September 30, 2010

Dear Marketers: Faux Metrics

Dear Marketers:

Ever heard a quote that sounds something like this?

"Facebook users were 2.7 times more likely to click on calls-to-action in targeted and personalized e-mail campaigns, yielding users who were 1.6 times more engaged than the average e-mail subscriber."

The online realm is increasingly polluted with "faux metrics". Faux metrics, for your information, are metrics that sound impressive and convincing, are wrapped in beautiful language, but have minimal correlation with what matters most ... profit.

"Today's thrifty consumer will spend one percent less this Holiday season, requiring forward-thinking marketers to capitalize on a seventy-six billion dollar opportunity by offering value, selection, and deep discounts."

One wonders why a one percent drop in spend must be fought with value, selection, and deep discounts?

Faux metrics sound great, but lack an actionable outcome.

"Sixty-three percent of iPad users were male, and they were eight percent more likely to purchase after seeing an ad, creating a unique opportunity for the savvy advertiser."

Oh. In other words, if 2% of the population owns an iPad, and those customers are 8% more likely to purchase something after seeing an ad, then my $50,000,000 business is likely to grow by 0.02*0.08 = 0.0016 = 0.0016*50,000,000 = $80,000, but only if I act on this unique opportunity.

"Engagement" is probably the biggest faux metric in our industry. Engagement is seductive, because it implies that the customer is so in love with our business that the customer must want to transact with us. We suspend all other facts as we pursue the truthiness of engagement.

"E-Mail subscribers, in this highly competitive retail environment, were 9% more engaged with retail brands that offered personalized, trigger-based messages."

"Those who clicked on a bit.ly url on Twitter were thirty-seven percent more likely to respond to landing page calls-to-action, yielding engaged users that can be monetized by forward-thinking digital marketers."

The most interesting metric I track is "repurchase rate". I simply count the number of customers who purchased in 2008, then I track the percentage of 2008 customers who purchase again in 2009. I record the values of this metric over time. The metric is highly correlated with total company profit. The metric is not correlated with "engagement", or a myriad of faux-metrics promoted by the online digerati.

In fact, "repurchase rate" hasn't moved much at all in the past decade ... small increases in the 2003-2006 time frame are more than offset by large drops in 2007-2009. For all of the digital magic thrust upon us by the online punditocracy, customers are not purchasing any more today than they purchased back in 2000, or 1995, or 1990. We offer the customer more and more and more and more ... and the customer still repurchases at a 38% rate, generating 1.6 orders per year.

But to read the "faux metrics", you'd think that today's highly-engaged social shopper is spending 294% more than the moribund customer of days gone by.

Your turn: What are examples of faux metrics that you recently uncovered?