Knowing is at Least, if not More Than, 40% of the Battle
When I send out weekly performance summaries to my clients, I often focus on just a few key take-aways and insights. For instance:
Campaign A is providing leads at $5/lead while Campaign B is converting at $15/lead. I’ve shifted most of the budget from Campaign B to Campaign A, but started an A/B test on Campaign B’s landing page to see if its performance can be improved.
These reports focus on what happened and what is about to happen. What’s missing in these emails, and discussions around measurement in general, is what didn’t happen. In other words, what mistakes did we avoid because we had data pointing us in another direction?
- We didn’t spend $1,000 on Campaign C without any understanding of cost per acquisition
- We didn’t spend $1,000 on Campaign D because the advertiser promised to reach a large audience
- We didn’t roll out a new landing page that performs worse than the original landing page
These issues disappear when measurement is prioritized. It becomes self-evident that we wouldn’t spend $1,000 on one platform when we can spend $500 on another for the same results. But what is the value of knowing this? It’s a trickier question than it may seem.
The Value of Knowledge
I believe there is value in moving from a scenario where you don’t know the return on your marketing spend to a scenario where you do. That statement may not sound controversial, but how many marketers attach a dollar figure to this knowledge? In my experience, not many.
I’ve transitioned many marketers to the latter scenario and invariably the discussions turn to standard ROI calculations such as:
[Leads] * [Customer Conversion Rate] * [Customer Lifetime Value] / [Cost] = ROI
This ROI may be positive or negative and that tends to dominate the discussion. However, what gets set aside is that we can have an ROI conversation at all. That’s amazing! It’s an amazing thing that is taken for granted as soon as it arrives yet it isn’t factored into ROI calculations despite its impact on the business. What I would love to see is a calculation that incorporates the impact that measurement has on decision making and the paths avoided.
Despite the post title, I don’t have a formula readily available to place a value on knowledge. However, I will try to remind clients about the value of knowing. When we shut down a campaign that’s under-performing, I’ll highlight the work that went into our ability to evaluate its performance in the first place.