Online/Digital/Social Metrics

Marketers are tapping into mobile communications as well, sending text messages to subscribers of services around the world.The Internet has evolved from a form of electronic brochure in the early to mid-1990s to a platform for advertising, videos,music, PR, blogs, and new product launches. Since the mid-2000s, the growth of social media, particularly companies likeFacebook, Twitter, and Google+, have quickly gained acceptance around the world. Facebook alone has over 900 millionusers, a staggering figure considering the company was founded in 2004. These new digital tools have created additional,powerful marketing opportunities for companies, effectively accelerating the shift in power from companies to individuals.

Gross Page Impressions (or Gross PageRequests)

Measurement NeedThe Internet has become a key vehicle in a marketer's communications "toolbox." It can be used for a wide range of functions,from a general information source, much like an electronic brochure, to a product-delivery service (e.g., software downloads).Unlike print ads placed in different publications, which are difficult to measure beyond general circulation numbers, theInternet's electronic foundation allows for easy measurement across many different criteria. Overall, marketers want tomeasure whether their website is being used and, if it is, how frequently.

SolutionGross page impressions (GPI) measures a website's total traffic volume. It is the number of times any person has accessed a

website, irrespective of repeat visits or unique visitors.- Website traffic data can be collected from web server logs, which aresoftware programs that automatically record each and every website visit.

Impact on Decision MakingGross page impressions is useful for starting an analysis of marketing vehicle usage as it will suggest to marketers whethertheir website is generating much interest from the market overall. However, it does not reveal any specifics about the users ortheir web surfing choices. If marketers want more in-depth information, a third-party market research firm, such as anaudience measurement company, could assist. For example, marketers may want to determine the advertising potential fortheir website based on the traffic visiting it, using that data to sell the attractiveness to potential advertisers. GPI is a helpfulmeasure to show potential advertisers the number of people visiting the website. Of course, many other variables will beimportant to advertisers, but GPI is a good starting point.

Cost per Click

Measurement NeedEach advertising medium has different pricing and payment conventions. Print and broadcast advertising, for example, costless per ad as advertisers buy more print ads or airtime. Payment is usually up front, meaning that the advertisement will not beplaced until the advertiser has paid the media vehicle in full for the use of that space. Web advertising is most often in the formof banners, interstitials (e.g., pop-ups), and links (referenced in Chapter 65,

"

Click-Through Rate"). Marketers know how tomeasure the effectiveness of these ads using click-through rates, so now they must determine how to measure cost of these ads.

An important aspect of social media marketing is getting community members to share positive word of mouth thatultimately leads to clicks. This effort involves both financial and time investment, so marketers need to understand the cost perclick of their word-of-mouth efforts.

SolutionTwo approaches to determine cost per click will be discussed.

Approach 1: Cost per ClickCost per click is the price paid for an Internet advertisement on a per click-through basis. Websites that offer online advertisinghave simple pricing structures. For example, consider a campaign where payment is based on the number of times a banner isclicked. Clicks are sold for $0.10 per click. Hence, if there are a thousand clicks per week on the banner, the total amountpayable to the website for that week would be $ 100.

Approach 2: Cost per Click JCost Jkt (Jicfe,. -i worn U,U,V/

where

CPC = cost per click

WOM= word of mouth (based on Chapter 63)

To determine CPC, the marketer divides the total cost of the online marketing campaign by the number of direct clicks. Theresult is then divided by the WOM calculation.

Example: Let's assume the campaign cost $50,000 and generated 100,000 direct clicks. Simply plug in the numbers asfollows:

cpc = S50,ooo/mooo

= 0.50

From Chapter 63, we know that WOM = 4.8. Completing the calculation gives the following result:

0-50/4.3= 0-104Therefore, the cost per click , equals $0,104 or 10.4<t.

When compared to the CPC of $0.50 or 505, the cost per clickwom is cheaper on a per-click basis, suggesting that the WOM

campaign was cost effective.

Impact on Decision MakingGenerally speaking, advertisers must weight costs with each media vehicle chosen. Online advertising is a simple approach,although the costs are not always obvious, since predicting the actual number of user click-throughs is difficult. Advertisershave faced the unfortunate side effect of competitors who repeatedly click the online ad, just to increase the cost. Since per-click pricing is relatively inexpensive, a competitor has to be devoted and persistent to drive up the costs. Fortunately, mostonline websites have software tools that can determine if click-throughs are following a repetitious pattern, so that advertisersdon't pay for these types of clicks. Marketers should ensure the website they have chosen has user statistics that provideguidance on the audience type. This helps marketers determine if the site reaches the desired audience.

CPCwom estimates the cost per click with WOM, showing marketers how much less per click it costs using WOM

incentives than marketing designed to motivate direct clicks from target customers, providing a clearer sense of the cost perclick for all clicks, direct and WOM. This helps determine if a WOM campaign is maximizing its potential. If the result of thecalculation is less than one, then the campaign is considered successful.

Cost per Action

Measurement NeedCost per click (Chapter 66) charges an advertiser whenever one of their ads is clicked, whether or not a paying transactionultimately occurs. Senior management may find cost per click

'

s lack of a guaranteed transaction too imprecise to justify theiradvertising expenditure; therefore, marketers need to demonstrate a stronger correlation between advertising and final sales.

SolutionCost per action is based solely on specific results, such as sales or registrations that are converted from user clicks. Thewebsite owner takes most of the advertising risk since their commissions depend on good conversion rates that translate intosales.

Let's assume your company pays $0.10 to a website for every completed transaction (instead of every click) coming from abanner ad. If one thousand people visit your website daily, one hundred click on the banner, and ten buy a product, then thecost of advertising on the website would be $1 per day ($0.10 x 10 sales).

Impact on Decision MakingFor website owners, the decision to charge for completed transactions versus per clicks is a higher-risk strategy, but it will alsobuild confidence with customers because a cost-per-action payment system suggests you are willing to support your websiteaudience claims, since you receive no payment until a transaction is completed.

For advertisers, a cost-per-action approach will cost more per click since you are paying for a revenue-generating result.But your marketing and senior management will likely be happier since the cost is directly related to a positive financial result.

Social Media Profitability

Measurement NeedMarketers need to evaluate whether their company's social media efforts, such as blogging and tweeting, are producingprofitable results.

Solution{R - Cg) X (F X Cr X OrX Pr)- hXT = Pmfit

where

7? = Revenue per sale

Cg = Cost of goods per sale

F= Number of followers/friends

Cr= Click rate (percentage of followers that click on the marketer's social media links and then go to their company'ssite)

Or = Opt-in rate (percentage of followers that opted to receive email)

Pr = Purchase rate (percentage of followers that opted that also purchased)

h = Hourly rate charged for marketer's social media efforts

T= Amount of time marketer spends on social media

Example: The following assumptions are made:R= $500

Cg= $80

F= 3,500

Cr= 30%

Or= 5%

Pr= 30%

/?= $65

7= 60 hours

In addition, the measurement period covers 30 days. The result is: ($500 -$80) x (3,500 x 0.30 x 0.05 x 0.30) - $65 x 60 =$2,715.

Therefore, this social media campaign produced a $2,715 profit.

Impact on Decision MakingThe variables in this calculation are the key areas requiring a marketer's attention since an improvement in each of thepercentage rates improves the profitability. Marketers can then focus their efforts on how to improve the click, opt-in, andpurchase rates individually by improving the design of each of those parts of their social media efforts.