I’m the first to admit that an article on measurement and KPIs is not the sexiest attention-getter out there. But a 130% decrease in COS (cost of sale), 41% increase in share of voice, or 390% increase in ROI should have any marketer licking their chops. These are actual results not from changing investment, but realigning goals towards KPIs with a stronger commercial impact.
Most of us are used to traditional digital advertising KPIs like ROAS (return on ad spend). While these can be useful as optimization tactics, they’re not what we’re really after—actual business results are. I’ve seen campaigns with ROAS of over 12,000%, but they were simply cannibalizing organic sales. When setting KPIs for commerce-centric campaigns, we need to look beyond the campaign at more of the areas it can affect, such as:
- Combined online and offline ROI
- Inventory levels
One of the best metrics we should be using is share (market, category, voice, etc). This gives us a clear view into how we’re actually performing measured against our peers and tells us the effectiveness of our actions. Bain & Company published an interesting article on how deceiving just sales or growth metrics can be (Bain & Company - The Great E-commerce Illusion). 7 out of 10 of the largest CPG companies were behind in eCommerce penetration, despite posting online sales growth of over 30%! Growth in online eCommerce is accelerating for virtually every category, so it’s important to understand how your share evolves over time.
Combined online and offline ROI
Another often unmeasured, but critical KPI, is combined online and offline ROI. The majority of shoppers across APAC perform online research before making a purchase (whether online or offline). For example, 60% of consumers in Japan, 69% in Singapore, and 72% in China all research online before they buy (Consumer Barometer with Google). Unfortunately, many companies are unsure of how to measure this impact, especially from online advertisements on offline sales, but it is very possible. What may appear to only have a modest ROI when viewing online performance alone, could actually be multiples higher when factoring in the increase of offline sales after online research. Understanding the full impact of our campaigns gives us the opportunity to optimize them correctly where we may have been leaving valuable sales on the cutting floor.
While these are likely all KPIs you have at least heard of around marketing and advertising, commerce stretches far beyond, offering completely new opportunities. Supplementing traditional KPIs with business intelligence data allows us to optimize for overall business performance and maximize our campaigns effectiveness. One KPI definitely worth considering is profit margin. If we focus solely on sales or ROAS, we might end up selling a lot of products, but they could have very low profit margins. If we add in profit margin data and optimize towards it as well, we can find a balanced approach and increase overall profitability.
Inventory levels are another very interesting KPI we can use. Many companies have to liquidate dead stock through clearance sales or other means which leads to losses. If we understand which products are on the path to excess stock, we can make the proactive decision to increase ad spend on those products to get more sales now and decrease stock levels. While this will increase costs in the short-term, it will save us a lot of money versus having to sell on clearance or dispose of extra product.
Of course, there are many other KPIs worth focusing on as well. Things like reach and new customer acquisition, consumer life time value, defense of brand, and platform/store importance are also very worthy of incorporating. Rolling KPIs together into an average score can be effective to optimize towards many goals at once. Each business is different, so there is no one-size-fits-all.
Diversifying the KPIs we measure and supplementing them with additional data sources gives us new tools as we seek to improve overall business performance. Measuring smarter than the competition will give you the advantage in an increasingly intense battle over the consumer.
Nate Shurilla is head of innovation and North Asia commerce at iProspect APAC.