The Missing Measurement
October 9, 2019 •Kevin McSpadden
We get what we measure.
And what we measure drives our actions, behaviours and – most importantly – our decisions.
So if you measure the right things in the right way, you’ll make better decisions and be more successful.
When a brand delivers a great product at the right price point and buys the right amount of stock to meet demand, performance marketers look like heroes. Conversion rates improve leading to increased orders, more customers and greater customer loyalty.
Everything just works.
Conversely, when the product or pricing misses the mark, no amount of marketing genius can help.
Performance marketing is held accountable for online sales performance, yet marketers generally spend very little time considering one of the core contributors to performance: product.
In a brand, product is everything. We all know this. Yet in our myriad of measures in the business, do we understand how product and pricing impacts our sales, customer performance and new customer acquisition rates?
We need to ask the right questions in order to make the right decisions:
- Which products recruit our best new customers?
- Is there a difference in customer lifetime value by product and if there is, am I reflecting this in my performance marketing plans?
- Are changes in our product and pricing strategy having the desired impact on customers (such as increased spend per customer or loyalty)?
- Are my designers, merchandisers and buyers seeing the impact of their decisions from a customer performance perspective?
What’s the real-life impact of not asking these questions?
I remember working with a business which was having an uncharacteristically terrible season. New customer recruitment was down by more than 40% and existing customer repeat purchase rates were down by 28%. The marketing team were under the spotlight, but they hadn’t made any big changes to their approach and couldn’t explain what was going on.
After digging into the data, we found that whilst the average repeat shopper rate for the season was down 28%, it was down nearly 50% for customers with historically lower average order values and slightly up for those with higher order values. New customers average order value was up 19%.
Going deeper still, we found that the business had changed its price architecture. They had removed lower unit price options and replaced them with higher priced alternatives in important product categories, not recognising the importance of those category price-points for new and lower AOV customers.
They made an unintentional but very expensive error because they failed to understand how their existing and new customers were influenced by product categories and pricing architecture.
It was literally a £1m+ mistake.
With the right measures, and by linking historical, new and existing customer product and price performance, they re-designed their merchandising strategy and normal growth resumed.
We have seen this happen time and again across the 200 or so brands we have worked with.
With the right measures, you can avoid falling into the same trap.
When you target and measure your product merchandisers on growing the proportion of customers buying into a specific category or on revenue per category for each customer on the database rather than simply on overall sales growth or sell-thru rate, you get superior performance.
These targets and measures ask different questions of the team.
- How do I get the 85% of customers who don’t buy category x to buy it?
- What should I change in my range, pricing point or merchandising?
- What should I test?
- What would a 10% improvement be worth?
Does your business link performance marketing and product merchandising around customer performance as a common target and measure of success?
Product is everything. It drives your success. When a customer visits the website or your store, product is the single biggest factor in whether they buy.
Most retailers measure what is available and normally supplied for free by a marketing platform such as Google Analytics or your email platform.
Step back and ask yourself: ‘am I measuring what is really important? Or do I measure what I have to hand?’
Do get in touch if you’d like to better understand how measuring customer and product performance can drive superior results.