The analytic capability now possible for measuring online behavior is astounding, and it’s only going to get better.  Amazingly, we are only in the infancy period of what is actually going to be feasible with website analytics in the future.  Even now, analytics enables smart business decisions and advertising that is more relevant, targeted, and cost efficient than anything in marketing history.  With all of the powerful tools available, though, it’s easy to become overwhelmed by the amount of data that’s out there. 

Mark Jeffery’s Data-Driven Marketing gives techniques to simplify this abundant data with 15 metrics.  Five of these easy-to-understand metrics are directly related to search engine marketing (SEM), and can help you determine which strategies are effective and which are allowing you to lose money.  Of course there are other metrics out there, but Jeffery’s are important to consider in the ongoing evolution of website analytics, and are relatively simple and easy to apply.   Below is a brief overview of how each metric can work for you.

1)     Cost-Per-Click (CPC): Cost-Per-Click is the price set by search engines that you pay every time a user clicks on your paid ad.  In the world of search engine marketing, Cost-Per-Click reveals how many times your landing page, given a set budget, can be viewed by web-surfers.  For example, if you have a budget of $1,000, and the CPC of an ad is $2.00, then you can afford to have 500 people potentially view your website.  Of course in reality you would have multiple ads running simultaneously, but the basic principle remains the same.

2)     Transaction Conversion Rate (TCR): Transaction Conversion Rate is simply the percentage of customers who, after viewing your site, purchase something.  Most companies will provide you with analytics like TCR so no real calculations are necessary.  This is a useful metric in and of itself, but it has other interesting applications as well.   For instance, take the Transaction Conversion Rate and multiply it by the Click-Through Rate (another easy to use metric provided by search engines) and voila! You now have your Take Rate, or the probability that an individual will purchase something on your site when he or she sees your ad on a search engine.

(Note: Strike-through in equation indicates the cancellation from multiplication)

3)     Return on Assets (ROA or Return on Ad Dollars Spent): When you invest, one of the key things you are undoubtedly interested in is what kind of return you are getting.  This simple metric can be calculated by dividing your net revenue by your cost.  This is also called Return on Investment (ROI).

4)     Bounce Rate: Bounce Rate is defined by Google as the percentage of customers who navigate away from your site after only viewing the landing page.  This metric is especially helpful in judging how well your ads target your customers.  A high bounce rate means the people coming to your site aren't finding what they are looking for.  If that's the case for you, consider making specific changes to your ads based on your data.

5)     Word of Mouth (WOM): Social media is all the rage today, but why?  Consider the follow scenario: Jenny clicks your site to watch a video, but to do so she has to share it with at least 5 friends.  Now Jenny’s click is not worth only one, but actually six clicks!  When you consider the friends of Jenny telling their friends, you can imagine the exponential potential of Word of Mouth.  To calculate Word of Mouth, simply take the number of direct clicks to your site (any clicks directed to your site that weren't referred), add it to the number of clicks from recommendation engines (such as the number of links forwarded through emails), and divide the sum by the number of direct clicks.  What you end up with is essentially a multiplier that tells you how much each direct click is worth in reality.

Posted by: Jonathan Bernstein