them to your website That is something that can be tracked with a tracking code. Now there are some things that do not allow you to put a link in. So we talked earlier about search marketing. So for paid search, you can put a tracking code in your paid search ad, but for organic search where someone is looking at the Google results, you can't easily put a tracking code into your URL. And so for that you need to use referrals and other mechanisms in order to track that that visit came from the visitor that— the tactic that you're tracking. But for anything that you can actually put in the URL, that's something that you can use a tracking code for. For most venues on the web, we've talked about a few of them, It's pretty simple to use tracking codes. So any place that you can actually code an HTML link— so in the chart we show you an example. So those words that you see highlighted, they're actually an HTML anchor tag. So you'll see the little A for anchor. So you'll see a start anchor and an end anchor. And an end anchor. And so you also see a URL in there. And the way to put in a tracking code is to put in this URL something that someone has identified as a unique combination of characters. And that combination of characters can be handled in many different ways. It's possible for you to use that unique combination of characters as something that is redirected to the correct link. That's a possibility. Some other systems can be implemented so that you put in the entire URL, but you add a set of characters at the end that are ignored when they go through. So the tracking code is picked up by the web analytics system, but it's ignored by the web server in terms of serving the page. Either of those methods work just fine. Different people have different ideas about which method they like better. So sometimes you can use URLs that get redirected, and then the analytics system can identify that a particular URL— sometimes those are called vanity URLs— that that URL has been triggered, therefore it came from a certain marketing tactic. Other times the tracking code itself can be encoded right on the link and that code is then picked up by the web analytics system and measured, so it's counted, but it isn't used actually to decide the precise page that the web server would bring the visitor to. So either of those methods work just fine. So any place you can put an HTML link, so you can put that in an email, you can put it in a paid search ad, a display or banner ad, you can put it in a blog, you can put it on a message board, you can put it in a social bookmark. There's many others too. I mean, you can put it in all sorts of places. And so basically any place you can actually physically code this anchor tag, you have control over the URL and you can use this technique. Of putting in a tracking code. And so what this tracking code is doing is it is uniquely identifying some kind of marketing tactic. Now you could use that unique identifier for a particular piece of content. So for example, it could be one individual email that has a certain message that's been sent out, or it could be a variation on an email that has its own unique code. Or you could say, I'm gonna use the same code for all email. And any of those are reasonable decisions based on your situation. If what you're trying to do is to measure the return on investment of email, then having one code for all email works just fine. If you're also trying to figure out whether one particular email campaign did better than another email campaign, then you'd want to have the tracking code at the level of each campaign. If you're being even more granular and you want to say, I'm sending out 100 variations of an email for a campaign as a test before I decide which one I'm going to send to the rest of the list, then you'd want the tracking code to operate individually for each of those 100 different email variations. And the same is true for any other tactic you're doing, whatever level you'd like to measure at, that's what level you have unique tracking codes for. And so you keep track of all of your codes so that you know that this code refers to this variation of the email, or this code is for all emails, or however you've set up your system. It's really just a marker. So the tracking code just marks what kind of tactic it is, or it marks an individual piece of content. It marks whatever it is you need to measure. And from then on, the web analytics system will keep track of how many visitors came to the site that had that tracking code, and then the analytics system will be able to do the rest of the work of measuring you out through conversions. And so a lot of what we're gonna focus on is how you can identify that an individual piece of marketing content is what triggered the conversion event, because we've talked in prior lessons about How you measure conversions, how you measure the value of them, how you even measure sales offline and track them back to online conversions. So by bringing all of that together, now what you're understanding is how you can look at each individual marketing tactic and know what it is that they are doing to send traffic to the site. So, Mike, I'm going to ask you a question. So that helps us understand how we code tracking codes with marketing tactics in which we can embed an actual anchor tag, an HTML link tag, in the content itself. But not all content allows us to do that. So if you're trying to track marketing tactics on Twitter, for example, You can't very easily embed even a normal-sized URL in Twitter because it takes 140 characters sometimes to even put the URL in. And obviously adding a tracking code to that makes it even harder. So there's a particular kind of redirection which is embedded into Twitter. Twitter has its own redirection capability. But there's also a capability that you can get from a plugin like Bitly or TinyURL, or a couple of popular ones, where they use something called a URL shortener. So a shortener does exactly what it sounds like, which is it takes the URL that you actually copy into Twitter and it makes it much smaller. So it turns it into a very unique identifier. That would start, for example, with bit.ly/ and then some very short code. So that URL shortener actually means that it allows you to type longer Twitter messages because the link that you have in the tweet is something that is much shorter because the URL shortener has, has already done that. But the URL shortener has other capabilities as well. So it can actually measure how many people have clicked on that link. So you can actually use that instead of an analytics system sometimes to find out how many people have clicked on a URL that's in a tweet. But what the main goal for you here, if you're trying to use your analytics system to measure all these things, is you would like to have the tracking code passed on a tweet. And so the way to do that is to give the URL shortener— Bitly, TinyURL, or Twitter's own built-in URL shortener— give that mechanism the tracking code. So give it the URL that has the tracking code in it. So I know this starts to feel like ankle bone connected to the shin bone, shin bone connected to the knee bone, but what's really happening here is that In the tweet is going to be, for example, a Bitly URL. Clicking that Bitly URL takes the, the click to Bitly. Then Bitly is going to expand that URL into the one you gave it. If the one you gave it has a tracking code in it, then when that goes to your website, your web analytics program will peel off the tracking code And your web server will take that URL and serve it, serve the page. And so all those things are happening as before except you have one step in front of it which is using the URL shortener. So everything about this is exactly the same as it would be if you could encode the URL link right into the tweet. The only difference is that you have a step in front of it in which the URL has been shortened. And then it's that— and then that tracking code still gets passed just as it did before. Now some kinds of social media don't have any ability to encode a URL that you would think of. So videos make that quite difficult. Where do you put a link inside a video? So you could put it on the same page that has the video on it. So that can work just fine, but for some situations you don't have control over that either, such as in YouTube. In YouTube, you might be able to encode a link in your description, but the problem is that someone watching the video might not be terribly likely to follow that kind of call to action in the description. And so maybe a better way of putting a call to action in a YouTube video is to use the YouTube function called literally call to action. Now this is something that requires you to pay YouTube, so it's a form of advertising. So while you can put the video up for free and people can watch it and you don't have to pay for anything, if you want to add this kind of call to action, you have to fork over money to Google every time somebody clicks on it. And that's actually a pretty good deal for most of these things because the overlay on the video is so prominent that people are very likely to see it and they're much more likely to click on it than they would click on a link that's elsewhere on the page. And so the way that you handle the tracking codes in this situation is if you've put together this call to action overlay and you're willing to pay Google to do this every time YouTube shows your video, then the link that you provide to Google in the call to action has to have your tracking code in it. So you're probably seeing a pattern here. One way or another, by hook or by crook, for every blessed thing you do, you want to figure out how you have the proper tracking code embedded so that when people click, your web analytics system will pick off that tracking code as they come to the site, and that will allow you then to segment all of your analytics, whether it's certain conversions, whether it's page views, doesn't matter what they are, can segment it based on that tracking code, and that allows you to identify unique visitor traffic by tracking code, which then allows you to understand what the return on investment is. So in each of these cases, the tracking code is passed to the site. And as we talked about before, it denotes a unique event. Now you can decide at what level you need to do this tracking. So you can decide, for example, that you're going to track all YouTube videos with one tracking code. Or you can decide that each individual video will get its own tracking code. What I mean, obviously it's a lot more work both to come up with all the codes, to put each of the codes in the YouTube call to action, and more pointedly, after the fact, to be analyzing each of these ads individually and then possibly summing them all up in order to find out how video has done for you as a tactic in general. So the more granular you make it, the more information you get, the more choices you're able to make about how to improve things, the more insight you'll get as to how effective your marketing campaigns are, but also the more work you have to do. So it's— you have to make a trade-off. It isn't right for everybody to code things at the most granular level. For some businesses, it's not worth the effort to either code them or analyze them at that level. But if you want to have the most possible insight, if you want to have the best opportunity to improve your return on investment, then the more granular you're able to code the tracking codes, then the more insights you're going to be able to glean. Because one of the things you can't find out if you code all videos with the same tracking code is which ones did better than the others. And you might actually find a pattern that says that every time we do a video on this subject, or every time we use this narrator on the video, we seem to have a higher conversion rate than when we do something else. And so only by working at that most granular level will you get some of those insights. But you'll get a lot of the insights from doing even gross-level tracking. Like, you might find out that video works much better than email, and it wouldn't take too many tracking codes to figure that out. So when we say it denotes a unique event, it's really a unique event of your own choosing. It's the granularity that you want it to be. And as we've said multiple times, your metric system, your analytics system collects that code when the page on your website is viewed. And sometimes, for some kinds of systems, it would be translating that tracking code to even a new code. So it depends on the way your system works. So for example, if your system works with vanity URLs, then one of the things it's probably going to be doing is it's going to take that human-readable vanity URL and it's going to translate that not only into a URL that actually exists on your web server that might be a lot longer than the vanity one, but it's then going to assign its own tracking code based on that URL. And so the mechanics of this are less important in many ways than exactly how the process works. Because the most important system is that your metric system, your analytics system can report visits to the site and have those visited— visits attributed to particular marketing tactics at whatever level of granularity you've decided. And so by having that happen, now all of a sudden all the work you've done before to count conversions, to understand the value of conversions, to count offline conversions, all of those things are now being able to be segmented by what marketing tactic brought people to your website. And that's what tells you what the return on investment is for each of those marketing tactics. So we said before that you cannot do this with search marketing, organic search marketing. You can do it with paid search but not organic search marketing. So how do you think through doing this with organic search marketing? So the first thing you want to look at is rank checking. Now why do you want to look at rank checking? Because if you have a page that isn't ranking very high for the particular search keywords that you're interested in, then it doesn't really matter what other things that you do to that page because not enough people are seeing it for it really to have the value. So you have to first look at rank checking. And you can use something called an automated rank checker. So there are programs out there that instead of you having to enter those keywords into each search engine every day, you can then use those automated rank checkers to keep track of where things are going. Now, as you use those automated rank checkers, you always want to comply with the terms of service of the search engine. Some of them have rules about how frequently you're allowed to check. You probably wouldn't want to check your rank every minute or every hour, but maybe checking once a day is okay. And as we said, the automated rank checking programs are things you have to be a little careful about for how you've set them. So you can not only observe your own rankings, but you can observe your competitors' rankings as well. Now, and these are metrics that help you understand how your search marketing is doing, but one thing to understand is that the increasing personalization is making it difficult to check rankings because everybody who signed in might get a different search result. And so you're really only checking the rankings for the people who aren't signed in and aren't having their results personalized. And that's— that is actually an area where you need to think through where is it that you're getting your traffic from. And so after you've checked the rankings, then what's happening is that you're now going to check referrals. So if we think through through how referrals would work, what's really happening is that you're understanding where your search traffic is coming from. So referrals can tell you a few things. Because you cannot put that tracking code on organic search, there's no way to do that. Instead, what you're doing is you're trying to let what the search engine tells you about that visitor coming to your site allow you to bring that back to understand where you got the search traffic from. So the first thing the referral can tell you is which search engine it's from. So did it come from Google? Did it come from a different search engine? All those things are things that the referral can tell you because it tells you which site you were referred from. So if you see that you were referred from google.com, then all of a sudden you know that you have the traffic coming from Google. The other thing, and all of these things can be done automatically by any good web metrics or analytics system, you can also know what keyword the person typed in. So you can create reports for both organic search and paid search, but for organic search is really what we're focused on, which is which keyword phrase was the ones that generated that traffic and from which search engines. And so you can then understand not only how much traffic you're getting from search, you can also understand how much traffic you're getting from each search engine. You can even further understand how much traffic you're getting from each search engine for each keyword. And you can also aggregate them so you can find what the total traffic is across all search engines from a particular particular keyword. And by understanding that, these are really your marketing tactics. So what you have to start thinking about is your marketing tactics have to do with which search keywords and which search engines you're getting the traffic from. And you can then start to attribute different search engines as having higher value. So work that helps you in one search engine might be more valuable than another. You can also understand, more importantly, how to segment by keyword. So you might want to look and see which keywords not are necessarily giving you the most traffic, but which ones are giving you the most conversions. And are there some keywords that seem to convert at a higher rate than others? If so, why? Now it could be that you've got a much better fit with your product with those keywords, and if so, that's great. Then you want to try and identify other keywords that are similar to those keywords and keep working on raising both the volume of referrals and the conversion rate for all of those keywords. But it could also be that you're identifying a path through your site that seems to convert better than others, and then you want to ask yourself, why is that? And so by segmenting by keywords, you can find out which ones seem to have higher or lower conversion rates, and then you can apply those lessons to others. So again, thinking about organic search, you want to assess those conversions with metrics. So how do you assess the conversions that come from organic search? So any reasonable web metrics and analytics system can isolate conversions by keyword. And so if you understand how you can isolate each of those conversions by keyword, then what you can do is you can not only project ahead of time what the improvement is going to be— so you're kind of predicting your return on investment— but you can also check after the fact. You can also compare the return on investment across different keywords to try and analyze whether there are certain characteristics in common with keywords that seem to bring both high volumes and high conversion rates, and whether there are other things in common with ones that do less well. And that might help you to focus more of your investment on the keywords that do well, or you might decide that you're gonna focus some investment on the ones that aren't doing well because you think you might have an an ability to bring those things up. Now, no matter what you do, using the segments of keywords and by looking at not only predicting your return on investment in advance but also checking to see whether you were right and then comparing those ROI figures against each other, all of this helps you to understand how to use transactional ROI calculations So that you can then improve the performance of your search marketing. Now continuing with organic search. And the reason we're focusing heavily on organic search is twofold. One is because organic search is a critically important driver of return on investment. In— for many websites, organic search has the highest return on investment. So it's important that we spend a few minutes understanding how to calculate the return on investment for the highest performing marketing tactic that you have. But the other reason to focus on it is because it's so different from how you have to do the others. We looked at how the others can— you can easily embed these tracking codes. You don't get to do that with organic search. But there's one thing about organic search that's very similar to how you understand how you do the return on investment tracking for the other tactics. So you also, you want to look at things by segment. So you want to look at overall how organic search returns investment, but then you want to break out by search engine. Does one of those search engines have a higher ROI than others? If so, you might want to focus more attention on that one. Organic versus paid. By keyword as we talked about before. This is a chart that's specific to organic search. But understand that you can apply the same thinking to all of the other things we've talked about. It's just that the segmentation that we're talking about are different. So each of these you can think of as segmenting what it is that you're measuring. So are you segmenting search engine, organic versus paid, or by keyword. That's how you would segment for search marketing. How would you segment for YouTube videos? You'd probably segment video by video. You could also segment if you have several YouTube channels, you might segment by the various YouTube channels. You could also segment based on topic. You could segment based on who the announcer was. You could segment based on what product line it was about. There's a million ways to do segmentation for all of this content. The more that you have time to use, the more kinds of segmentation you can do. That's going to help you. So this is an example of segmentation for organic search. But what's important is that we think about segmentation as being an important way to analyze how we're going to focus on improving return on investment based on our conversions. So you might ask yourself, what's the purpose of all this segmentation? Why would conversions vary over time? Why would they vary between different segments? Well, the reason they would vary is because your competitors are constantly changing what they're doing, you're changing what you're doing, There's also other kinds of areas that are changing all the time. In paid search, you're seeing biddings change. In YouTube, you're seeing different videos go up all the time, and the new ones seem to get more attention than the older ones. Everything that you can think of is changing all the time, and that's gonna make your conversion rate change, even if, even if you're not changing anything, or maybe your competitor isn't changing anything. Maybe your clients are changing, your customers are changing what they're looking for. At any point, there are plenty of reasons why conversions would vary over time, and you need to focus on watching how those conversion rates change so that you understand what's happening and you can take action. So all the things that we've been talking about up to now are for transactional return on investment, and this is how most companies Calculate return on investment. And compared to relational ROI, it is kind of simple. I mean, honestly, there are many, many companies that don't calculate their ROI at all. But of the companies that do, the vast majority of them use this transactional ROI that I've shown you. So let's look again, just Understand what it means. So think about what it means to have a 1% conversion rate. If you have a 1% conversion rate for a marketing tactic, for your website, it doesn't matter. If you have a 1% conversion rate, let's say it's for your website, then you have to attract 100 visitors to get that 1 conversion. Likewise, if you have a 1% conversion conversion rate on your email marketing, you'd have to send 100 emails in order to— for that conversion to happen. So let's just say for sake of argument that it costs $1 for whatever this marketing tactic is that you have to do 100 times, and that one conversion is worth $200. Then your calculation for Transactional ROI is $200 minus $100, which leaves you $100, divided by that cost of $100 again. That gives you a 100% return on investment. So that's the calculation for transactional ROI. But what about relationships? We've been previewing all along that there's transactional ROI, there's relational ROI, How do you think about measuring relationships? That's what we're going to talk about next. So how do you find your best customers? How do you think about which customer relationships are the most valuable? Right, that's what return on investment is. It says How do I identify the most valuable marketing tactics? And that makes sense from a transactional point of view. What do I do in order to get the cash register to ring? But from a relational return on investment point of view, you want to identify who your most valuable customers are. Because those are the customers that you want to attract more like. More like these. Is what you're really trying to do. What do I do to attract more customers like my most valuable customers? So let's think about what it is that makes a customer valuable. So in this chart, you can see graphed into 4 quadrants where you've got revenue That goes from low to high, and the cost of serving that customer goes from low to high. So what does that tell you? Well, if you've got customers that are low cost to serve but also low revenue, we'll call them casual customers. And those casual customers are not terribly important, but they're okay. They're not costing you a whole lot and they bring you some revenue, so they're decent customers. Worse would be if there are customers that cost a lot to serve and they don't return very much revenue. They're your high-maintenance customers. And so those— in those 2 segments, the casual customers and especially the high maintenance customers, you want to move them. You want to move them into other quadrants. You want to make them much more valuable than they are. Or you might want to stop serving them. You know, you might want to fire certain customers, so to speak. Because they're actually not helping you very much at all. The other 2 quadrants are much more interesting. What they call the royal customers are the ones that are high cost to serve, which is bad, but they're also really high revenue. So they need to be treated like royalty, but they are worth it because they return so much value. So you can deal with that. But the most profitable customers, the most valuable customers, are the ones that have extremely high revenue and they cost very little to serve. If you could, you would migrate all of your customers into that quadrant. And so that's how to think about the value of the customer. The value of the customer has to do with how much profitability it returns to your firm. And so customers that cost the least to serve and bring back the most revenue, they're the ones that are the most valuable. So then your question becomes, to improve your return on investment, where your investment is the cost of serving a customer, you need to ask yourself, what can I do to find these most valuable customers that I don't have now, and what can I do to move some of these other customers into that most valuable quadrant? So it would help as we try to identify which customers are the most valuable if we could understand some kind of metric that would allow us to take individual customers and assess their value. So luckily there is such a metric. It's called Customer Lifetime Value. Sometimes it's abbreviated CLV. Sometimes it's abbreviated LTV for Lifetime Value. Regardless of how you abbreviate it, the concept is really important. So if you think about what the concept is, what it really says is that to value a company, you want to— the real value of a company is not the plants that it has or the products it owns. The real value of a company is not its assets. It's the value of its customer relationships. And in a book from the year 2000 called Driving Customer Equity, they referred to that concept as— no surprise— customer equity. And they show how Long-term value of companies really is determined by how valuable their customer relationships are. And so when you think about what customer equity must mean in measurable terms, it's the total of the value of all of the revenue that those customers will bring Bring to the company. And so how do you calculate that value? Because it doesn't make sense that revenue that you're going to get 10 years from now is worth as much as revenue you're getting tomorrow. There is a certain time value of money. And so in order to make the calculation, you have to apply— Time discounting to the valuation. And in the simplest sense, that time value discount might be about the inflation rate, for example. So if you have inflation that makes money you get years from now worth less than money you would get now if it had the same monetary denomination— so it might both be called $10, But the $10 from 10 years from now might actually be worth $9.40 today. And so that discounted value of the money, that's what you calculate. So money that you get right away is worth 100%, and money you're going to get years from now is discounted based on how far away in time you'll be receiving that money. Money, and so when you think about what customer lifetime value is, it says for each customer there is a lifetime value associated with that customer that you can calculate as a present value, as they would say in economics. So that discount actually has a technical name called. Present value. And then the question is, how do you— what are the factors that go into the lifetime value? So one of the biggest factors is how can you increase retention of the client? So that customer, if you have customers that are regularly leaving you, they have lower value than if you have customers that are extremely loyal. Right? Another way of thinking about it is, can you make the customers more profitable? So we've looked before, the difference between those most valuable customers and the loyal customers had to do with how much it costs to service them. So by increasing customer profitability, either because they're buying more and you don't have to pay more to serve them, or you're reducing how much it costs to serve them, that will increase profitability. Profitability. And you— there was also a thought that you might want to increase what they call share of wallet. So for each customer, can you extract more of their budget for whatever this area is that you're covering than you do today? So, so having customers stay longer, making them more profitable, increasing the amount that they spend with you, all those kinds of things make sense. And one other one that makes sense is, can you get customers to switch from competitors. So all of those kinds of things add up to understanding the lifetime value of any particular customer. So let's think about how you measure— how you calculate lifetime value. So I won't walk you through the complete formula because Honestly, it's fairly complicated. It's easier to read about it and see an example. And so I have a link here from the Database Marketing Institute, which is a website you really ought to get to know because it's got a lot of very interesting direct marketing metrics on it that are very well explained, and lifetime value is one of them. So You know, you have to take my word for it that the math behind this is pretty well understood. So we talked a little bit about what the kinds of factors are that might go into it, but there's actually many, many more factors. And depending on how analytical you want to get, you can make this as complicated as you need it to be, but you can also try and keep it simple as well. So you need to think about things we talked earlier about The discount rate, which talks to what the present value is of the money that you're expecting to receive. So you're going to understand purchase history that tells you frequency of purchase. You're going to understand what the average transaction is. So how does it contribute to what the value is? You're going to understand all sorts of probabilities about if you have customers that have bought certain products, what are the probabilities that they'll repurchase? What's the probabilities that they'll buy other products once they've bought some from you? What is the period of time for which you expect a customer to stay with you? Now, why is all this important? Let's take a simple example. Suppose you are a dentist. Would it make sense for you to drive all of your marketing investment around the first transaction of getting a new patient to come in for a cleaning? Probably not. Because you know that once a patient comes in for the cleaning, you know that 90% of them like you, and after they've come for that cleaning, they're going to come back year after year after year. You may know from your experience that The average patient that you acquire sticks with you for 12 years. Now, some of them leave earlier, they move away, or maybe a few of them become disenchanted with you, or their dental plan changes and you're not the dentist that's covered by the dental plan anymore. So, you know, some of them leave earlier than that. You have others that have been coming to you for 20 years. And so you have that history, you have that historical data that tells you how long patients tend to stay with you. And so much better to be driving your marketing around the lifetime value of that acquisition. If you knew that you could fill up your schedule by acquiring a number of more patients and that in order to do that you were going to have to lay out a marketing expenditure that you might not get back for even the first year because the first couple of appointments that you, that you do wouldn't bring that marketing expenditure back, but you knew that over the long haul it was going to do it, it might be worth it for you. That's what lifetime value lets you do. Now all those calculations probably look a little complicated, and there's a reason for that. They're a little complicated. Luckily, all of our friends in direct marketing have been doing this for years. So direct marketing didn't start on the web. Direct marketing started with catalogs, with direct mail letters, all sorts of ways of directly attributing sales to marketing tactics. That's what direct marketing is about. And so there are shortcuts to using lifetime value. So there's a very interesting shortcut called RFM, where RFM stands for recency, frequency, and monetary. So the recency calculation is when's the last time the customer ordered. The frequency calculation And the monetary calculation is how much are the orders worth? So what are the dollar values, for example, of the orders, the transaction sizes? So what do you do with RFM? Well, this can help you identify who your best customers are, even if you don't have enough data. Gumption or enough information to be able to calculate lifetime value using all those gory detailed numbers and putting together that very complicated calculation. You can still segment your customers based on who's the most valuable. So the most valuable customers are the ones who have ordered the most recently who order the most frequently and who have the highest transaction sizes when they order. That's just common sense. Those are the most valuable customers in many respects. Now, again, we talked earlier how some customers might cost more to serve than others. So this doesn't quite capture that, but it's a shortcut. So it's not intended to be as good as calculating lifetime value. What it is trying to calculate, though, is who are the customers that tend to be the ones that will provide the most revenue. So that's one kind of shortcut against lifetime value that lets you segment which customers you want to treat differently than others, because your best customers you want to treat better. You want to give them better offers. You want to make them more loyal. Those are the ones you're aiming at. Now, if even this calculation is too hard, if even putting together recency, frequency, and monetary is too hard, recency alone has a fairly good predictive value. If you segment your customers based on who's ordered the most recently from you, the chances are those are the customers who are most likely to order again soon. And so that's what you can use to decide how you're going to segment your customers. Maybe you're going to provide your best service and your best offers and your most marketing tactics against the customers that have ordered the most recently. So why do we keep drilling into segmentation? So segmentation is actually the most important thing you can do with all web analytics data. Now we're making these points about transactional ROI data, but honestly segmentation is just as important for relational ROI, and we'll get to that a little bit later. So why is segmentation important? Because the more aggregate your number is the harder it is to figure out how to improve it. So think about it. If all you know is the conversion rate for all of the tactics in your marketing and every piece of traffic that comes to the website, and they all have this one big conversion rate, what do you do now? Yeah. How do you make things better? What change would you suggest that would improve the conversion rate? If you have a large enough website with enough marketing tactics, making one change and then trying to see if you've improved the overall conversion rate for the website from that one change is ridiculous. There are so many other factors that could affect conversion rate. Conversion rate goes up and down all by itself without any change. So how could you possibly look at that big aggregate number and understand what happened based on this minuscule change that you've made? So that's where segmentation comes in. If instead you could measure the conversion rate of one small marketing tactic, then make a change in that tactic, and then watch and see that over a period of time the conversion rate for that one tactic is now markedly improved, now you've got something. Now you understand that the change you made was actually beneficial. So that can help you make more and more changes. And it's actually these small improvements, these tiny little changes that you make tactic by tactic, that's what's going to eventually improve the conversion rate of the entire site. But without segmenting your data so that you can see which things are working from these small changes and which are not, you will not be able to identify when those small improvements occur. You'll not— and you'll also conversely not be able to identify when something you did actually had a detrimental effect, then you better stop doing it and go back to what you were doing before or try something else. By segmenting your data, that— no matter how you do it, that's going to help you understand which things work better than others. So let's look at some examples of how to use segmentation. So what is the kind of segmentation that we're talking about? So we want to think about it both for transactional and relational ROI. So, so if you look at paid search, are conversions higher If we have higher bids, if we get our paid search ads in certain positions. So for example, you might think that conversions are always higher when the ad is number one, but perhaps it's not true. Perhaps conversions are higher when the ad is lower. Do you get higher conversions from certain search engines? So perhaps you might get much lower volume in a certain search engine, but maybe you get much higher conversion rate. So those are just examples of ways that you could segment your data to try to answer those questions. And when you get the answers, then what do you do about it? What you do is you try and figure out why those things are happening and see if there's a way you can take advantage of it. You can do the same thing with relational. So you could also ask yourself if lifetime value is higher when you use higher bids, if you're in certain positions. I mean, of the— you're attracting new clients, you're acquiring new customers. Which one do you acquire more customers for? Do those customers tend to have higher lifetime value? And again, the examples continue. Right. Can you look at things that use new keywords? Can you look at different kinds of copy? Can you look at different kinds of landing pages? Can you do dayparting where you're looking at different times for different ads? Which ones seem to work better? And so for all of these things, you can look and see whether your conversion rates are higher. You can also look to see whether your lifetime value is higher for either of these. So no matter how you're tracking ROI, whether you're using relational ROI or whether you're using transactional ROI, you can look at your paid search campaigns, you can look at these segmentations and many, many more and try and figure out which ones are performing better, which ones, which segments are performing worse, and what can we do about that. Let's look at social media marketing. What kinds of segmentation can we do there? So again, we're going to ask ourselves the same questions whether you're doing transactional ROI or relational ROI. You're going to ask yourself questions about different segments. So you're going to ask yourself for transactional ROI, are your conversions higher? For relational ROI, you're going to ask, is lifetime value higher? And so what are the kinds of segments you can do in social media? So particular kinds of messages or particular content in messages or particular subjects or different venues. I mean, you can look at a blog versus Twitter versus Facebook versus YouTube. You can look at all the different venues and say, are conversions higher or lifetime value higher from different venues? You can look at the whole dayparting question and again. So in search marketing, you can actually set up your campaigns so that they only fire at different times of day. And you can't do that with YouTube. I mean, once you put the video up, it can play all the time. But suppose you found out that tweets that you did at 9 o'clock in the morning seemed to have higher conversion rates than tweets that you did at 3 o'clock in the afternoon. That might cause you to change your tweeting pattern. You can also look at social media from the point of view of whether you're responding to what others are saying or whether you're initiating a conversation. Does it turn out that when you're responding, you have more credibility and you have a higher conversion rate? Or does it turn out that when you're initiating, you've really thought out the message and you've nailed it, but when you are responding, maybe it doesn't work so well. And so those— there are lots of different ways of segmenting. Again, these are just examples. These are only a few. Let's look at an example of email marketing. I am going through several different examples, and the reason that I am doing that is because You can do this with everything. So I'm trying to pick different examples to give you an idea of how you can start picking apart your data with what you're doing. So, so the question is, are conversions higher or is lifetime value higher with particular email messages that you have or emails that are on different types of subjects, or if you send the email before the start of the business day, or if you send it on the weekend, does it do better than at other times? And so you, you also want to ask yourself, how about the difference between sending email to a business address or a personal address? Or are you finding that email sent to one country seems to do better than to another? All of these things are things you can do just by segmenting based on either what's in the email address or what's in the message or when you send it. And there— and again, these are just examples. There are many, many different examples. So you need to decide what your marketing tactics are. So you decide your message, And you choose how to use that messaging in all these different kinds of tactics. So, so you start out by trying to make a strategy that says, here's what we're trying to do, here's the big picture of the message, here are the kinds of people we're trying to reach, and then you start to figure out what the tactics are. How are you using that messaging? Then what you're going to do is you're going to either set up tracking codes, which is what you would do with most of these things, or you're going to pick a different tracking method that makes sense. So we spent a lot of time talking about how in search, organic search, you need to look at referrers and keywords and understand how to do your segmentation that way. If you're talking about TV or radio or print, you're going to have to have another way of doing it. You could do things vanity URLs. You could make decisions about brand name searches. There's lots of ways for you to set up attribution rules that lets you decide which tactic you're going to give credit for. And you can give all of the credit to that tactic, which is the simplest way to do it, but maybe not the most accurate. You can also use matchback systems, as we talked about before, that can actually allocate Based on studies that you've done or other rules that you set up. So whether you're tracking ROI or you're using some other methods, you could be doing transactional ROI, you could be doing lifetime value, you could be doing even simpler metrics like revenue or profit or task completion, any of— it doesn't matter what metrics you're using. The most important thing that you have to know about metrics, whether you segment them or not, the most important thing is to use them to make decisions. You cannot spend all your time analyzing, looking, understanding, and not do anything about it. So the most important thing is to do something about whatever the metrics are. Once you start taking action based on the metrics, you will naturally be driven To be segmenting them, to be understanding the complexities, to be trying to get, get more insight. You will be driven to do all the right things with the metrics if only you are setting up a feedback loop that says, based on what the numbers say, that's what's going to help me figure out what to do next. So let's take a look at a real-life example. Everybody knows Amazon.com. What you might or might not know is that Amazon is nuts about making sure that they use metrics to make as many decisions as possible. Because rather than looking at a decision like this one, which is should the shopping cart be on the left or the right, instead of looking at that decision and Well, who should decide that? Should it be the designer? Should it be the person in charge of sales? Should it be the marketing person? Should it be the webmaster? Instead of doing that, they have a really easy decision. It should be the customer. How does the customer decide something like that? Well, they did an A/B test. The one on the left is A. The one on the right is B. So they ran the shopping cart on the left for a week. Then they ran it on the white a week. Lo and behold, 1% higher sales with the shopping cart on the right. That's where it goes. So if you go beyond A/B testing, maybe you've got way more than 2 choices. You have A, B, C, all the way to Z and even more. So you can have something called multivariate testing. Now, there's many different tools that do multivariate testing. One of the ones that's free is Google Website Optimizer. And so it can, it can look at thousands or I think even millions of different variations if you have the stomach to create that many content variations. And what it will do is it will randomly show them to live visitors and it will track to see which ones convert better. Based on whatever rules you give it. And then what happens is you can permanently change the page to the best version when you see that you have a winner. So let's look at another real-life example of testing. So let's look at these 2 pages. See one on the left One on the right. Which one do you think had 116% higher conversion? So almost twice as many conversions. Well, it turns out it's the one on the right. But honestly, when you take a look at it, it looks a lot more similar than different. It has a different masthead. The left nav is a little simpler. Maybe you can look at it and make up reasons why this is true, but the fact is that no one could have predicted this ahead of time. And it took several months for this online mortgage vendor, Really Great Rate, to go through thousands of different variations before they came to this one on the right and then found they could not improve on that very easily. And so they decided to then move on and work on some other things. But spending those few months doing all that multivariate testing, that allowed them to over double their conversion rate. And the same kind of thing can happen with you. And so once you have these feedback loops in place. Then you have a chance to start testing. Then you have a chance to start making decisions based on what it is that's working. So what is the secret of improving your return on investment? So one thing that you need to think through is we've talked a lot about how to track ROI and we've talked about how you have to identify each of the marketing tactics and make sure you can track them and watch them coming into the site. But the biggest improvement you can usually make for return on investment is to create a more structured web experience. So instead of just thinking about all these marketing tactics as dumping somebody into the website and then hoping a miracle occurs and they buy something. Instead, what you need to do is to look at how you can orchestrate your site so that every lead that comes into it has a chance of closing. So everyone who comes in there has a chance of completing the task and converting. So sometimes the right thing to do is to put them into your main website, but You might find that your main website isn't optimized for conversions and maybe for whatever reason it's hard to do. Don't be afraid to create a microsite or at least think about creating kind of a microsite style experience where you know that they're coming in from a certain kind of marketing tactic. Create a structured experience within your site for all the people that are coming from that tactic. And don't be afraid to allow the customer to self-qualify. So rather than throwing all sorts of money into trying to sell everybody, make it easy for the website to focus on only those people that really do make sense as leads. And don't be afraid to, to have people drop off As long as you're pouring enough leads in there and you can make sure that you're closing the ones that you need to close. Now once you've created that kind of structured experience, so you've now got your marketing tactics set up, you're feeding them into a structured experience, now you have to constantly test. This is when you start doing your A/B testing, your multivariate variant testing, and you're constantly measuring. So you're measuring how many visitors are coming in, you're measuring conversion rates, and you're looking to track what the improvement is in ROI, in lifetime value, whatever it is that you're trying to improve. That's what you're constantly looking at. This is a process that goes on and on and on. It never stops. You never get to say we're done. And you also have to focus on tracking the offline results. Now we talked in the earlier lecture about lots of ways of tying things from online to offline, whether it's through couponing, special phone numbers, there's all sorts of techniques. But I want to talk about another technique here that's especially important in terms of tracking return on investment, which is to use CRM systems, customer relationship management systems. Many companies, especially B2B companies or companies that have offline sales forces, those companies often have CRM systems already set up. So if you do, that's great, but there are also simple CRM systems that are even open-source CRM systems like SugarCRM for companies that don't have CRM systems and need them. So how would you then use web tracking codes? What you're doing with the web tracking code is instead of throwing it away when they get to the web conversion, if instead that web conversion is turning into a lead in the CRM system, then what you want to do is you want to take that unique web tracking code and translate it into a CRM tracking code that again puts the entire transaction from the beginning of that exposure to the marketing message all the way through to an offline sale. And so if you've tagged with tracking codes each individual content item in a marketing campaign, you can actually measure the offline conversions all the way back to each content item that began that conversion. Even if it's something that takes several months, if it takes multiple follow-ups by the salesperson, all those things will be tracked in the CRM system. And again, as we said before, you have to keep changing everything in marketing so that you understand how you're increasing sales. So this is how you're really maximizing your ROI is by this constant change and by having it hooked up from the web metrics system to the CRM system. That puts you in a position to actually track revenue based on marketing changes, which is where you need to be. Now, for a lot of companies, it's actually a daunting process to set up a CRM system or especially to tie that CRM system back into the web analytics system. And so ask yourself how you could start more simply. If you don't have a CRM system, could you at least just even on paper track which clients came in from which pieces of web content and just follow them till the end? If you have a CRM system but You don't know how to hook it up to the website. Could you start by manually entering the leads so they come over from the web system? Can someone manually enter them into the CRM system? So long term, it's important to automate that lead passing from the website to the CRM system, as I said, and that will help you scale to take on more opportunities. So many more opportunities will be able to flow from the web into the CRM system with all of that. Paperwork is taken care of, you're able to align the tracking code between the web analytics system and the CRM system. But walk before you run. If you can't do all these things at once, do the minimum you can just to be able to track, because tracking is what leads to feedback-based decisions. So once you get the feedback, you make a better decision than if you had no feedback, and then it becomes a virtuous cycle and it continues to work long after you've started. So what are the things you're going to change again, right? It's not enough to know how to track ROI. It's not enough to understand that you can calculate your ROI. You have to know how to improve it. So what are the things you are going to do to improve it? You are going to change everything. You are going to change your products, your content, your prices, your policies, your user experience. You are going to change everything over and over and over again. Customers are voting with their mice and the question is, are you collecting the votes? Are you acting on what they are telling you? This is your big chance. So understanding how to analyze the metrics, understanding how to improve ROI, this is where now the operational technique of constant, constant update and change and improvement is going to really pay off big time. So as I say in one of my books, do it wrong quickly and then fix it. So instead of trying to plan your marketing campaigns so that you understand exactly what the right thing is to do. Instead, rely on the metrics. Instead, use your ROI metrics as your feedback loop. You do it wrong quickly, then you fix it. It's much easier to let the market tell you what's working and what isn't working than for you to huddle up in a room with 3 other smart people and try and figure out what the market must be doing. What's the message that they're guaranteed to like? That's really hard to do. And there's no reason to, because you could start out with a message that maybe isn't all that refined, and then over time, as people hear more about it, as they pay attention to what's going on, as you watch what they're doing, then you can make decisions about which things are working and which things aren't working and change it. So one of the market tells you what's working, then you adjust to do it better. So how do we sum up this lesson? This is a critically important lesson because unless what you can prove you're doing has return on investment, then it's— you're not going to be able to do it for that long. You're not going to get the budgets you need to Do what you need to do because you cannot prove what the return is to the business. Now, it's very easy to measure the cost that goes into return on investment. So the investment part, the I part, that's not hard. Everybody can measure how much they're spending. The hard part is not even measuring the revenue, but attributing the revenue. How do you know which revenue came in? Because of which tactic. And so you have to focus on conversion measurement. You have to focus on understanding how those conversion measurements affect your transactional ROI. You have to also understand how you're going to measure relational ROI if you're ambitious enough to do that. And testing— you have to test, test, test in order to improve your results. And if you never stop testing, you'll never stop improving. So that's it for the lesson. Thanks so much for all of your attention. We'll see you again next time.
