Praxis Metrics – Leveraging data to optimize ad spend
In this guest appearance on the Perpetual Traffic podcast, AJ and Meaghan talk about how to use your data to optimize your ad spend, and rapidly scale your business.
They cover everything from getting your tracking in order, all the way up to creating customized dashboards and leveraging complex machine learning and AI.
Enjoy the episode and our insights below.
The struggle today-
Many marketers feel that they aren’t getting the most accurate data inside of the ad platforms. Unfortunately, they are completely correct. Some marketers go so far as to purchase a cheap dashboarding tool in order to help them bring all of their metrics together into one platform in order to help them with this issue. Unfortunately, this will not solve the problem for them at all.
Why do we suddenly have this struggle with data? What drove us to this point?
In our opinion, the problem stems from an overabundance of data. Never in the history of the world has so much data been available to us. Even in the last 20-30 years, large-scale data projects were reserved exclusively for enterprise-level companies. But now, every company has access to “big data”; despite this, many still have the mentality that their business doesn’t have the same access to data, and therefore the same opportunities and responsibilities, as the larger organizations.
Because these smaller businesses fail to leverage the data available to them, they often find themselves utilizing incomplete or dirty data. If they utilized all of the tools and tracking options available to them, they would have a much more complete and accurate picture of what’s happening.
The opportunity today-
Similar to the dot-com boom of the late 90’s, we’re seeing a “data boom” today. Those that have embraced data and created strategic initiatives around data are already separating themselves from their competition. Taking action from data is the new competitive advantage.
Those who capitalize on data have the opportunity to outpace and out-scale their competitors. John Wanamaker said: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”. Those who eliminate waste in their budget open themselves to amazing opportunities. By doubling or quadrupling down on the things that work, they can drive exponential growth.
How you can capitalize on this opportunity-
Ask the right questions-
We firmly believe in the Socratic method. Asking questions helps you find deeper truths. The trick is finding the right questions to ask that will propel your business forward.
We found that the best way to find these questions is through a process called “metrics mapping”. The diagram below walks through an example:
Metrics Mapping starts with the big goals of your organization. This could include doubling your revenue year over year, increasing sales of a certain product by 30%, etc. From there, we want to drill down to the questions that you need to answer in order to meet that goal. If you want to double your revenue, then why don’t you? What questions do you need to answer in order to hit your goal?
Once you have the questions that you need to answer, it’s time to figure out what numbers can help you answer that question. In the example above, we need to know how to increase conversions and revenue from the website. In order to figure out how to do that, we need to figure out conversion rates, LTV, CPA, and profitability.
Once we have asked the right questions and gathered the necessary data, we need to:
Get granular with it-
Averages are inherently evil. Averages by definition mash together your highs and your lows and give you one number to work with. In order to properly scale your business, you need to know what creates the highs and what creates the lows. Once you know that, you can scrap the things that bring in the lows and double down on the highs.
Going back to the previous example; once we’ve gathered the numbers, we can strategize our next move. Perhaps we need to update our nurture sequence to increase return purchases. We may have a funnel step that causes dramatic drop-off that we can eliminate.
By getting granular in our analysis, we can discover a myriad of opportunities.
What metrics should every business look at?
Every business suffers from “terminal uniqueness”. While every business has certain things that they specifically need to track, there are a host of metrics that every business should know.
The obvious metrics that fall into this category are ad spend, return on ad spend, etc. In addition to these, businesses should also look at cost of goods sold (COGS), shipping expenses, and overhead. Many businesses forget to factor these costs when they look at what their allowable cost per acquisition can be.
This allows you to look at your return on ad spend through the lens of profitability, rather than just revenue generated.
What is the biggest problem businesses have with reporting?
Over-attribution. We see this issue with almost every client that we work with. Facebook, Google, and every other ad platform utilizes different attribution models. Generally, the platform will leverage an attribution model that favors them, and makes them look the best.
So Facebook utilizes an attribution window, meaning that if someone clicks on your ad, and then returns to your site within 28 days, they will claim that they produced 100% of the revenue from that client. Google defaults to last-touch attribution modeling, meaning that wherever that user came from when they made the purchase receives 100% credit for the revenue of that client. Other platforms count view-through conversions combined with an attribution window, meaning that if they saw your ad and then purchased within a certain time frame, that platform claims credit for that sale.
This scenario can lead to multiple ad platforms claiming that they are responsible for the exact same sale.
How do we combat this issue?
If you’re interested in learning more on this subject, we have a separate blog post on ways that every business can work through the over-attribution problem here.
In addition to those tips, our biggest suggestion for fixing this issue is getting a multi-source business intelligence tool. By extracting data from the back end of each of the ad systems, you can piece together a client’s journey and create your own attribution models. This allows you to see your true customer journey, rather than just a simple metric provided to you by a biased platform.
Unfortunately, even that solution relies heavily on the tracking that you have in place. If your tracking hasn’t been set up properly, then you have to rely on the data reported by these platforms, rather than leveraging and creating your own.
Your output is only as good as your inputs-
It doesn’t matter how much you spend on your powerful tools, they still rely on the data that you give to them. If your tracking isn’t set up properly, it’s impossible for a dashboard to correct that for you.
Powerful insights require great data. And unfortunately, good data requires great tracking.
Good news though, if you can get your tracking nailed down properly, then everything else glides into place. The old adage of “measure twice, cut once” applies to data as much as carpentry.
Going back to the metrics mapping process, we want to help you find the “source of truth” for every metric that you measure.
The “source of truth”-
Every metric should have a place where the definitive answer lives. If you want to know how much revenue you’ve brought in over the last month, you can check your bank account, or Stripe, or Paypal. If you want to know how long visitors from Instagram stay on your website, Google Analytics could help you find that answer.
Each data platform specializes in different data points, and we want to get the best data from the best sources.
Where to begin?
We recommend that every business start with the projects that will move the needle for the business. This generally means starting with sales and marketing initiatives, as they generate revenue for the rest of the business.
We have been shocked at how many issues businesses solve by getting their data set up properly for sales and marketing. Also, by leading with these departments, we can generally start to uncover holes in other parts of the business. If we see a spike in cancellations that coincides with customer survey emails, we know that we clearly have something to fix there.
It’s important to remember with every data initiative that it’s a journey. As much as we wish that we could fix every data problem overnight, it takes time to solve these issues and answer these questions. From there, we need to take action from the insights that we gained, and then we can see the results.
Leverage your uniqueness into growth-
As we stated earlier, every business suffers from terminal uniqueness. While this can complicate projects, that is also the place where you can see the greatest results.
By leveraging your uniqueness in the things that you track, you can get extremely granular, and explode your business in ways that others can’t.
One of our clients, Fancy Sprinkles, found amazing insights by tracking what no one else bothered to track.
Fancy Sprinkles, which does exactly what their name sounds like, gets most of their leads from Instagram. They decided to go back through every post that they had ever done and manually put into a spreadsheet the variables of the post. They tracked whether the product was shot indoors or outdoors, close or at a distance, color palettes, everything.
When they overlaid this data with their social media engagement rates over time, they found amazing insights. During October, they assumed that they should post something orange and black to capitalize on the holiday. But after consulting their data, they quickly realized that those colors got the worst engagement in October. The data told them that they should use purple and green, outdoors, and close-up. Their engagement skyrocketed because of these insights.
Tracking may require an up-front investment. Fancy Sprinkles needed interns to work for hours to catalog all of that data, but once they had the historical data, it became much easier to simply input those data points on every post that they made.
When should people seek help with their data?
As soon as it gets annoying or frustrating.
This may seem simplistic, but it doesn’t make sense for you to abandon your superpowers only to beat your head against a wall.
Your company hired you because of your skillset, and if data doesn’t fall into that skillset, it’s better to outsource that than to take away time and energy from the things that you do best.
What should businesses have in place before consulting with Praxis?
We built Praxis to meet companies wherever they are on the data maturity spectrum.
If you already have your tracking in order and want to move on to scaling your business and gleaning better insights, then we offer pre-built dashboards that can help you start leveraging your data into growth.
If you have issues unique to your market or business that you need specific help on, we offer custom dashboards and implementations that we can build from scratch to better suit your needs.