The promise of digital centers around just how measurable everything is.
A marketer can go into an analytics platform and instantly see impressions, clicks, and spend by different audiences, times, and creative treatments. With on-site tracking, they can measure performance down to the individual marketing channel. The operations team is able to see how order volume changes during sales and by time of day. Finance departments can tie back every cent of revenue and cost directly to its source.
In theory, this data makes it easier to run an effective business. The marketing team can optimize around the best performing tactics, operations can forecast and plan for labor spikes, and finance has a clear view over how all of this impacts the company’s profitability. More conversions are good, less spend is good, on-time orders are good, and this is where most of our revenue comes from.
Digital platforms have become more sophisticated. The amount of data they collect and can report on has increased exponentially. This has been celebrated by many people in the business world. We agree — having that data available to a business is great. But companies should be diligent in how they consume data.
Many in business are under the impression more data is better. It can be tempting to want to see every piece of data available on a real-time basis. But we have found that this tends to lead to analysis paralysis rather than the expected rush of brilliant insights. You end up spending too much time on why two metrics are moving in opposite directions, or wondering whether the strength of one metric is the cause or effect of a second.
Over time we’ve found the magic number tends to be five. Every role in a company should have right around five metrics that she can look at to start the morning and understand how her part of the business is performing. More important than the exact number of metrics is how they are reported. A static number will always tell you less than a trending one, so you should be able to see how each metric has changed week-to-week, month-to-month, over the trailing eight weeks, or maybe even year-to-year. The exact timeline will depend on your business, but the sentiment remains the same.
This should not be confused with saying that only five metrics matter.
If one of the five metrics is moving in the wrong direction, then it deserves a deeper analysis to understand why that is happening. In our minds, one of the benefits of a small number of regular metrics comes from the fact that you can develop a clear set of next steps for each metric if it is underperforming. For instance, if the average order value is down then maybe we investigate changes to items per order or coupon usage or potentially the product mix in each cart. If cost per lead has gone up, we might dive into conversion rates and bounce rates at the landing page level.
Although digital marketing analytics continues to evolve at a breakneck pace, that doesn’t mean it’s necessary to constantly ingest and break down all that data. Focus your regular reporting on just five key performance indicators so you and your company can focus on what matters most.