FREEDyourMind

What is happening with my conversion rate?

This is the question I received recently at an emetrics conference.  The web analyst was getting questioned by his management why their conversion rate was dropping.  After all, his boss kept reading about the importance of conversion rate.  I hear this question a fair amount.  Recently I heard this from a senior exec at a multi-channel retailer.  Their online sales were soaring, so was their traffic.  And customer satisfaction was also increasing. But conversion rate was dropping.  They wondered why?  Well, let's take a closer look. 

As we looked at the data we found a couple of interesting things going on.  Their traffic was soaring for two reasons.  A good percentage of the growth was the result of a very effective SEM campaign reaching out to new customers.  New visitors were converting at a lower rate then the normal site traffic.  Not a surprise, we expect to see new visitors convert at a lower rate then returning visitors.

Another strong contributing factor of the growth was a significant increase in visitors doing research for purchases in the store.  This segment of the audience will also convert at a lower rate then traffic that is  looking to purchase online.

Now, the reality is that everything this retailer was experiencing was positive, yet it was driving conversion rate down.  Conversion rate can be an important metric, but only when used properly.  I find that most sites are using it incorrectly.  Conversion rate at an aggregate level is a great example of a misleading metric.

Be careful that the metrics you use measure success, not simply measure what you can count!

Simple . . . and Useless

I saw some recent data from a survey vendor that was a great example of the fact that while simplicity works for some things, it just doesn't work for understanding your site visitors.

The research implies that on retail and e-commerce sites, there is a relationship between success and the answer to a simple question about whether a visitor was able to complete a task.  Sounds simple, right?  Well, let's think about it.  What constitutes completing a task?

Is browsing online for the big screen TV and then leaving the site "completing a task"? Was putting something in a shopping cart and then abandoning the site "completing a task"?  Was purchasing a product online and having it shipped "completing a task"?  How about purchasing a product online and then going to the store to pick it up? The answer to all of these is yes...and no.  It depends. Different people will answer differently.  This is not an accurate, precise and reliable measurement.  This is not a predictive measure.  That would explain why they talk about task completion "tumbling" while sales rose sharply. The correlation between task completion and sales just isn't there.

Simple is good for some things...but not when we talk about understanding your site visitors.

Word of Mouth, Twitter and the WeinerMobile

I am at the Word of Mouth Marketing Association Summit (WOMMA).  A great group of people that are at the forefront of the word of mouth marketing movement.  And with that cutting edge thinking the experience of being at WOMMA is an experience.  People are twittering, blogging and who knows what else thorughout the conference (search for #WOMMA on twitter). 

While at times I have wondered about the value of twitter, I saw some value here at the WOMMA show.  You get instant feedback on the presentations.  It kind of reminded me of the CNN coverage of the presidential debate.  As I was a participant in a debate on the ACSI vs. NPS, the twitter traffic gave me instant feedback on the debate.  Now debating against NPS is fun and easy.  NPS is a great example of a BAD METRIC.  No accuracy, precision or reliability. You might be better off using a dart board then NPS.

And I had another experience of a lifetime.  As an example of word of mouth marketing, the WeinerMobile from Oscar Mayer was at the conference.  And as my luck would have it, one of my colleagues, Gavin Hewitt, won us a trip in the WeinerMobile.

Now, imagine this, cruising down the Las Vegas strip in the WeinerMobile.  Talk about word of mouth.  Although I am not sure what they were saying.  Check out www.hotdoggerblog.com. 

Off to WOMMA

I am off to speak at the Word of Mouth Marketing Association's (WOMMA) annual summit in Las Vegas.  It should be an exciting conference.  Word of mouth can have a powerful impact.  I think the focus on word of mouth is a very important effort and I applaud those that got the WOMMA started.

But I also think there is a lot of misinformation on the metrics around word of mouth.  I will be participating in a debate about NPS, an often used proxy or metric of word of mouth.  It is also a very misleading metric. Join me at WOMMA in Las Vegas and you can learn more.

The Limitations of Traditional Online Surveys

I could probably write a book with this title (hey...there's an idea!), but the reason I'm thinking of it now is that I was just popped a survey on a magazine website.

It asked all the basic demographic information that might be useful for research. But so much more was left on the table.  It is great to gather information, but if you are going to put your site visitors through a survey, make sure you are making the most of the opportunity. 

Some quick thoughts (or you could call them "must haves"):

• Make sure you are getting a representative audience to complete the survey.  Without it you have individuals opinions (there is some value there) but with a representative audience you have taken the first step towards having a useful metric.
• Demographics can be important,  but lets also understand what is driving their satisfaction and what is likely to result from the online experience (loyalty, retention, purchase online, purchase offline, etc.).
• Understand the relationship between those drivers of satisfaction, overall satisfaction, future behaviors and financial success. It is great to know where we are today, but the holy grail is to know what we need to do to improve -- and what impact it will have on our success.  This is not an easy task, but it is the key to turning voice of customer into actionable information.
• Rely on a proven methodology.

I like to think of it as "applying science to voice of customer."

Into the Wild: Web Analytics as a New Frontier

Into the Wild is a bestselling book by Jon Krakauer and a movie made last year by Sean Penn. It's about a young man named Chris McCandless who disappears into the wilderness of Alaska for a planned stay of several months. He had no compass and no map and his only food was a 10-lb bag of rice. McCandless died after a few months alone in a bus in the Alaskan bush; accounts differ on whether he died of starvation or because he was poisoned by some seeds he misidentified.

There are debates about whether McCandless was crazy or stupid or idealistic or heroic, but what seems clear is that he could have easily survived with a few more preparations and a better understanding of what he was getting into. Admirers and detractors alike agree that he didn't have the proper respect for the challenges he was about to face, and that he mistakenly trusted his own instincts above logic and facts.

Bear with me. I promise this is related to web analytics!

Just like hikers and mountain climbers talk about preparedness and proper tools and equipment, those of us working on making successful websites have our own tools and equipment. Using a website to foster online and offline sales, loyalty, and recommendations does not have to be a random attempt filled with educated guesses. There are proven, scientific tools to guide your choices and you can easily determine what kinds of metrics have the greatest ROI and which tools to use for which problems. As they say, when you have a hammer, every problem looks like a nail.

Somehow this all reminded me again of Eric Peterson's white paper about the ecosystem of web analytics and how to integrate various web metrics for maximum success. I guess the point is that you don't have to be going "into the wild" when you're running a website--you don't have to go out there without proper tools and protection and eqiupment. The right tools will equal success. McCandless would probably succeeded if he'd only had a map.

So while others debate about McCandless' mental health, you can question mine because everything makes me think of web analytics.

Time Spent ≠ Online Engagement

I just saw the latest Nielsen ratings of the so-called stickiest sites on the web.

Not to beat a dead horse (has it been a year already since the new Nielsen ratings were announced?), but time spent on a website is not the "best engagement metric" that it claims to be. It works better in some industries than in others, but in general, a longer visit is not necessarily a sign of a better visit, of future sales, loyalty, engagement, etc.

What do you take away from the stickiest sites?  Does it provide value to you?  Is a long time on a site good or bad, from the visitors' perspective?

What Metrics Do the Best of the Best Use?

Just saw this post from Ron Shevlin's blog last week... Ron does a report called the Hallmarks of High-Performing Integrated Marketers in Retail Financial Services which looks at which business practices and marketing strategies distinguish the high-performers from the rest of the pack.

From Ron's post:

"High-performers are more likely to measure the lift in customer satisfaction and average customer spend than other financial services firms. And less likely to measure likelihood to refer the brand and brand awareness . . .

The findings from the survey shows that high-performing firms put their emphasis on measuring the metrics that matter — those that measure and drive bottom-line performance. The under-performers can continue to look at NPS and brand awareness at their own risk."

In fact, according to the data in the post, customer satisfaction was the most commonly used metric for the highest performing firms, other than sales and average customer spend.

Of course, it can't go without saying that c-sat has to be measured with a time-tested methodology.

It's funny, the two most common statements I hear about measuring customer sat are in direct opposition to one another: "customer satisfaction is a proven predictor of financial success and ROI" and "customer satisfaction has no proven connection to financial success."

Both are true! Customer sat measures with a proven, time-tested, accurate, precise, reliable methodology have been proven in numerous academic articles to be leading indicators of financial success, loyalty, recommends, ROI, and even stock prices.

Customer sat measures which are based on a handful of questions, a haphazard methodology, or a marketing fad have no relationship to success, because they aren't accurate or predictive in nature.

So it's a challenge, from where I sit, to make the distinction for people. Saying "customer satisfaction predicts financial success" is like saying "food is healthy." Well, broccoli is healthy. Twinkies are not (but they do taste good). Both are considered food. And sometimes it's not as easy to tell the difference between predictive customer sat methodologies and cheap imitations.

So just ask. Ask for proof. Ask for academic citations. Ask for case studies. The proof is in the pudding, and if you put your vendor to the test, they should relish the chance to knock your socks off.

UK Puts Restrictions on WOM Marketing

Starting May 26, the U.K. is putting strict restrictions on word-of-mouth marketing and making it a criminal offense for marketers to misrepresent themselves as consumers, according to Ad Age. A new law will make it illegal for brands to seed positive messages online without making the origin of the message clear. Apparently this legislation has already been in place throughout the rest of Europe since January 1.

This is pretty interesting and pretty revolutionary. I think there would be a lot of people in jail right now or fined to the hilt if such a law were passed in the U.S.!

Word of mouth marketing has become such a difficult area to navigate precisely because so many companies participate dishonestly. Just look at reviews on Amazon.com and ask yourself how many of them are real and not from the company itself, trying to drum up support and interest.

I think usually, consumers can tell when they’re being duped, and the loss of loyalty and the backlash from being discovered is worse than any fine the government might impose. But I also think marketers get away with this A LOT of times when consumers don’t necessarily figure it out. There are ad agencies and marketing agencies that have made a name for themselves by designing and implementing campaigns that are designed to look “grassroots” and “viral.” It’s a whole industry here in the U.S.

I still think that at the end of the day, people will take advantage of any open system—it’s human nature. For now, WOM still works, and as a result, it’s valuable. As long as WOM recommendations are a valuable commodity, there will be people manipulating it for their own means, just like everything else in human history.

Okay, I'll Bite

Richard Owen, CEO of Satmetrics has issued a response, of sorts, to the numerous criticisms of the Net Promoter methodology that have come from us, in a published paper by IPSOS, and from folks like Ron Shevlin, other academics, and scores of other critics. I’ve seen NPS fans in the blogosphere practically begging Fred Reichheld or someone from Satmetrics to address the criticisms point-by-point and put them to rest once and for all.

But the only defense they really offer is that a) the critics have something to gain from the attacks b) companies wouldn’t be using NPS if it didn’t work (right, because companies never do stuff that doesn’t work!), and c) NPS may not work as well as more complex and comprehensive metrics, but it’s so simple and easy that it doesn’t really need to.

I saw Fred Reichheld also has a new blog post up about how you can consider yourself a user of Net Promoter even if 1) you aren’t asking only one question 2) the question you ARE asking isn’t “the ultimate question” and 3) you are doing anything at all to increase promoters and decrease detractors.

By this definition, we are all NPS users, which I guess is his point. Though when the concept set forth in a very specific book is diluted down that much, I don’t really get the point of calling it “Net Promoter.” It’s a bit like Coke going out there and saying that you can consider yourself a Coke drinker if you’re drinking any liquid, whether or not it is sweet, carbonated, and brown.

I guess the criticism is starting to sink in a little, so they’re doing their best to bring the issue back to the idea that measuring promoters and detractors is important, no matter how you do it. But it seems like they are just changing definitions around so that anything can be considered a Net Promoter system rather than addressing the criticisms of the specific plan they have been suggesting for years now.

Here’s the bottom line: likelihood to recommend is EXTREMELY IMPORTANT, but it is NOT the only thing you need to measure. And both of these blog posts are kind of missing that key point. We all agree that people should be paying attention to word of mouth. We all agree that one positive aspect of Net Promoter is that it’s gotten a lot of companies to rally around the concept of the customer, which many were not previously doing.

But #1, promoters and detractors are not the only think you need to keep track of. That metric, no matter how you measure it (NPS or some other system) is not going to predict growth. There are just too many variables—not all products lend themselves to recommendation, not all people are the sort to talk about their experiences, etc.

And #2, NPS just isn’t the best way to measure recommending because it overstates detractor behavior and has high margins of error.

So kudos to Reichheld and Satmetrics for getting the conversation started. But it’s time to stop holding on to this notion of NPS as a brand that must be protected and defended at all costs, and start getting at what actually works. Sure, one of the things we should all be paying attention to is how many people will recommend our company or not. But that issue is not the singular issue facing companies today. Continuing to hold on to this outdated concept is going to hurt far more companies than it helps.

There is apparently a roundtable at the WOMMA Research Symposium this morning, led by Walter Carl and including representatives from both sides of the NPS debate on whether you would recommend NPS as a metric. They’re going to make the audio recording available after the event, so I’ll be interested to hear that discussion. It seems there are still very specific criticisms of NPS that have not been addressed by the practitioners who promote it.