Friday, March 09, 2012

Two Rights Make a Wrong

Why is average the most dangerous word in marketing?

A recent post by George Michie over on Search Engine Land talked about reasons management might not like the numbers your reporting.   While written about paid search campaigns the lessons are applicable to all marketing endeavors.   Here's just one of the examples from that post:

Since management likes to see just the top-line numbers, this report would be a recipe for disaster - a tongue lashing at best and a pink slip at worst.

So, why did all three key metrics fall?   (And the question as to whether these are the right metrics in the first place is addressed in the original post.)

We mix our tactics for a number of reasons: create reach, ensure coverage, and stimulate different responses to name just a few.   Like all marketing tactics, some things are worth more to us than others in terms of their ability to generate contribution margin.   So, in this example because some keywords are worth more than others the manager made two right decisions between weeks 1 and 2.  First, she identified the allowable marketing cost for two segments of key words:  "Quality" - $500 vs. "Discount" - $150.  Second, she allocated spend according to the performance of each tactic to grow the business profitably.

The results: 75% more high quality visits and 67% fewer discount visits.  A much different story than the averages told above. 

In this case, two right decisions got transformed into one that was perceived as bonehead because averages were reported.  In fact, because of the fundamental change in approach we can't really compare the overall CPL $250 to $304 although I'm not sure I'd try to make that argument directly to my boss.

Notes to self:
  1. When changing the mix over time, don't report aggregates only.
  2. Don't report diagnostic measures, report what actually matters.
  3. When segmenting, there is no overall average.

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