Omnichannel Marketing Part 10: Measure It
Jack Schmid, Founder
Any seasoned direct marketer knows the importance of understanding the numbers side of the business. You have to know both the left-brain (analytic) and right-brain (creative) rules for maximum success. My philosophy is “know the rules before you break them.”
People often ask me for the most important direct marketing metrics. As we have evolved to a wider use of selling channels (Websites, e-mail campaigns, search engines, in-store selling), do the tried-and-true tenets of catalog marketing still hold up?
Here are my top five metrics that every omnichannel marketer must know and use in the measurement and tracking of their business.
1. Business financial model
Every consumer, business-to-business, or even not-for-profit multichannel seller has a unique financial model that describes its business–there is no single business model. Each company has a set of costs (including its cost of merchandise, fulfillment, marketing or selling and administrative or overhead) that is totally specific to its operations. This business model should reflect a mature company position (at least three to five years in business) and must represent the goal or ideal that the company is striving for.
2. Cost to acquire new customers (or “front end” marketing)
There are dozens of ways to recruit new customers. The challenge for successful omnichannel merchants is to identify those acquisition methods that produce the best short-term (from a cost standpoint) and long-term (as in lifetime value) customers for your company. The Internet and retail stores have added to the versatility of the ways to bring in new buyers. But the bottom line is in measuring what it costs to get new customers and then tracking them for longer-term value.
3. Lifetime value of customers
The “backend” analysis of acquiring new customers is measuring their longer-term value or their propensity to continue doing business with your company. Omnichannel selling is not about a one-time sale. It is totally driven by repeat sales from existing customers. Knowing what customers will spend over time is crucial to putting a value on your list and in determining how much you can spend to acquire new customers.
4. Return on Ad Spend
Every marketer should (but doesn’t always) have a thorough understanding of how each channel contributes to the bottom line after cost of goods and marketing costs have been accounted for. It’s common that each channel is claiming as revenue have significant overlap. So it’s important to first determine an attribution model to get to an accurate view of topline revenue, then subtract costs to arrive at a figure for return on ad spend (ROAS).
5. Breakeven Analysis
This is an analytical tool that too many omnichannel merchants ignore. Breakeven analysis works backward from the financial model to solve for the percent response and average order value (AOV) needed to generate the revenue per mailing, email campaign or any customer promotion to pay for itself (or break even.) This analytical tool can be used in conjunction with the business model to help in the pre-promotion expectation and the post-promotion look at results.
Measuring the right metrics is crucial for successful omnichannel marketing. Understand your financial model, customer costs, lifetime value, and performance to optimize your efforts and identify areas for improvement. Knowing the rules before breaking them is key to direct marketing success.
Tags: analytics, campaigns, multichannel, omnichannel, Strategy