Common metrics used to judge the success of marketing efforts—such as cost per acquisition (CPA) and return on ad spend (ROAS)—can prove to be short-sighted and ineffective. Even though CPA, ROAS, and other front-end metrics may be what the C-Suite is used to, evolving the conversation to profit-based measurement can lead to better results. Profit optimization is not as easy as flipping a switch; marketers have the challenge of sharing the message and convincing leadership that it can create results. Last week, we hosted a seminar with Nick Danford, Agency Development Manager at Google, and Maddie Cary, Point It’s Vice President of Client Services, to talk about PPC profitability.
Over the seminar’s two hours, our panelists walked participants through profit optimization from Google’s point of view, as well as the agency perspective. Nick talked about his experience as a client development and client acquisition leader, working with businesses in education, retail, and food service (among others) to implement profit optimization programs. Maddie focused on how businesses can establish a digital program focused on profit optimization and how to overcome common obstacles. Following is a selection of highlights from the conversation that we felt were too good not to share.
Why are front-end metrics less effective than they could be?
No matter the industry, every marketer wants to convert leads to customers. There is an abundant supply of data available, but it is easy to get distracted by a surplus of information that actually tells you nothing.
If your organization is measuring success only by last click attribution, you are going to encounter information gaps and decision-making problems. You won’t know what resources you spent getting to that point—the data gathering, collateral design, cost of paid advertising—just what ended up attracting a click.
Profit optimization is more accurate and leads to better results
Once you can turn the organizational conversation around and help the CMO and CFO understand that metrics like CPA and ROAS don’t correlate with profit, you’ll have at least a small opening to help change mindsets and meet goals.
Profit optimization can also prove to be a useful resource for integrating your sales and marketing departments, by giving you something to measure. Maddie remarked that 59% of businesses don’t measure sales and marketing alignment at all—a major lost opportunity!
Knowing what generated leads, paired with data about what turned into leads, makes the route to conversion less likely to hit a dead end.
Digging into the data and making it work for you
The challenge many marketers face today has less to do with the availability of data and much more to do with how do interpret it, draw conclusions, establish goals, and convince the C-Suite why your strategy will work.
You’re also going to have to ask questions. Maddie shared two of her favorites:
- “What are the things that help us drive demand?”
- “What are the things that capture demand and help us drive profit?”
Nick put it well when he explained that it takes more than the player who scores to win a basketball game. Using that comparison, he asked what would happen if only the person who scored the basket got paid. Where would that leave the other players, the coaches, the trainers, and everyone else who got the team to that point? Relying on last click attribution is like crediting only the player who scored.
Nick and Maddie stressed that there is so much more data available, and that data paints a more comprehensive picture that can point the way to profitability with the right analysis and strategy.
Using data in a versatile way can help strengthen agencies as strategic partners, Nick said. He continued, “If you understand leads in the context of profit and what they’re actually bringing you…digital marketing agencies can be even greater partners and bring more success to the challenges that your businesses are facing.”
It’s also essential to understand metrics options and how they all relate to each other. Isolated, compartmentalized metrics do no one any good. “If you’re sick of a metric, you can’t just complain about it. You have to propose another. You have to be a thought leader and propose another metric that you think is more useful to the company,” said Nick. You also are going to have to be the champion for that metric’s role in your profit optimization strategy (don’t worry—we can help).
Nick described how his team uses “client playbooks” to check in monthly on initiatives most likely to lead to profit. That allows the team to review what worked and what didn’t, while projecting ahead for the next steps with the clearest potential.
Defining (and demystifying) “profit optimization”
Part of the goal of the webinar was to demystify the term “profit optimization.” This is just thinking about marketing differently and measuring it differently, said Nick.
He explained how the Google team worked with a CRM startup that was competing against Salesforce to move it beyond its practice of just tracking initial leads. The next question, said Nick, needed to be how to move the lead from raw to qualified. The team incorporated information into AdWords reporting, stratified it according to business size and took geo into account. Ultimately, the overall leads rose almost 10% and estimated profit grew by 43%.
Do we need to abandon organic efforts?
Short, emphatic answer: NO! Organic will always be important, but paid offers you more layers, possibilities, and options.
Paid media adds control and testing scenarios not easily available with organic media. “Organic should still be very much a part of your strategy. But paid offers a lot more levels of information to figure out how to actually maximize,” said Maddie.
Case studies make the point
Nick explains how diverse businesses can achieve profit optimization based on customized marketing approaches. A restaurant, for example, moved beyond conversions to calculate “customer match” by analyzing anonymized email data, uploading it, and segmenting the information to yield an increase of 20,000 more high-potential, high-frequency diners per month. ?
An insurance company used deep data analysis to figure out that chasing new customers was not as cost effective as developing current clients by explaining how to bundle policies. “It’s a lot easier to add in a policy than hunt for a new person,” said Nick. ??
Maddie shared an example of how she helped an e-commerce client build value by figuring out which of two campaigns was driving the most revenue per order. Always put money where the value has the most potential, she recommends. She also explained how a layered approach, breaking out campaigns and targeting based on audience size helped guide a business toward its highest projected close.
Convincing the C-Suite
At this time of high turnover for CMOs—when the CMO position is often transitioning to “Chief Strategy Officer” and the CFO has an ever-watchful eye on spending—it’s up to you as the marketing professional to position yourself as a thought leader on profit optimization and be prepared to help them understand how everyone benefits in the long run. Maddie also gave pointers for introducing profit optimization concepts gradually, to bring leaders along and get buy in more easily.
Identify activities that demonstrate value
Big or small, you need to be prepared to delineate the profit-optimization activities that will demonstrate value. Here are some reasons it’s worth choosing profit optimization over front-end metrics. ?
- It’s more effective to focus on the right metrics at the right time than to focus on growing all things at all times
- Traffic doesn’t matter; what matters is how you’re getting the traffic in order to drive more profit
- C-Suite involvement is critical—but the onus falls on you to convince them
- Organic reach still matters as part of your strategy, but paid gives more levels of data that can help you figure out how to maximize profit
- Automation can be an asset; refining workflows can help sales teams spend time on the tasks that have the most potential to create value
- Understanding what your manager is trying to accomplish should be a goal prior to presenting ideas for profit optimization
- Part of your challenge as a marketing professional is packaging a new idea in a way that leadership can embrace. “Speak as if it’s the most important metric,” advised Maddie
To sum up
It’s easy to get comfortable with collecting data the way you’ve always done it: cost to acquire, ROAS, and conversions. But comfortable doesn’t equal profitable. Optimizing profit involves doing the hard work: setting up a paid search program that aligns sales and marketing; taking data from all phases of the lifecycle into account, and abandoning the old way that wasn’t working anyhow.
Flip the paid search script and get ready to measure something that really matters: your profit. ?
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