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Developing Metrics is a Deliberate Process

2014 10 21   Peter Feinstein   Per Inquiry Advertising    

I was reminded recently that what I take for granted to be common knowledge is really not so common – and that I shouldn’t make assumptions when I speak with people who call Higher Power Marketing for help.

What I’m talking about is how we establish metrics for performance advertising – also known variously as pay-per-call, cost-per-action, direct-response and per-inquiry (PI) advertising. Since I live in that world 24/7, I sometimes forget that most people don’t know how we establish success or failure of a product or service offering.

It’s all about testing client copy/creative on reliable media to learn what works – and, more importantly, what doesn’t. The process is simple and repeatable, with easy-to-interpret results that show whether to advance a client into pay-per-call advertising or guide him or her in another direction. To get to these metrics, we test – both the front end of a campaign (i.e., the client’s creative) and the back end (the client’s call center or web-sales solution), so we can get a complete cost and revenue picture.

On the front end, we do what’s called an A/B Test; that is, we test two different creatives on identical media over a two-week period (one week each) to study the inbound call activity. After the two weeks, we look at everything from calls per run to calls per outlet, calls per schedule and calls per dollar spent. We also study call length on each variable. By the time we’ve looked at all the inbound-call data, we have a very clear idea of which piece of copy performs better.

Thus, we’re able to establish very solid and reliable measures of inbound performance. How do we know they’re reliable? Our selection of paid media is based upon more than a decade of experience in weekly ad spending. This helps factor out the wobbles, flatten out the extreme highs and lows of response rates, and set a clear benchmark for measuring client creatives.

Then we do an about-face and sit with client representatives in their sales center. We re-examine everything to get a full picture of how the sales system’s conversions affect the front end. From this vantage point, we know the revenue per call, the client’s break-even point, the profit margin and the super-profit point. By developing the full picture, we’re able to offer our clients a clear path to predictable growth and profit. We know very quickly whether to recommend continuing cash buying, moving to pay-per-call media or integrating the two.

Observing the back end often reveals ways to improve conversions with tweaks to the call-center scripting. It’s also common for us to identify a weakness in the offering to which we can make minute changes on the front end that yield incremental sales on the back end! It’s a fair amount of work, and we’re very careful with the process – especially in evaluating what happens on the client’s back end, because that’s where the profit that drives the offer is made.

And that brings us full circle. My recent wake-up call was from a prospective client who wanted to know if he could run a paid campaign with us to arrive at pay-per-call metrics, while at the same time paying us as if the media was placed on a pay-per-call basis. When I asked him what he wanted to pay per call, the answer was “$25.” I asked how he arrived at that figure, thinking that perhaps the company already had reliable metrics in place. The answer, which shocked me, was: “I don’t know. It just seems like a nice round number.”

I was shocked, because I’d just assumed he understood the process of setting metrics. I realized that we had to alter that “nice round number” thinking and replace it with firm, reliable, tested numbers that offered true insight into the relationship between media spend and profit.

Whenever HPM undertakes such testing, we remind the client not to go into it with the idea of being profitable. We explain that client will get something far more valuable than a few dollars on a small media spend: real-world, highly actionable data on the creative and media that can be used to leverage data week after week – whether it’s in paid media, pay-per-call advertising or a combination of the two. Without testing, ‘nice round number’ is all you have. That’s unsafe at any spend.

This column was first published by Response Magazine, October 2014 issue: http://www.response-digital.com/response/201410/m3/Page.action?pg=48