{ { Marketing Metrics Explained. Copyright 2011 icontact Corp.

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1 { { Marketing Metrics Explained

2 How do you determine the strength of your marketing program? Are you focusing on the most important marketing metrics? What are you comparing your current key performance indicators (KPIs) against in order to measure success? Marketing Metrics Explained tackles these questions and leaves you with the following takeaways: You will learn how each metric is calculated and the importance of each to your program. You will learn how to use KPIs to assess your program s strengths and weaknesses, overall health, and impact on your business. You will learn how to set reasonable expectations and goals for your marketing program on the basis of where your program stands today. What are the most important marketing metrics? According to MarketingSherpa, The most commonly tracked metrics continue to be clickthrough, open and delivery rates. 1 Marketing Metrics Tracked by Percentage of Organizations Clickthrough rate 92% Open rate 90% Delivery rate 81% Clicks per link in 51% Clicks per 51% Post-click conversion rate 44% Response by list segment 36% Revenue per 33% Social sharing rate 18% Source: MarketingSherpa Marketing Benchmark Survey Methodology: Fielded Sep 2010, N = 1,115 1 Jeff Rice, New Chart: Top Tracked Metrics, Marketing Sherpa, last modified December 14, 2010, 2

3 Focus on Five Key Metrics Why Your Clickthrough Rate Matters More Your campaign s clickthrough rate (CTR) is one of the most important metrics to measure. Your CTR shows your overall engagement level with your subscribers and how relevant they deem your content. A strong CTR equals a strong engagement ratio, which is a key metric monitored by multiple Internet service providers like Hotmail and Gmail. Your CTR carries more weight than your open rate because multiple clients detect and define an open differently. MarketingSherpa notes that the open rate, once the predominant metric of marketing, has been surpassed by the slightly more definitive clickthrough rate. 2 Clickthrough Rate (CTR) The number of times a link is clicked in a message divided by the number of delivered messages. For example, if a message is sent to four subscribers and one subscriber clicks on the message twice, the resulting CTR for that message is 25% (1 unique click / 4 delivered s = 25%). Unique Clicks / Delivered s = CTR Why Your Open Rate Matters Less Your open rate alone should not determine the success of a message. Although it is important to monitor your open rate over time for spikes, it is not the ultimate metric due to the fudge factor around capturing and detecting an open. Mark Brownlow of Marketing Reports tackles this very issue in his blog entry What Do Open Rates Mean? Open Rate The number of times a message is opened divided by the number of delivered messages. Unique Opens / Delivered s = Open Rate When your service sends out your , they include a piece of code in each one requesting the display of a tiny, transparent (i.e. invisible to the viewer) tracking image. When the recipient s browser or reading software (an client like Outlook Express) tries to display the on a screen, it reads that piece of code and sends out a request to the service for the tracking image. 2 Ibid. 3

4 When the service receives the request, it records it and uses it as an indication that the recipient has opened the . 3 Unfortunately this process for tracking an open creates the following three issues, which Brownlow captures perfectly: 1. An open actually just means the recipient s software or browser displayed the such that the tracking image was requested. It says nothing about whether the recipient actually read or engaged with your in any way. 2. The tracking image can be activated without the recipient ever actually seeing the at all. Many clients have a preview function, where part of the is displayed below or to the side of the list of s in your inbox.... So some of those recorded opens are from recipients who never even looked at your If your recipient gets text-only s or has an client that only displays text versions of s (like many mobile devices), then the image code is ignored and never requested. No image request means no record of an open. So your recorded open rate misses out on those people. Why Your Delivery Rate Is Not a Given Your delivery rate can vary depending on your list s overall health. If your list has a large percentage of hard bounces because of data entry errors, or if you re sending to a stale list (i.e., a list that is older than six months and that has not been ed before), then your delivery rate may suffer. Over time, by growing your list organically and sending to the list on a frequent basis, you will clean out the majority of hard bounces and garner a much higher delivery rate. Delivery Rate The total number of messages sent minus hard or soft bounces divided by the total number of messages sent. Bounces can either be a hard bounce, a permanent delivery failure (i.e., the address is misspelled or doesn t exist), or a soft bounce, a temporary delivery failure (i.e., the subscriber s mailbox is full). (Sent s - Bounced s) / Sent s = Delivery Rate 3 Mark Brownlow, What Do Open Rates Mean? Marketing Reports (blog), August 2006, 4

5 How to Capture and Track Your Conversion Rate You can use analytics programs, such as Google Analytics, to measure your conversions. These products enable you to capture B2B webform or survey conversions and B2C retail conversions. Taking the time to set up conversion tracking strings and tracking codes is well worth the effort. Karen Bannan notes as much in her BtoB article featuring input from Mark Feldman, VP of marketing at NetProspex, a sales and marketing database company: Conversion Rate The total number of conversions divided by the total number of messages sent. Conversions / Sent s = Conversion Rate The majority of marketers look to traditional metrics such as open and clickthrough rates to help shape campaigns and strategies. While this is smart, Feldman said, marketers must also follow conversion rates from leads into sales. This metric shows you how effectively leads are being processed by the sales team, he said. Sales pipeline metrics help you get a picture of your overall ROI, as well as the effectiveness of your targeting. 4 One thing to remember, though, is that not all conversions are trackable. If your sends a customer to your retail storefront, for example, you won t be able to track that the lead came from unless you offer an incentive such as a coupon to redeem. Although measuring conversion from marketing is simpler than for many other forms of marketing, it is still not a perfect measure of return on investment (ROI). MarketingSherpa noted this when it posed the following question in its Marketing Benchmark Survey: Does your organization have a method for quantifying ROI from marketing? Of the respondents, 59% said they did not have a method of quantifying ROI, and 41% reported that they did have a method in place. 5 Unfortunately, 59% of marketers are unable to capture their marketing program s ROI. If you fall in this 59%, begin by tracking your program s return on ad spend (ROAS). 4 Karen J. Bannan, Tracking the Right Metrics, BtoB, May 12, 2011, 5 Adam T. Sutton, Marketing: Show Me the ROI, MarketingSherpa Blog, February 3, 2011, 5

6 Why You Should Calculate Return on Ad Spend By tracking your ROAS, you will learn the impact and profitability of your efforts. The formula for calculating ROAS is very simple as long as you know your total sales and your total costs for each campaign. You can capture your total sales by using a free analytics tool like Google Analytics. You only need to invest a little time and effort in order to determine how impactful your marketing program is on the bottom line. Return on Ad Spend (ROAS) Your total sales divided by the total cost. Total Sales / Total Cost = Return on Ad Spend Metric Benchmarks for Measuring Performance According to a survey released by the Direct Marketing Association, marketing s using a house list are seeing an average open rate of nearly 20%, a click-through rate of 6.64% and a conversation rate of 1.73%. 6 These metrics represent the average across thousands of uniquely different marketing programs. To help you determine the overall health of your marketing program, icontact has created key metric benchmarks for programs at several levels of maturity. Keep in mind that more mature programs will have stronger KPIs than programs in their infancies. For example, metrics for a program that has only ed a list once will differ from those of a more seasoned program that has been sending s to a list every two weeks for the past two years. 6 Frank Washkuch, Marketing s See Open Rate of Nearly 20%, Says DMA Survey, Direct Marketing News, June 15, 2010, source=feedburner&utm_medium=feed&utm_campaign=feed%3a+dmnewshome+%28dmnews+home%29. 6

7 Marketing Performance Benchmarks Key Metric Onboarding Infrequent Sending Frequent Sending Clickthrough Rate 3.4% & Lower 3.5% to 6.2% 6.3% & Higher Open Rate 12.5% & Lower 12.6% to 20.5% 20.6% & Higher Delivery Rate 84% & Lower 85% to 95% 96% & Higher Conversion Rate 1.09% & Lower 1.10% to 1.64% 1.65% & Higher ROAS 1,250% & Lower 1,251% to 3,999% 4,000% & Higher You can determine which benchmarks apply to your program depending on its maturity. Onboarding Benchmarks Onboarding benchmarks apply to you if you are new to your marketing provider or new to marketing altogether (i.e., have never sent an out of your marketing provider before or have just started sending in the last month). Any program going through an onboarding process will have a much higher bounce rate as well as a higher overall unsubscribe rate. Therefore, these metrics will deflate your delivery rate for the first handful of sends to your list. If you are sending to subscribers who joined longer than six months ago and who have yet to receive a message, they may not recognize your name in your message s from field. Consequently, your open rate, CTR, conversion rate, and ROAS will be lower until subscribers become familiar with your brand in their inboxes. Infrequent Sending Benchmarks Infrequent sending benchmarks apply to you if you send once every two or three months or do not send an during certain seasons. 7

8 By sending infrequently, your list churn (i.e., the loss of subscribers because of hard bounces, unsubscribes, and complaints) will always be higher than the churn for programs that send frequently. Therefore, your delivery rate will be weaker. Brand recognition within your subscribers inboxes will also suffer because contacts may forget about your program and the value you provide. By setting a steady monthly sending cadence, you capture stronger engagement levels and increase your open rate, CTR, conversion rate, and ROAS. Frequent Sending Benchmarks Frequent sending benchmarks apply to you if you have a more mature marketing program (i.e., you consistently send s every two weeks to your list). To achieve strong KPIs, you will need to maintain your overall cadence strategy. If you touch your list at least once every two weeks, your list will become pristine, and your s will not bounce. Your delivery rate will also be strong and stable. What You Can Do In order to push your open rates, CTRs, conversion rates, and ROAS higher, you need to optimize your marketing program on a routine basis to ensure that you are sending relevant content within robust templates. Monitor your metrics and set aggressive (but realistic) goals for improving your program. About icontact icontact is a purpose-driven company based in Raleigh, NC, working to make marketing and social marketing easy so that small and midsized companies and causes can grow and succeed. Founded in 2003, icontact has more than 300 employees and more than 700,000 users of its leading marketing software. icontact also provides the event marketing platform Ettend. As a B Corporation, icontact utilizes the 4-1 s Corporate Social Responsibility Model, donating 1% of payroll, 1% of employee time to community volunteering, 1% of equity, and 1% of product to its local and global community as part of its social mission. icontact works hard to maintain a fun, creative, energetic, challenging, and community-oriented company culture. 8