Category: Digital Analytics

A couple of years ago, I was doing a Strategic Consulting engagement for a global company that operates in 75 countries. The scope was to build out a Marketing strategy for the next generation of success. I was immensely grateful for this fun and deeply challenging opportunity. In an early meeting with a sub team, they shared that the primary success of their Marketing campaign was the metric Cost Per Session. I’d never heard of it. In. My. Life. And, I had a couple of decades of experience. I’d worked with the largest companies on the planet. I’d authored two bestselling books on Analytics, in multiple languages. I’d helped invent entirely new Analytics tools!! The only CPS I knew was Cost Per Sale. Now, there are plenty of poor metrics. Take Impressions & Views. They are so value deficient, I would call them “things” and not metrics. [TMAI Premium Subscribers: Please review the invaluable guidance in TMAI #459, #460: Impressions Suck! If you can’t find them, please email me.] Still, Cost Per Session surprised me by its existence because I could not believe anyone would consider that as the end point of what their job was in Marketing. Just shovel traffic, and do it as cheaply as possible? ☹️ Pause. Deep breath. I’m going to come back to Cost Per Session. If you’re in a gun to your head type situation, I’ll share what you can measure instead to suck less. Even more valuable, I’ll share why as Google heads to AI Mode, a focus on Cost Per Session will harm your company exponentially more. This blog post was published as Premium edition #463 of my newsletter. Each week, I share actionable insights and hidden patterns to stay at the bleeding edge of Marketing, Analytics, and AI. Sign up for TMAI Premium to accelerate your career trajectory. Outcomes Over Activity. My objective is to protect the CMO from the CFO. As in, ensure that the client is executing a marketing strategy aligned with the awesome vision of the CMO, AND that all that activity is producing results that can withstand a CFO’s strict scrutiny. This turns out to be a bit of a pain for the CMO, as it forces a bit more discipline than they might prefer and a bit more accountability on the marketing organization than they prefer. After a period of adaptation, this pays off handsomely by identifying the incremental business impact of marketing to the CFO. Quickly followed by ever-increasing marketing budgets. A real-life case study of that shift in emphasis. The most common reports floating around your company likely look something like this: Google Advantage+, OMG, YES! Way to go!! Na na na na Email. Sucks to be you!! Sorry. What I mean is Google Advantage+ does a better job of eliciting a higher response rate. We celebrate this. We ship more budget to Mountain Park. If you have an engaged CFO, or legacy-minded CMO, she/he would ask what the outcomes were from the activity above. No biggie, we add our normal favorites like Revenue and Conversion Rate and share: Google Advantage+ delivers. More Orders. More Revenue. Joy! When you are assessing the impact of your Owned, Earned, and Paid marketing efforts, at the very minimum, go all the way to Outcomes. I know that sometimes this is hard because you are a B2B company, or you are a B2C company with a longer sales cycle, or you are a pharma company where the Outcome is a doctor writing a prescription. I still encourage you to go to Outcomes. In all of these cases you can either track the direct site Outcome or you can measure a Micro-Conversion and times it by an Average Lead to Offline Conversion Rate and Average Outcome Value and get a working set of numbers. These might only be 85% accurate, but they are a heck of a lot better than just looking at the Activity! Now… If you have a CFO who truly cares about Marketing, they will want to fund Marketing to the max. But, they have to look across all company opportunities (Stores, Support, Product, Eng etc.). Hence, she will ask you for one more thing. Accountability Over Outcomes. All of that Marketing was not free. Google Advantage+ costs you money. Email costs you money. Start by collecting those inputs. I recommend Campaign Cost and Cost of Goods Sold (what it cost you to make the products your marketing sold). Here’s that lovely picture. It is not surprising that Google Advantage+ costs more. We want to understand COGS – you can do actual or apply an average percentage across products, none of this will be reported to the SEC and hence good enough is good enough. Once you have the two inputs into Marketing, you are ready for the Accountability view. $17k in Revenue minus $7k in Campaign Costs minus the Cost of Goods Sold gives you a Profit from Google Advantage+ AI-powered campaigns of $5k. You can choose the level of accountability you want to demonstrate to your Marketing Loving CFO. If you want less CFO love/budget, you can use Return on Ad Spend (ROAS). [Note: TMAI Premium Members, review TMAI #455: Minimum Acceptable ROAS? 8. It will change your Performance Marketing strategy forever.] The tables now flip. Google A+ at 2.4 looks significantly worse than Email at 9.6 ROAS. A different view from both Activity AND Outcomes. Depending on your company culture: Earning you instant gratitude and thanks from the Paid Media team OR the Paid Media team becoming defensive and… ROAS gives Marketing full credit for Revenue by not accounting for Campaign Cost (ad spend). Hence, it vastly inflates Marketing’s impact. A smart CFO will see through this. My recommendation: At least aim for CFO like (if not love). You can do that by computing Return on Investment (ROI). It subtracts from the Marketing’s claimed Revenue the Campaign Cost. The tables continue to flip. Google A+ has a big percentage drop to 1.4 and Email has a smaller percentage drop to 8.6. Don’t stop the accountability train. Aim for CFO love! Compute Profit on Ad Spend (POAS). You can see the formula above. You are now actively losing money on Google Advantage+. For every $1 you send to Google, they send you $0.70 of Profit back. You are not going to believe it; this is not the end of the story. That comes by holding Marketing to account for the budget, and calculating Profit On Investment (POI). Time to cry. For every $1 you are sending to Google, your campaign is sending back a negative $0.30. Essentially, if this was your data, you exist to provide employment to Google’s Advertising Sales team. Email delivers a profit of $4.7 for every $1 in spend. Does it matter that your Revenue from Google A+ was 12x higher than Email? This is why every CMO who wants to grow Marketing budgets YOY, every CFO who truly loves Marketing demands their team measure Accountability over Activity. Here’s the complete picture: You’ll use the above to make decisions. You’ll expect your Agency to use the above picture, and more (!), to make decisions on your behalf to drive ever higher POI. Your VPs of Global Marketing, your CFO, receives something much simpler: If your company culture is against calculating POI, my recommended Priority 1 (P1), you can use POAS (P2). If the culture rebels against Profit or there is simply no way you can calculate it, go one step higher to ROI (P3). Don’t lower your standards and measure ROAS (but, if you do, the formula is above). Action: Should You Cut Google Advantage+ Budget? Yes. The results clearly illuminate that the way you are spending money on Google (or Meta) you need to immediately stop. In fact, with such poor POI, you should have never started. Yet. Recognize that Email only brought you 14 Orders, vs. 173 from Google Advantage+. Sure. You lost a lot of Profit on every one of those 173 orders. But there is the promise of scale. Google and Meta are successful businesses. They are built primarily on Advertising Sales. That means countless companies are getting high green POI. In this instance, chances are the problem is you, and not the platform. My recommendation: Step 1: Cut your Google/Meta spend to zero immediately. Send a message, it is not ok to be the giant sucking sound on company Profit. Pause a week, a month. Let the message sink in. It won’t be easy, there will be massive alarm bells that TRAFFIC IS DROPPING, REVENUE IS DISAPPEARING. Remind everyone, Profit is having a positive recovery at the same time. Step 2: Offer your internal Paid Media team, your external Agency (if you have one), and your Meta/Google Sales team (if you have one), an opportunity to deliver green POI. Step 3: Ideally, that invitation kicks off a fresh three-part strategy: A. What intent is available on the ad platform? B. What new set of tactics need to be activated to match that intent with audience, creative, and offers (if relevant). C. Mr. Zuckerberg has spoken of completely automating all Advertising, just send cash & one image per product. Great. What AI-Powered features are we actively using to turbocharge tactics (B) to engage with optimal intent (A). Step 4: Simple A, B, C strategy, of course, needs lots of smart work underneath it to unlock the scale once more – this time, making tons of Profit vs. currently actively eliminating Profit. Step 5: Keep spending on Google, Meta, Tiktok, Snap, WeChat, until you see high green POI. [How high is high? That’s the job of your CFO to identify. Oh, and also what’s too low – something clearly missed in the case study above.] Cost Per Session | Bye, Bye. At this point, you recognize the utter futility of letting any Marketing team use Cost Per Sale as a Success KPI or a Metric or, dare I say, even an Influencing Variable. Right? [Note: Premium members please see: TMAI #448: KPIs, Metrics, Influencing Variables.] The Cost Per Session of Google Advantage+ was $14. Stopping your success measurement at the Cost Per Sale KPI might be delivering job promotions to Marketers, ever higher fees/rewards to your Agency, with the Ad Platform laughing all the way to the bank. You saw the POI of a $14 Cost Per Sale above. If company culture, leadership issues, or a mass hypnosis prevents you from stopping this unprofitable behavior, my advice is to suck less. Instead of using Cost Per Session, shift to measuring Cost Per Non-Bounced Session. You received 510 Sessions from Google Advantage+. A spend of $7,200 translates Cost Per Session: $14. The Bounce Rate was 52%. 245 Sessions were: I came, I puked, I left (my definition of Bounce Rate). Completely unproductive (especially since you Paid for each of these people to come!). Take them out. Cost Per Non-Bounced Session: $27. With these new, more reality reflecting numbers, there is a higher potential that your internal team and your external Agency (if they are aligned with your interests) will look at $27 and say wait, that sounds crazy high for just a Session, maybe we should dig in further and revisit our tactics. Perfect. Sucking less. There is one more reason you should dramatically deprioritize Cost Per Session focus: SEO implications in an AI Search world. Google recently shared this collection of guidance for how to do SEO for AI Search. Specifically for AI Mode – a ChatGPT or Perplexity type experience from Google. You should read and start to activate Google’s guidance immediately. [Note: Premium Subscribers, it is crucial to understand the underlying changes to Search – for both Paid and Organic. Please review: TMAI #412, #413: AI Search: The Sky Is Falling!?] Google’s guidance for better AI SEO has this important, relevant bit: Understand the full value of your visits We’ve seen that when people click to a website from search results pages with AI Overviews, these clicks are higher quality, where users are more likely to spend more time on the site. Why is this? Our AI results may give people more context about a topic overall, and display more relevant supporting links, than with classic Search. This may provide a more engaged audience and new opportunities with visitors, but you might not optimize for these if you focus too much on clicks instead of the overall value of your visits from Search. Consider looking at various indicators of conversion on your site, be it sales, signups, a more engaged audience, or information lookups about your business. Google’s saying: Don’t use Cost Per Session. Don’t incentivize Cost Per Session. Don’t focus on one-night stands. If I did not persuade you to disincentivize Cost Per Session, I hope Google did. Bottom line. If you want to support your CMO’s career – because that is also very good for you -, prioritize a focus on Outcomes over Activity. If you want to really do that, you need to ensure Marketing’s impact is resilient and incremental, prioritize a focus on Accountability over Outcomes over Activity. It is not lost on me that this is difficult, it demands a ton of smart thinking, a lot of hard work, some uncomfortable conversations. In exchange… You get an AI-disruption-proof career. Carpe diem.

The post Smart KPIs: Accountability Over Outcomes Over Activity. appeared first on Occam’s Razor by Avinash Kaushik.