Thursday, June 3, 2010

There's no ROI in Analytics

I was watching Avinash Kaushik's webinar on multi-channel analytics today and saw a question pop up regarding whether ROI can be figured out based on analytics. The marketing world and those who use marketing are increasingly obsessed with trackability, and that makes sense. Money is tight everywhere. If you spend money, you want to know it was worth it. There is no doubt that programs like Google Analytics are amazing, and with advice from experts like Kaushik, it's becoming more and more feasible to look at an ad campaign or a webinar, compare it to your website's traffic, and learn from your triumphs and/or your tribulations. It's great. It's geeky. It's even fun. But there's a big but.

Analytics is not ROI. Or is it?

I think the definition of ROI has gotten a little bit fuzzy, and I think this is an increasingly dangerous problem. Why? Well, marketers can drive traffic to your website. Marketers can tell you how many people visited your site, what pages they visited, and if you have an e-commerce site, you can learn who bought what, too. However, a marketer can NOT force people to buy your product. And that's a really really REALLY important distinction that often gets lost in the shuffle.

Now, some companies might define "ROI" as how many clicks back to their website they receive. In that case, analytics and ROI could be synonymous. However, there might well be a disconnect between sales and marketing in that scenario. Ultimately, it's not visits to a website that pays the bills, as we all know.

The other danger in tying analytics and ROI so closely together is that even though the science of analytics is getting better and better every day, it is still very difficult to pinpoint where a sale comes from unless you actually ask. Kaushik talked about this in the webinar today. If you run ads in the same publication 2 months in a row, and the first month your traffic spikes while in the second month your traffic dives, does that mean the ad lost its power in 30 days? If your sales spike six months later, can you attribute it to randomness or the fact that people held on to your ad or your e-newsletter and thought of you when the need arose?

Analytics Sets the Table. ROI Cooks the Meal.

I like to think of analytics as if it were a butler making sure that everything is just so before a big dinner. Is your traffic strong? Is it going to the places you want it to go to? What's your bounce rate? ROI is the meal. It's the show. And while a person could analyze a cost per click for an ad campaign or an e-newsletter, ROI is not so easy. Analytics is important because it shows whether you are giving yourself a chance to get your Return on Investment. ROI is what comes after those clicks turn into customers.

ROI is just going to become more mysterious

We thought it was hard to pinpoint ROI when we were dealing with print programs, website development, and trade shows. Guess what's going to be even harder? Calculating ROI for a Social Media campaign. Here are just some of the questions involved.

1. Is my investment time? Whose time? What is that time worth? Is that time worth the same when responding to a tweet or updating a Facebook status?

2. Is my investment the salary of my brand new, shiny Social Media manager? If so, how can I determine if that person is performing well? Will it be based on likes, follows, retweets?

3. If a person buys from your company after seeing a YouTube video you had posted a year before, do you calculate that as ROI for the cost of developing that video, or is just bonus points for the new year?

Analytics will still work. You'll be able to see that person who clicked to your site from Facebook. You'll be able to track the success of your videos, too. But that ROI is just a different animal. It's wild and crazy. We need to cage it up, identify it, agree on that identification, and make it our friend. Because whether you're a marketer or VP of sales and marketing at your company, you're going to get asked to prove the success of a campaign based on the ROI. Explaining that it's a wiggly worm just isn't going to cut it. We can all agree on that.

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