5.1 How do I measure sales? - Video Tutorials & Practice Problems

<v ->The first thing we need to do</v> for money metrics is to be able to measure sales. Now, I'm gonna come into this from a funny angle because a lot of times as marketers, we don't spend a lot of time measuring sales. If you're in e-commerce, then maybe don't pay attention to this but most websites aren't e-commerce sites and we have this funny attitude towards money. We might measure leads, we might measure other things but we don't tend to measure revenue all that closely in a lot of sites, especially B2B websites. And so what I wanna do is contrast this with how direct mail and other types of direct marketing have always worked. So think about the catalog that used to come to your mail box or the letter trying to get you to buy another credit card. And if the catalog marketer said to the boss, hey, I shipped February's catalog on time, it's under budget, customers like it and it looks beautiful, wanna see it? You know what the boss would say? You're fired. Those are none of the things I'm interested in understanding. What I wanna understand is which products sold better month over month? For the ones we changed the pictures for, did those sales go up or down? Which products are such dogs that we should drop them out of the catalog for next month? Basically, what the boss wants to know was was there a response? Was there a sale? And maybe that strikes you as a funny example but the problem is that when we talk about digital marketing, especially when we talk about websites, we say kind of the same things. We said hey, we finished the website redesign. It was under budget, customers like it and it looks beautiful. Want a demo? Suddenly that doesn't sound as funny anymore but it's just as dumb as that catalog marketer. We need to figure out how we're going to tie our marketing to sales. Now again, if you're an e-commerce company, this is easy because the website is the sale and you're already counting it, you're already looking at revenue every minute of the day. But for everybody else, if you have a website where you're selling offline, you need to figure out how you're going to tie your marketing tactics to sales. And so let's look at how you can measure demand. So what are the things you're looking at when you look at a website? Well, the first thing you can look at is visitors. How many people come to the website? The second thing you can look at is conversions. So even if the conversion isn't a sale, it's still something you're trying to get people to do. Maybe you're trying to get them to fill out a contact form. And so if you have 1,000 visitors come to your site, and you have a 1% conversion rate, you have 10 conversions. That's your base. Now, I don't care if you have a huge website and you have 1,000 people a second coming to the site or you have a really small website and you have 1,000 people a year coming to the website, it doesn't matter. It doesn't matter what the time period is, the numbers are still the numbers. So how many people can you get to come to your website? And how many of them can you persuade to do the thing your website wants them to do. Those are really the numbers you wanna focus on. Now, if this was your base, what could you do to make it better? Well, you could increase your conversion rate. What does that mean? Well, it means that you're basically persuading more of the people that come to your site to buy from you or to complete whatever the conversion is on your site. So let's say that you change the pictures, you change the marketing copy, maybe you change the offers, maybe you even lower the price. A combination of things that you did are doubling the conversion rate. Your site is now twice as persuasive as it was before. Same, 1,000 people coming to the site, but because you've double your conversion rates, now you've doubled your conversions. What else could you do? Well, what if you increase the traffic to the site? What if you get 2,000 people to come to the site? You double your traffic coming to the site. Well, that's also gonna double your conversions, and how would you do that? Well, you might send out more emails or you might buy some ads or do search marketing. There's all sorts of ways for you to attract more people to come to this website. Same old crappy website with the 1% conversion rate but that's okay. You've doubled the number of people coming, so you've also doubled your conversions using this technique. Well, what would be the smartest thing to do of all? Well, that's right, you would actually do both. If you could increase the number of people coming to the site, and you also increase the conversion rate, if you double both of them, well, now you've quadrupled your conversions. And guess what. These are the two things that you're really working with. And you're working with this for every kind of marketing there is. So whether it's sending out an email, whether it's a search impression for an ad that you've bought or it's some other type of ad or it's a social media share. It doesn't matter. You're looking at the things that we've talked about before. Did they see your marketing? Did they engage with it and did they eventually buy something? That's really what you wanna know. And so even though marketers may traditionally have measured things like brand awareness, that's not required to measure something like that for digital marketing. You can measure these things instead, and it'll be a lot easier, plus it'll be a lot more actionable because guess what. If someone buys something from you, I guarantee you that at some point, they became dimly aware of your brand. So brand awareness, I'm not saying isn't important, I'm just saying that if you measure these things, it might be easier for you to improve your marketing than measuring brand awareness. So what are your conversions? So for your website, what is the thing you're trying to get people to do? Is it an e-commerce site? Are you trying to get them to buy online? Or do you want them to find a store or a dealer or a partner? Do you want them to call you? Is there an affiliate link that you're trying to get them to click on? Do you want them to fill out a contact form? When I was at IBM, we always had them downloading a whitepaper. Now, I don't know why we never used any other color paper but we never did. And why did we want them to download that whitepaper? Well, because we put a phone number there that was nowhere else. So after they downloaded the whitepaper, they would call us on the phone and we would know they came from the whitepaper. And we could follow them as they went through the CRM system. And eventually, we learned that 5% of the people that download that whitepaper will buy $50,000 average in consulting from us. And so that meant that we suddenly knew that every download of the whitepaper was worth 5% of $50,000 in revenue. And so that's what we started to figure out. How do we get more people to download whitepapers? All of our marketing was based on that because we could suddenly tie what we were doing to revenue. So how do you track those offline sales? Well, the easiest way is if you contact the customer. So if you put a button on your site that says call me now, well, then they're gonna put in their phone number and then your call center can initiate the phone call and you know exactly what they've done. You have connected that website visit to the phone call. Now, if the customer switches channels, then maybe you need to provide something that helps you to connect the dots. So maybe they're going to print some specifications to bring to the dealer, or they going to print a coupon or they're gonna call a special phone number. We talked about the special phone number on the whitepaper. You can have a special phone number on your website so you know they came from your website. You could actually have a different phone number on every page of your website so you know what page they were on. There are some companies that generate a unique phone number for every visitor who comes to the website because that way they know all of the pages that that visitor looked at when they called that phone number. Now, are these things cheap? No but the data they provide is incredibly valuable. And so how do you measure your progress to an offline sale? So it starts with a prospect and it's your outreach marketing that's going to do that and so you could be looking at Facebook Insights, you could be looking at other types of ad platforms that help you to understand what your outreach has been. Then what you're going to do is you get them to your website, using your web analytics system, and eventually, it becomes a marketing qualified lead because what's happened is that they filled out a contact form perhaps or whatever the rules are for you deciding it's a marketing qualified lead. And you're nurturing that lead by using emails, by using some other omnichannel techniques through your marketing automation system. Possibly by using retargeting ads and that's how you're kind of figuring out how you're getting this person more and more interested to buy from you. And eventually, it's a sales qualified opportunity. It's in your CRM system. The salespeople are following up. You might still have a nurture campaign under way to help the salespeople but it's in many ways, the sales team has taken over this lead at that point. And so there's all different steps along this journey that you can measure progress to that offline sale, and if you can connect the dots all the way to the sale from what you first used to target that person in marketing, that can help you know which marketing is actually the most effective. And so there are systems that you use to track to those sales. So you might use tracking codes to understand where they were before they got to your site or other types of referral metrics in your web analytics system. Then your web analytics system knows all the things that they did on your website. And then when they become leads, that might be in the CRM system or maybe you're driving them to a retail store where a point of sale system might process a coupon that they printed out from your website. So how do we measure revenue? What exactly do we mean by revenue? Well, there's usually two types of revenue that companies have. One of them is called web analytics revenue. You might call it e-commerce revenue. You might have a different name in your company but it's basically a guess at the revenue based on the activities that people did online. And so it's an estimate of the actual revenue that you book based on what's happened in your analytics system. And so, for example, if you're an e-commerce company, if you know they checked out, you know how much money they are going to pay you, and so you can use that as a rough estimate of the revenue. Now, is it an exact amount? No, it's not. Now, the reason it's not exact is because they might return an item or maybe there are taxes that have to be paid or shipping fees or other types of things that weren't reflected online. Sometimes that can happen. And so you have an estimate of the revenue but it's not an exact revenue number but it's really good for making directional marketing decisions. There's no reason not to use that if that's easy for you to calculate. And by the way, it's not just e-commerce companies that can do this. When I told you that downloading a whitepaper was worth 5% of $50,000, I can put that number in my web analytics system, and my web analytics system can add up that estimated revenue for every time that whitepaper was downloaded. And so you can do this whether you sell offline or whether it's e-commerce. Now, the other kind of revenue is the one that you're probably more familiar with, which is financial revenue. So this is what's in your ledgers, in your financial reporting system. Maybe you would get it from a data warehouse. And so this takes into account all of the adjustments to the revenue that your web analytics system doesn't know about. Now, the thing that's important here is that you might need to use these types of numbers if you're doing reporting that has to have actual revenue but for most marketers, these numbers are not the most important. Using the easier to access web analytics revenue is plenty good for making directional decisions for your marketing effectiveness.