Day 15 - Key Analytics & Performance Indicators

Ryuzaki

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One of the downfalls of internet marketers is they tend to cast a wide net, take a shotgun approach, throw shit at the wall and see what sticks... You guys know the metaphors. It's spray and pray, and it's stupid.

You MUST Be Familiar With the Marketing Terminology

"You can't manage what you can't measure." - W. Edwards Deming
Today's guide is going to be chockfull of jargon and terminology that every internet marketer needs to be exposed to. As you make your way up the ladder of this industry, people assume that you know what you're talking about, so you're going to get hit with a ton of acronyms. Even here, Builder Society is already being called BuSo. Everything gets shortened and you either keep up or you get left behind.

There are three reasons to know all this terminology:
  • If you can't measure it, you can't improve it.
  • If you can't communicate with other professionals, you can't leverage each other's abilities.
  • If you don't internalize these concepts, you can't go for the big boy campaigns.
You can make it very far with "normal" campaigns where every aspect can be measured and optimized.

But I'll tell you what you can't measure... You have no clue how well that billboard you paid for for six months is performing. You have no clue how well that celebrity endorsement is contributing to your bottom line. You have no clue how many calls are coming from that phone book listing you purchased.

You have to internalize every bit of this. Your brain has to play with it, chew on it, get feedback, iterate on it. Eventually you'll be the marketing Rainman, who's intuition and skill makes us wonder if we don't need to rewrite our philosophy books on epistemology. There's some philosophy jargon for you. You may not know what that word means, and that renders the entire sentence and concept meaningless. This is why it's important to know the marketing terminology.


The Acronyms & Concepts You Must Know

If you've been in the game for a while and know these terms, good for you. Skim the list and see if there's anything new you could learn and exploit. If you are a brand newbian (hip hop jargon!) then you need to read every word of the following section and burn it into your brain. Bookmark this page and use it as your encyclopedia and dictionary on the fly when someone throws out a term you've forgotten. Don't be the dummy who can't hang and doesn't know about...

KPI - Key Performance Indicator

Let me say now, there are boatloads of acronyms that aren't making this list. They are either used infrequently and it's not a big deal if you say "What does that mean?" or they aren't related directly to the act of making money and figuring out how to make more money. You'll see technical acronyms like URL, HTTP, IP, API, and others. You'll see acronyms for terms that get typed too much like FB, RT, G+, etc. They aren't critical. Just look them up when you encounter them and you'll eventually remember.


The following are critical. Knowing what they stand for is the first step in understanding what they are used for and eventually using them. You literally cannot be successful online without understanding the concepts behind these acronyms.

Get ready. There's not going to be pictures and fun stuff. Just straight information for you to burn into your brain.

Monetization & Advertising Concepts

CPC - Cost Per Click
This refers to the amount you'll earn or pay when a user clicks an advertisement. It's more often associated with being the publisher, meaning you're displaying ads on your own website.​

PPC - Pay Per Click
This refers to the same concept as CPC but is often used in conversation to refer to you being the advertiser, versus being the publisher. In this case, the value will change depending on how much you and your competitors are willing to bid to receive traffic.​

PPV - Pay Per View
It's not always about clicks. In this case it's about views on videos or live streams. It's big in industries such as music, movies, adult, biz opps, etc. You ever heard of that one site called YouTube?​

CPA - Cost Per Action
Sometimes you'll see this called Cost Per Acquisition and be used where Cost Per Lead might be used. That's how I think of it. But I know some refer to it as Cost Per Action, where you may simply get an email address and a zip code out of a potential lead. But they aren't yet remotely qualified or worthwhile.​

CPL - Cost Per Lead
This is different than CPA because you are getting a fully qualified and hot lead (or selling it). For instance, a PPCall lead is going to be hot and ready to commit, versus someone who gives you a potentially fake email address and fake zip code.​

PPD - Pay Per Download
In the same vein as PPV, a Pay Per Download is someone usually downloading a piece of software or using a certain service to download any type of file. This is typically bottom of the barrel stuff chased down by spammers. It could be torrents, software keys, or any software packaged with a virus.​

CPS - Cost Per Sale
This is one of the most important acronyms and concepts. We'll talk about how to use it below, but it is your total expenses associated with acquiring one sale or lead.
AOV - Average Order Value
Subtract the CPS above from the average value of every order you receive, and you know your profit value and margin. Now you're ready to optimize your marketing campaigns within these parameters.​

B2B - Business to Business
B2C - Business to Consumer
You are the business. Whoever you're marketing at will affect every value we've been talking about. Businesses have more money and are typically easy sales. They know what they want and vet your product or service before hand. Consumers can be a headache but there's a ton of them. Knowing your position here will change how you approach the optimization of your business.​

MRR - Monthly Recurring Revenue
Re-bills, subscriptions, consistent value offered to recurring customers... these all contribute to your monthly recurring revenue. This is the leading cause of marketer's becoming lazy and complacent. There's nothing more advantageous than cash flow. Use it wisely.​

SaaS - Software as a Service
This is the new game in town, to the point where even Adobe and Microsoft hopped on board. It's helping to stop software piracy and keep cash flowing. Netflix and Hulu are SaaS's, as is SerpWoo, Ahrefs, Majestics, and Moz. A high value for a low cost keeps users engaged and subscribed, except for the idiots you give a foot and they start demanding a meter.​


Values to Be Optimized

CAC - Customer Acquisition Cost
This is specifically what it costs you in marketing to acquire a new customer. You add up all of your expenses and divide it by the number of customers you received in a given amount of time. The acceptable value of this is based on your average order value, and if you're branding and marketing are on point and the quality of your product or service is sky high, then this number should begin to drop over time (increasing your profits).​

CLV - Customer Lifetime Value
You know what it costs to acquire a customer. You know how much the typical customer will spend per order. Multiply that by the average number of orders per customer before they stop ordering altogether and you've got the lifetime value of a customer. You want to drive this number as high as possible, and it's done through quality and speed. How fast and satisfactorily do you respond to customer service? Do you go above and beyond to make things right, even taking a loss? Does your site load fast? Do you offer 2-3 day shipping? Will you price match or accept competitor coupons?​

CPM - Cost Per Thousand Impressions
This confuses a lot of folks because of the letter M. It's Roman and stands for mille which does not mean a million but a thousand. I can almost guarantee that when you see CPM it's always referring to impressions and nothing else. An impression refers to the number of time something is viewed on the browser, not always just loaded (depends on the network). This is usually a display ad, but might be a video too.​

CTR - Click Through Rate
A simple but deceptive concept. Click Through Rates are the number of clicks you receive on an item (an ad, an affiliate link, etc.) divided by the number of impressions you measured. So if you recieved 55 clicks over the course of 3000 impressions, then you have a 1.83% CTR. It's deceptive because amateur marketers will think a higher number is better, which it is when you're a publisher. But when you're a producer and you're the advertiser, a 10% CTR might be driving less sales than a 1% CTR, based on how misleading or targeted your campaign is. And when you're paying by click, you're wasting money by focusing on CTR.​

CR - Conversion Rate
The holy grail. Don't pay attention to CTR until you know you have your conversion rate optimized. Then you climb back up your sales funnel and optimize it. Conversion rate is the number of sale transactions per an amount of unique visitors. The slightest tweak in this value is the difference between millionaire and billionaire for a lot of people, but they are too focused on wasting money so they can boast high CTR's and sessions. Also heads up, you'll see CRO which is just Conversion Rate Optimization.​

BR - Bounce Rate
This is another misleading metric. If you understand your goal, you can use this to your benefit. Bounce Rate refers to the number of unique visitors who hit your website for a session and leave without visiting a second page. They might stay for 3 seconds and bounce, or they might stay for 10 minutes and bounce. They might click an ad, which is great but it increases your bounce rate. So is a high bounce rate good or is a low bounce rate good? Depends on your goal.​

CTA - Call to Action
This is another item you should be optimizing like mad. Your call-to-action refers to the text, button, link, phone number, and the visibility of those. Your goal is to convince someone to take an action. This job is easier when you've done your job properly throughout your entire sales funnel, because you'll have greased and primed the visitor already. But with the right CTA, you can capture buyers that otherwise would have left. This is supremely important. Everything you do should be concluded by a CTA, even a random blog post should be asking people to share it.​

QS - Quality Score
This metric is assigned to your landing page when you purchase advertising with bid-style networks such as Adwords. They all have algorithms that determine what your bid needs to be versus a competitor to earn the same amount of traffic. If you're site is crap and shows signs that the traffic is going to convert like crap, then you're harming the reputation of the network. They will charge you for damaging their reputation.​

ROI - Return on Investment
Take what you've earned, subtract what it costed you to earn it. Now divide that by what it costed you (same value you subtracted), and multiply it by 100. You're looking at your return on your investment. If this number is negative, you're taking a loss. If it's zero, you're giving stuff away for free. If it's 100%, you're doubling your money.​

EPC - Earnings Per Click
This is similar to CPC and PPC and any other variation instead of clicks. This is a sort of meta-metric that is comprised of several others after doing some math on them. Earnings Per (Action) is another one of your holy grail metrics. It boils everything down to how much money lands in your wallet per action you're going for. Optimizing this means you're optimizing everything else, from your ads, your CTRs, your conversions, your CTAs, and more. The higher you drive this, the more profit you take home. The higher you drive this, the more you can spend on marketing to expand awareness and reach. After a sustained campaign like this, you can back off and have an even higher EPC. This is the master metric when it comes to paid campaigns online.

Other Analytics

We've mentioned terms such as Conversion Rates, Bounce Rates, Click Through Rates, etc. But those completely new to analytics have a few more terms they need to understand at the base level.

Sessions
Old timers might call this UV's or Uniques, both referring to Unique Visitors. This is how many absolutely different visitors are coming to your site. Your analytics tracker may treat them differently but they are close enough. This may be based on IP, or may not be if the device and browser are different, etc. It's the best measure of how many different people are visiting your website.
Pageviews
This is the total number of pages loaded by your visitors. Your visitors may view an average of 3.4 pages per session. You might focus on pageviews or you might focus on sessions, depending on your monetization method. Remember, if a user views only one page before leaving, they are pushing your bounce rate higher.
Time on Site
You may also see this called Session Duration. The concept is the same. It measures how long a user stays on the website altogether. You can also measure how much time is being spent on each page as well.
Your Funnel / User Flow
All of this information comes together to show you how your sales funnel is performing. It is the natural progression of traffic, perhaps starting at a guest post, social profile, or advertisement, then on to your site to a specific page which leads to a lander and then your checkout form. Optimize everything.

A Real World Example

Just to drive in these concepts, let's take a look at an examples, a typical PPC campaign. You can do this same type of calculation for content marketing and any other campaign. Before someone goes off the rail, let me have a disclaimer that I'll almost certainly screw up some math here, because I'm making this up as I go and it's just for example purposes. Follow along and get the point, don't worry about the numbers themselves. You'll learn to calculate them yourself as you begin your campaigns. The point here is to know WHAT to calculate.


PPC Example
Your new product is out! It's an eBook that you're selling through Clickbank that the buyer can immediately download after paying. Nobody knows it exists and you have no affiliates. So you go straight to the old gray mare, ole' trusty herself, Pay Per Click.

To keep the discussion simple, we'll only advertise with one network: Facebook.

This eBook is about how to become a professional video game player in the big tournaments surrounding Starcraft. I don't know, I've never played it, I'm making this up as we go.

So you start thinking about your demographic. People play this game globally, but you only speak English and wrote the eBook in English. Fortunately lots of people around the globe speak English. So you decide to create several segments to target. You advertise to both genders, all ages, and any country where the user knows English.

You bust that up so that you have a set up somewhat like...
  • Males - Age 10-15
  • Males - Age 16-20
  • Males - Age 21-25
  • Males - Age 26-30
Except you replicate that per country. And then you replicate the entire thing for Females. And you push the age's higher.

You write some ad copy with a Title, Description, and Image, and Link. You'll split test these later.

Boom you're off to the races. You're willing to pay 25 cents per Western country where English is the primary language, such as U.S., Canada, U.K., Australia. You'll pay 10 cents for Asian countries and European countries. Less for India, Philippines, and the Middle East.

Let's say you run the campaign for $500 worth with an even spread across the segments. You lose money to clicks and the only segments showing a profitable or close to profitable conversion rate are...
  • Males - Age 16-20 - United States
  • Males - Age 20-25 - United States
  • Males - Age 16-20 - South Korea
  • Males - Age 20-25 - South Korea
I'm making the following numbers up to be easy to play with. You're selling your eBook for $20 flat and Clickbank wants $5 per sale to use it's system. So you're down to $15 revenue per sale. Let's say you pay $1 per sale whether that be Credit Card, Stripe, or Paypal fees. So now we're at $14 revenue per sale.

You spent $500 and received 8 conversions. The U.S. conversions costed you $12 bucks each, while the S. Korea conversions costed you $6 each.

You're stupid and have no upsales to redirect to after the conversion and have no upsales in your confirmation email. Your Average Order Value (AOV) is $14.

You've spent $500 so far, before optimizing your campaign. You paid an average Cost Per Click (CPC) of $0.17. Your ad received 50,000 impressions but you only paid for clicks. You paid for 2,941 clicks. So your Cost Per Thousand Impressions (CPM) is $0.01. Your Click Through Rating (CTR) was 5.88%.

You spent $500, made $8 from your U.S. conversions and $32 from your S. Korea conversions. So you're down $460. At this point, you're Return On Investment (ROI) is -92%. You almost lost everything, but what you really did was pay for data to find out who's going to convert. Now you know. Now we optimize.

You drop out every demographic segment that didn't convert. That represented $420 of your total expenses. So really you figure that if you had already known about these four demographic segments, you're ROI would really be -50%. Now we're talking.

You decide to cut out the U.S. demographics because your payout is Net 30 and you can't float the additional expense just to make $2 Earnings Per Sale (EPS) on those segments. The CPC was too high. You might make a second lander just for those segments to drive up the Conversion Rate (CR), but right now you want to focus on optimizing for the Korean traffic that brings you $8 EPS.

So the first thing you do is keep your two Korean segments, but you create two new titles, two new descriptions, two new images. We're not going to split test meticulously here, we don't have the money. So we blow through another $200. We find out that the younger segment responds better to one advertisement about all of the money they could earn by playing this video game and the older responds to a more mature advertisement about earning global recognition for being the best at something.

In the meantime, we made $120. So we only lost $80! We're at a total expense of $700 with a total earnings of $160. This campaign is at -77% ROI total, but the last optimized run was at -40%. You believe that you can optimize your lander and call-to-action and sweeten the deal and go positive long enough to make your money back and walk away with some big cash before you tap out the demographic (and then take your data and run it on Bing, Adwords, etc...).

These following numbers are going to be disengaged from the rest, again for simplicity. Follow the concept, not the math. Now we look at your lander. Let's say your Call To Action (CTA) was creating a 30% Click Through Rating (CTR) and the lander overall was at a 10% Conversion Rate (CR).

You change the color of the CTA button, change the text on it, and then list the benefits of purchasing the eBook (self-esteem, recognition, etc. Stuff for the older crowd) on the lander instead of just the features of what's included in the eBook. You show a picture of last year's winner holding a giant cardboard check worth $300,000 near the CTA button to get the young crowd excited. Now you're pushing a 50% CTR on the button and your conversion rate is up to 15%. You're sucking more money out of the same volume of traffic. So let's just say that you're now spending $300 and receiving $450 for your efforts.

Now you create two landers, one for the young and one for the older demographic, and you split test variations of the two ads. Now you're spending $300 and making $600. It's go time! You calculate that your Earnings Per Click (EPC) is $2, so you drive up your CPC bid from $0.10 to $0.50 just to get more traffic. You need to make sure that your check is big when the Net 30 comes up so you can continue your campaign and scale it to other networks. It turns out that the optimization of your landers pushed your Quality Score (QS) up, so you're getting even more traffic at that CPC than you expected. Awesome.

You let these ads run until the demographic stops responding to it. You've sold what you're going to sell and they've all seen the ad enough times now. Before you move it elsewhere, it turns out that you spent a total of $5000 but your revenue was $8000. Your ROI ended up being 60%, which is killer. Now you've got a $3,000 wad of cash to pay for a lander and optimize a campaign for the U.S. traffic, as well as seed the next South Korea campaign on another network.

You decide to offer an upsale of a second eBook at $10 and 50% of your customers go for it. Now your Customer Lifetime Value (CLV) and AOV is $19 instead of $14. If you were smart enough to collect emails during the sale, you could drive your CLV higher, but you didn't. But you were smart enough to use Clickbank so you start allowing affiliates to sell your product as well as a Pay Per Download (PPD) program.

You know your Cost Per Lead (CPL) and assume that most affiliates are going to generate sales through SEO, which you were right. So you offer to pay them a commission that is less than your CPL. Now your ROI goes up even more. Life is good as a digital kingpin.


Conclusion

Now that you're familiar with all of these terms and the process, you're ready to start playing in the big leagues. You're paying for traffic that is highly motivated and willing to spend money in your niche. You should be branding your lander and collecting emails so that you can get these visitors back to your main site later, which offers tips, tricks, and more products surrounding their passion. Drive that CLV up!

To do this effectively, you need to not only be a Big Brand, but you need to understand what it means to become a Mega Brand. A Big Brand has awareness and reach (think Microsoft), but a Mega Brand has loyal disciples (think Apple) ready to punch naysayers in the face. You want to create this online world of yours that boosts people's egos, makes them feel significant, safe, important, and valuable.

It's time to caress your brand and push the boundaries so you can continue to siphon value out of traffic you paid for one time and one time only. It's cheaper to keep a returning customer than to acquire a new one, and that's how you snowball towards becoming a Mega Brand, the topic of tomorrow's guide.
 

Golan

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Ryu, what tools can you recommend for split testing? Of banners, landings etc.
 

Ryuzaki

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What tools can you recommend for split testing? Of banners, landings etc.
I hear that Optimizely is one of the best options, but costly. Probably best to use a service like this when the fractions of percentages of increases will quickly pay off the cost and you have enough tests to run. I've not used them, but people I trust have mentioned it time and again.

Wordpress has a ton of plugins of various types: https://wordpress.org/plugins/tags/split-testing where you can split test:
  • Landing Pages
  • Ad Placements
  • Calls to Action
  • Buttons
  • Post Titles
  • Themes
  • Widgets
And basically anything else.

You can also split test elements by creating entire page variations using Google Analytics: http://www.wpbeginner.com/wp-tutorials/how-to-ab-split-testing-in-wordpress-using-google-analytics/

To get an idea of where to start for the highest impacts, you can use heat mapping software like Crazy Egg, which shows you where people are clicking and hovering their mouses (best alternative to eye tracking).
 
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@Ryuzaki, great read!

Which KPIs would you suggest for an affiliate site?

I'm thinking:
  • Monthly revenue (how much am I making each month)
  • Affiliate Link CTR (are people clicking my links)
  • Site conversion rate (are people converting from my links)
  • ROI (am I making back the money that I spend)
  • EPC (how much am I making per click)
  • Email sign-up rate (what percentage of people are joining my mailing list)
 

Ryuzaki

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@TriForce, you pretty much nailed what I track for affiliate sites. You don't have to collect everything since that should appear in your analytics and affiliate dashboards, but it's when you combine that data that you can get a faster-to-digest overview of how you're doing, and a funner-to-manipulate list of KPI's.

For my main site I simply track the following (I don't track Email Sign-Up rates since I can grab that at any time from a dashboard, but I should. I just don't go hard on email on this project. I need to set up segmenting for each section of the site, then it would be more useful).
  • Revenue
  • Expenses
  • Profit
  • Run Total
  • Pageviews
  • RPM
  • EPM
That's it. In plain language, I look at the money I'm bringing in and sending out, which let's me watch total profit and how the project has done month-over-month and annually. Then I combine that info with total monthly pageviews so I can get a look at the revenue per mille and earnings per mille.

The RPM is more important than the EPM, which fluctuates wildly based on how much I invest that month and if I do any traffic leaking to lower ROI pages.

At the end of the day, Revenue, Pageviews, & RPM end up being the most useful for me.

But that's not to say that you shouldn't be digging into your analytics to focus on time-on-page, time-on-site, ranking positions, SERP CTR, affiliate link CTR, affiliate CR, etc. All of those will impact these meta-metrics positively.
 

RomesFall

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I'm tracking a bunch of different stuff for my own affiliate sites. I think what you track is going to depend on the goals you have.

One really basic example of this is Total Articles & Article Growth.

These are great to track for new projects since you can see how much growth you can actually drive to your site through that mechanism just by publishing more content.

You can then start tracking things like Organic Keywords, Keywords Per Indexed Page as some additional useful metrics to stack with those two.

Over time you start to see the Law of Diminishing Returns kick in.

Once you get to that point where a new article is only giving you < 0.5% Total Article Growth. It's a good sign that your goals might need to shift.

As I said this is a basic example, but it's a great example for people with smaller or newer sites that need to be focused on producing more content.