July 02, 2012

Why Do We Look At The Wrong Metrics?

Our laser-like focus on campaigns diverts us from measuring what really matters, doesn't it?

These days, everything we look at is campaign based ... and for good reason, because all we ever do anymore is manage campaigns.

Hundreds and hundreds of omnichannel campaigns!

We measure how each campaign performed.  We "optimize" each campaign, attempting to achieve the campaign nirvana!

Campaign optimization is a lot like trying to win at the stock market every single day.  You have an endless array of real-time information, you hone your trading skills, and yet, you lose money 49.8% of the days you participate.  Campaign optimization is no different.

How do I know this to be true?

Take a look at the table above.  For each of the past twelve years, this business measured customer loyalty metrics, and counted how many new customers the business acquired.

Look at annual repurchase rates among the twelve-month buyer file ... they barely change, do they?  This is typical.  We don't make customers "more loyal", even though we all have loyalty programs.  Don't believe me?  Run your own table.  Take a look at what your data suggests, for the past year.

Orders per buyer are fairly constant.

Items per order vary, in the opposite direction of price per item purchased.  This is also common ... when items become more expensive, the customer purchases fewer of them.  When items become less expensive, the customer purchases more of them.  If you don't believe this, run your own table, find out for yourself!

Value, defined as repurchase rate * orders per buyer per year * items per order * price per item is reasonably constant.  In twelve years, this metric bounces around by about 8%, but doesn't fundamentally move, does it?

Think of all of the campaigns executed over a decade, all designed to "optimize" customer performance ... all of the analytical and marketing anguish poured out over making sure that the "call to action" is exactly right.  Think of the shift in customer behavior between 2001 and 2012.

And yet, the customer behaves exactly the same.

Without a steady diet of new customers, this business is stuck, and will always be stuck.

Sort of like your business.

Unless your repurchase rates are 60% or greater, it is terribly hard to move customer loyalty metrics.  The business survives and thrives because new customers are acquired at rates greater than in prior years.

Or, the business survives and thrives because merchandise productivity is improved.  This can easily be measured through a comp segment analysis.

When we constantly look at response rates, open rates, click-through rates, conversion rates, landing page traffic, shopping cart abandonment, and a veritable plethora of campaign-based metrics, we miss the real story ... that everything we're measuring fails to describe actual, annual, customer behavior.

Why do we look at the wrong metrics?

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