Use the Right CRM Benchmarks

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Many industry pundits claim that the Internet is a marketing panacea -- a revolution in the art of marketing. Other critics claim that online advertising is unproved and ineffective. But both groups, however, agree that the medium is measurable.


Then how, if the results of online marketing are quantifiable, immediate and empirical, can there be any disagreement about its effectiveness?


The solution to the riddle makes sense: Support for online marketing effectiveness varies drastically because results in the medium vary drastically. This discord stems from two factors: first, a lack of appropriate and relevant benchmarks by which to set marketing expectations, and second, marketers' inability to maximize the impact of every component of the customer acquisition process.


The Internet marketing industry has attempted to set benchmarks. The most common industry average cited is a 0.5 percent click-through rate. That number means little, though, because it doesn't acknowledge who is advertising, what advertisements are shown, where the ads are shown or to whom. Claiming an average click-through rate of 0.5 percent is parallel to asserting that the average family has 2.1 children. No family has 2.1 children.


Data-savvy Internet marketing firms can provide online marketers with actual, relevant, industry-specific benchmarks by which they can measure their online marketing and focus resources for specific improvements. The information is the result of serving billions of ads each month, measuring qualified actions such as registrations and purchases and tracking the behavior of millions of users. It is not from surveys or samples.


The metrics are anonymous, but they are real. The result is a marketer's most strategic tool for improvement: benchmarks that are the results of cohorts with relevant value propositions and relevant marketing objectives.


Financial services firms, for instance, see very different results than consumer products businesses. With broad online behavior metrics found in most research, these valuable differences are lost. When these relevant measurements are compared to an organization's current results, they create a focused road map for maximizing online marketing effectiveness.


The first step in maximizing the impact of online marketing is to recognize that building relationships is a process. As a process, there is no single metric to determine its effectiveness. It would seem, therefore, that success in relationship building is difficult to gauge -- how does one measure the effectiveness of, and then improve upon, the process of relationship building?


Easy. Distilling the relationship process into its key points and gauging the effectiveness of those steps helps to measure relationships. Even small improvements in the right areas of the process can result in huge, compounded incremental value.


Let's look at the key points of a customer relationship: awareness/interest generation, conversion to customer, commitment of loyalty and increase in lifetime value.


Awareness/interest can be measured by a combination of strategically placed impressions and the response rate to those messages. Customer conversions can be measured by the percentage of people who continue on to take action such as a registration or a purchase. Customer loyalties can be measured by a recurring visit and/or repeat purchase. Increases in customer lifetime value can be tracked by increased sales or cross-product sales to a single customer.


Every one of these levers can be measured. But many times a marketer's result on any one of these metrics is often no more than a single number illustrating what has happened in a single campaign. What isn't clear is whether improving that metric would be relatively hard or whether it would be an easy accomplishment. But if that metric is compared to a relevant industry benchmark, a business can truly understand the biggest opportunities for improvement and the resulting optimal allocation of resources.


Targeted improvement efforts will result in small but leveraged improvements in each step of the relationship building process and will compound to create large increases in value.


Consider the following improvements to an e-commerce online marketing campaign:


• Awareness/interest. Achieve 20 percent more volume in impressions through informed rate negotiation and publisher bonuses; increase one site visitor for every 1,000 impressions shown (from, say, three to four) by optimizing media placements and improving creative appeal.


• Conversion to customer. Increase sales conversion rate of site visitors from 2 percent to 3 percent by testing and improving site design (e.g., purchase process).


• Customer loyalty. Increase retention from 40 percent to 50 percent by maintaining proactive communication with valued customers (e-mail).


• Increase customer value. Provide timely and targeted offers of appropriate products to encourage customer activity and increase lifetime value from $150 to $200.


These proposed improvements are based on relevant benchmarks. When they are improved in concert, they compound to create significant results in bottom-line value. The resulting upside from the four marketing enhancements is a 150 percent increase in first-time customers, 215 percent more lifetime customers and more than 4.2 times total value.


By breaking down online marketing into customer acquisition and retention components, online marketers can help advertisers improve results by orders of magnitude. Some metrics offer even greater improvement than others.


In order to maximize the impact of online marketing, businesses need to recognize that the customer relationship is an ongoing process -- from generating awareness to repeat purchases. The Internet is effective for marketers that leverage relevant metrics and use that knowledge to focus efforts on the most appropriate points of the process. When this is done, no one will disagree with the results.


•Jason Trevisan is director of analytics at iballs Internet Media, New York, which represents marketers and delivers high-performance digital marketing strategy and results. Reach him at jtrevisan@iballs.com.
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