Insider's View: How to make the most of Web analytics
For all the talk about the power of Web analytics, the majority of marketers are still not using it at a strategic level to improve their business.
The data support that claim. Just one in five companies (22%) has an internal strategy that “ties data collection and analysis to business objectives” and only 27% say web analytics drive actionable insights, according to The Online Measurement and Strategy Report 2009, published in June 2009 by Econsultancy.
DMNews chatted with Eric Peterson, founder of Web Analytics Demystified, a consulting company, to get at some of the stumbling blocks marketers come up against and how they can begin to overcome them.
Q. Why are most marketers not making the most of Web analytics?
A. In the history of digital measurement, there's been a lot of reliance on technology. Marketers rely on technology as a crutch rather than relying on people-driven strategy. The Web analytics industry is still relatively immature.
Q. What about the exceptions to the rule? Is anyone using analytics on a strategic level?
A. I think Best Buy is doing a great job. They have a team of people dedicated to Web Analytics. Intuit's TurboTax division is doing it right. Expedia would be another good example and to some extent Nike. These are companies where senior management has been given the mandate to hire a brilliant analytics manager, invest in the right technology, the right people and [the time to] develop it. Technology is an important enabler, so they invest enough in technology as well. Companies need to have an executive mandate to use data, not just to rely on data.
Q. What is the biggest challenge?
A. The number one stumbling block is the irrational belief that Web analytics is easy. Google analytics is so pretty and the user interface is so well thought out. But they've lulled people into a sleepy state. And the vendors have historically said, “It's easy. Just tag your pages and the insights will be there.” You need the business processes in place, not just the pretty package.
It's more complex than most organizations think when they get into this. You get starts and stops. You have failed executions, which leads to a lack of trust. Management says, “We gave you a million dollars and you didn't answer our questions.” They say, “I'm not giving you more budget or the headcount.” It's common. A failed implementation from years ago can still weigh heavily on how companies view the idea of evaluating visitor behavior online.
Q. Sounds like where CRM used to be. Companies put millions into CRM technology and thought the technology would solve their customer relationship issues.
A. It's the same phenomenon. That comes up so often. Marketers say, “This is just like our initial Siebel implementation.” But enterprises are getting a lot better about their CRM strategy. The problems are so similar that ultimately the solutions are similar as well. It will change when the proper investment in human capital runs side by side with technology.
I have a rule called the 50/50 rule for Web analytics investment. I did a little research. I talked to a little more than two dozen companies that are getting it right when it comes to Web analytics. I asked them how much they spend on technology and how much they spend on people, whether that is staff, IT or outside vendors. Invariably it came out to the same amount. By the fifteenth time I heard this, I was convinced.
This rule becomes useful to CMOs. How much do we spend on our vendor? How much are we paying staff and outside consultants? How much do we spend on technology? The further those two numbers are apart, the harder time a company has with digital analytics in my experience.
Q. Are there other challenges?
A. Web analytics is not only hard, but it's new. We don't study the technological underpinnings of Web based data collection in MBA programs. It's different data. Historically speaking, advertisers deal in GRPs and CPUs and samples and demographics, and largely that's missing from Web analytics. So they're dealing with brand new kinds of data.
Q. What's your advice for marketers?
A. You need to hire someone internally. As a consultant, I shouldn't say that, but the most successful businesses using web analytics are those who have people on staff who are managing expectations and the use of these application.
Q. Ok, I'm a CMO and I just hired a rock star. Now what?
A. A CMO needs to work with the manager to get the six-, 12- or 18-month roadmap to figure out what the priorities are. You can‘t “boil the ocean.” You have to be strategic about it. It's not the data and reports that help organizations transform and improve in their online channels. It's the insights and the recommendations that people derive from the reports. The CMO does not need more spreadsheets. They need people they trust in their organization to tell them why things are happening online to the best of their abilities and what they think the marketer should do about it. It's the right thing to look for. You don't look for numbers, you look for answers. I hear lots of frustration from CMOs and CEOs that they get all these spreadsheets and numbers that don't inform them.
Get outside help as well. That answer is self-serving. Find someone who has built this kind of strategy. That can be your buddy who works next door and implemented something that is working. It can be a vendor. It can be a consultant like my company. The average CMO doesn't have experience putting the strategy together, so hiring experts is the right idea. When companies don't get strategic help, what they do is lowest common denominator such as tagging pages and looking at reports.
Q. Has the situation improved at all?
It is definitely better than it was three years ago. I don't think it's good enough. If you look at the hundreds of millions of dollars spent on these technologies yearly, there's not enough that companies are doing to seek ROI through the use of Web analytics. Am I happy to just have it a cost center to tell me what I did? Or do I want insights to be derived from that investment that will net me $10 million or $20 million or $40 million?
Q. Are direct marketers ahead of other marketers because of their data experience?
A. Not as much as you think. Conventional wisdom dictates direct marketers who are used to managing data and testing would be further along. It turns out that not all good direct marketers make the leap to digital, because the data are all different. They're using a census approach, rather than a representative sample, for example. Different numbers represent success in online channels compared to offline channels.
You don't do five or 10 catalog drops a year on the Web. You continually change layout, photos, text to try to constantly optimize the Web site. The reporting is different. The theory is same, but the execution is different enough that I see plenty of direct marketers struggling with the transition.
My direct marketing clients will have teams of people to do list segmentation. They'll typically have one person to do all of that for the online channels. I have a client right now who has a person focused on the online channel. Fifty-six percent of revenue is generated online, but abundant resources are focused offline. What is wrong with that picture? The economy is not helping. You can't cut from your historical direct marketing organization because it's also responsible for about half of the business.