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Performance Metrics Assist. Prof. Dr. Özge Özgen 20.12.2011 OBJECTIVE Develop an understanding of how to assess the financial and strategic performance.

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Presentation on theme: "Performance Metrics Assist. Prof. Dr. Özge Özgen 20.12.2011 OBJECTIVE Develop an understanding of how to assess the financial and strategic performance."— Presentation transcript:

1 Performance Metrics Assist. Prof. Dr. Özge Özgen OBJECTIVE Develop an understanding of how to assess the financial and strategic performance strategic performance of an e-business company.

2 4231 views and mentions of your viral marketing campaign on the first day ◦ 4231 is a measurement. ◦ Without a context, it is just a number Consider goals and expectations of your company and your competitors’ effort

3 Performance Metrics Metrics translate the company’s vision, mission or e-business model into components with measurable outcomes. ◦ The performance metrics must be easy to understand and use ◦ Metrics must be actionable ◦ When employee evaluations are tied to metrics, people will be motivated to make decisions that lead the desired outcomes

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5 Metrics Framework Financial Metrics Implementation Metrics Customer-Based Metrics Objectives

6 Financial and Other Metrics of Overall Performance Financial Metrics Sales Revenue Gross Margins Profits Marketing Spend Sales Revenue Gross Margins Profits Marketing Spend Performance Relative to Competitors Market Share Relative Return on Investment Market Share Relative Return on Investment

7 Traditional Hierarchy-of-Effects Model Purchase Relationship Stages Awareness Exploration/ Expansion Commitment Dissolution Hierarchy-of-Effect StagesSample Metrics I am aware of Amazon I know what products Amazon carries I know Amazon vs. BN.com Quality of customer service interactions Satisfaction with Amazon Frequency of repeat purchases Amount of repeat purchases “Share of wallet” vs. competition I like Amazon I plan to buy from Amazon Next time I buy, it will be from Amazon Frequency of purchases Amount of purchases Awareness Knowledge Attitude Purchase intent Post-purchase behavior and satisfaction Post-purchase behavior and satisfaction Loyalty Not in model

8 Stages of Online Buying Process Search and shopping Purchase Post-purchase Loyalty Exploration/ Expansion Commitment Dissolution Hierarchy-of-Effect StagesSample Metrics Number of visitors Requests for product information (e.g., page views and patterns) Size of purchases Conversion rates Online satisfaction surveys Frequency of repurchases Dollar amount of repurchases Purchase intervals “Share of wallet” in category Lifetime value metrics Relationship Stages Attrition Interval since last purchase Percentage of returns

9 An Integrated Model of Customer Metrics OnlineIntegratedOffline Purchase Post-purchase Loyalty Awareness Knowledge Attitudes Purchase intent Search and shopping Purchase Post-purchase Loyalty Attrition Awareness Knowledge Attitudes Purchase intent Search and shopping Purchase Post-purchase Loyalty Attrition “Ask” “Observe” “Ask” and “Observe”

10 Conversions Conversion is the number of visitors who took a desired action on your site ◦ Buy Something ◦ Download ◦ Filled out a form Conversion Rate = Desired Action /Total Number of Visitors (Typically 1 month) ◦ For example, if 1,000 unique visitors were driven to your website from a search engine and 10 elected to purchase a product then your “sales” conversion rate would be 1.0%.

11 The Power of Conversion Rates Note: Average transaction size = 100% Source: Gurley, J. William. The Most Powerful Internet Metric of All. CNet.com, 21 February URL: The chart illustrates that a small improvement in conversion rate has a large increase in revenue

12 Frequently Used Website Metrics 3. Visit Metrics Stickiness (visit duration time) The length of time a visitor spends on a website. Can be reported as an average in a given time period, without regard to visitor duplication. Raw Visit Depth (total webpages exposure per session The total number of pages a visitor is exposed to during a single visit to a website. Can be reported as an average or distribution in a given time period, without regard to visitor duplication. Visit Depth (total unique webpages exposure per session). The total number of unique pages a visitor is exposed to during a single visit to a website. Can be reported as an average or distribution in a given time period, without regard to visitor duplication. 4. Hit Metrics Hits When visitors reach a website, their computer sends a request to the site’s computer server to begin displaying pages. Each element of a requested page (including graphics, text, interactive items) is recorded by the site’s server log file as a “hit.” Hence, a single page with multiple graphics can be counted as multiple hits since each graphic is counted as a separate hit. Given that page designs and visit patterns vary from site to site, the number of hits bears no relationship to the number of pages viewed or visits to a site and so are generally regarded as an inaccurate form of measuring traffic. Qualified Hits A further refinement of hits, qualified hits exclude less important information recorded in a log file (such as error messages, etc.). While qualified hits provide a better idea of traffic volume than overall hits, this figure is still not an accurate assessment of actual number of users. 1. Visitor Metrics Unidentified Visitor A visitor is an individual who visits a website. An “unidentified visitor” means that no information about that visitor is available. Unique Visitor A unique visitor is one who can be recognized and counted only once within a given period of time, usually between a half-hour and an hour. An accurate count of unique visitors is not possible without some form of identification, registration, or authentication. Session visitor A session ID is available (by cookie or token) or inferred (by incoming IP address plus browser type), which allows a visitor’s responses to be tracked within a given visit to a website. Tracked visitor An ID is available (e.g., cookie), which allows a user to be tracked across multiple visits to a website. No information, other than a unique identifier, is available for a tracked visitor. Identified visitor An ID is available (by cookie or voluntary registration), which allows a user to be tracked across multiple visits to a website. Other information (name, demographics, possibly supplied voluntarily by the visitor), can be linked to this ID. Another way to obtain an identified visitor ID is to develop a Web gateway or panel (e.g., WebTV or PC Meter) that captures a complete record of a visitor’s behavior. 2. Exposure Metrics Page Exposures (page views) The number of times a particular webpage has been presented to visitors in a given time period, without regard to visitor duplication. Site Exposures The number of visitor sessions at a website in a given time period, without regard to visitor duplication.

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14 Frequently Used Online Advertising Metrics Banner/Page/Site Frequency The number of times unique visitors were exposed to a banner or visited a page or website. Effective FrequencyThe number of exposures needed for an ad to become “effective.” In mass media models, advertisements require a certain amount of exposure before they can be deemed effective. Research has indicated that less than three exposures will not allow adequate recall. Too many exposures can be inefficient—after 7, 8, or 10 exposures, improved recall is incremental. Effective ReachThe number of people who are exposed to an ad at the effective frequency. 3. Other Metrics Ad Click-Through (ad Click Rate) The percentage of visitors who were exposed to a banner, clicked on the banner, and then were exposed to a target ad in a given time period, without regard to visitor duplication. Cost Per InquiryThe cost to generate an inquiry in direct-response advertising, such as banners. Calculated by the total cost of the direct-response advertisement divided by the number of inquiries it generates. 1. Exposure Metrics Impressions (exposures, ad views) Number of times an ad banner is downloaded and presumably seen by visitors. One impression is counted each time an advertisement is delivered by a Web server. Gross ImpressionsThe sum of all media exposures (number of people or homes) disregarding duplication. CPMCost per thousand impressions (or exposures). The cost to serve 1,000 impressions through a given website. 2. Reach and Frequency Metrics ReachThe number of unduplicated people or households that will be exposed to an advertising schedule at least once over a specified period of time. Banner/Page/Site Reach The number of unique visitors exposed to a banner or who visited a page/site in a given time period. FrequencyThe number of times that an individual is exposed to a particular advertising message in a given period of time.

15 Are relevant data being used? Complexities and Challenges in Online Metrics In developing and deploying online metrics, a number of challenges may arise: How does one capture the one-time buyer more effectively? Are metrics integrated across channels? Who is the advocate for integrative customer metrics? Are marketing costs accounted for?

16 Social Media Metrics Social media leads. Track web traffic breakdowns from all social media sources, and chart the top few sources over time. Membership increase and active network size Activity ratio. ◦ How active is your company’s collective social network? Compare the ratio of active members vs total members

17 Social Media Metrics Conversions Brand mentions in social media Virality. Social members might be sharing Twitter tweets and Facebook updates relevant to your company, but is this info being reshared by their networks? How soon afterwards are they resharing? How many Friends of Friends are resharing your links and content?

18 Online Tracking — EBay Customer Metrics Stages Customer Metrics Implementation Metrics Search and Shopping Auction Post-auction Loyalty Number of unique visitors Number of repeat visitors Number of registered users Number of unique visitors Number of repeat visitors Number of registered users Number of auctions user participates in Average dollar amount per auction Average dollar amount per product category Number of auctions user participates in Average dollar amount per auction Average dollar amount per product category Percentage of returns Online satisfaction surveys Auctions won vs. lost Percentage of returns Online satisfaction surveys Auctions won vs. lost Frequency of auction participation Interval since last auction Share of auctions (identify competitors) Frequency of auction participation Interval since last auction Share of auctions (identify competitors) Website: Number of page views, length of stay (stickiness), pattern of sites visited Community: Number of users on My eBay Website: Number of page views, length of stay (stickiness), pattern of sites visited Community: Number of users on My eBay Website: Time spent inside auction Product: Conversion to “Buy Now” feature; length of auction Communications: Conversion to “ a Friend” Distribution: Profitability per seller Website: Time spent inside auction Product: Conversion to “Buy Now” feature; length of auction Communications: Conversion to “ a Friend” Distribution: Profitability per seller Community: Replies to feedback, number of fraud reports Website: Transactions finalized vs. dropped Community: Replies to feedback, number of fraud reports Website: Transactions finalized vs. dropped Distribution: Items sold vs. not sold

19 EBay Metrics — Unique Monthly Visitors (March 2002) Source: Media Metrix U.S. Top 50 Web and Digital Media Properties, March 2002 Unique Monthly Visitors

20 EBay Metrics — Unique Monthly and Daily Visitors (March 2002) Percent of Total Web Users (114 million) 80%69%26% Unique Visitors (in millions) Source: Jupiter Media Metrix, March 2002 One quarter of all Web users visit eBay.

21 EBay Metrics — Unique Daily Visitors to Auction Websites (March 2002) Daily Unique Visitors (in millions) Audience size for all auction sites with reportable traffic:32.6 million monthly unique visitors 6 million daily Unique visitors Source: Jupiter Media Metrix, March 2002 EBay has more visitors than all other auction websites combined.

22 Number of Registered Users (in millions) EBay’s Registered-User Evolution Source: Company Reports EBay’s registered user base has doubled or almost doubled every year.

23 EBay Metrics — Average Minutes Spent per User per Day Source: Jupiter Media Metrix, March 2002 Average Minutes Spent by Customers per Day eBay vs. other auction websites eBay vs. other popular websites EBay rates high in “stickiness.”

24 Customer Metrics — Conclusion ◦ Each set of metrics – financial, customer-based and implementation – gives managers information on different aspects of performance.  Financial metrics assess the bottom-line performance of the business  Customer-based metrics measure the health of the business’s customer assets  Metrics that measure the implementation of the marketing program explain what actions need to be taken to strengthen the customer base and, ultimately, the financial results


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