Ever since Google announced it was giving away its web analytics tool, marketers have raced to board the analytics bullet train. This is both good and bad. Good because it is advantageous for an online business to make decisions based on factual data rather than flying blind. In today's competitive marketing environment it is vital to continually improve website and marketing campaign performance to maximize your return on investment (ROI).

But the bad news is that many marketers don't know what to measure, how to do it or even why -- let alone what to do with the data once they have it. The challenge is two-fold: selecting the right analytics solution and then knowing how to use that application to measure, manage and optimize your website and marketing campaigns.

How Do You Use Web Analytics?

A Forrester survey, "What Matters to Web Site Analytics Users (2004)," found that users were basically satisfied with and received good value from their web analytics applications. The two types of analytics applications are: (1) a hosted solution that charges a monthly fee, and (2) a software solution purchased for a one-time fee. Forrester reported that users of hosted applications paid an average monthly fee of $7,400; whereas licensed software users paid an average one-time fee of $74,500. Following are major findings on the way marketers used their analytics applications:

  • The majority of marketers (81 percent) said their most frequent use of analytics tools was to create and modify reports of customer activity on their websites.
  • The second most popular use was analyzing search engine traffic, cited by 65 percent of users as a frequently used task.
  • The third most popular use was creating segments of customers based on shopping behavior, cited by 57 percent of marketers.

Other uses, in order of importance, were:

  • Analyzing A/B tests of site features or content
  • Generating and analyzing e-mail marketing campaigns
  • Performing ad hoc analysis using a data warehouse
  • Analyzing site search data
  • Analyzing intranet or extranet usage
  • Gathering and analyzing data from CRM or other applications

Keep in mind that the above survey was conducted over a year ago and much has happened since. A number of new analytics vendors have hit the scene, and Urchin became the Google Analytics freebie. While there is still an element of mystery about web analytics, don't let that stop you. Analytics skills can be learned through training or supplemented through a web analytics consulting service. Some consulting services will assign an analytics specialist to your project to help you get started and answer whatever questions you may have.

Separate the Wheat from the Chaff

Once you get your hands on a good web analytics solution, don't be mesmerized with the vast data harvesting capabilities of today's sophisticated metric tools. These tools can give you the ability to configure a gazillion reports -- but do you really need that many? It is wiser to center your analyses on key metrics that can help you meet previously defined, actionable objectives. Work with the key metrics that are the true performance indicators for your business. This will give your team the tools they need to make wise tactical and strategic business decisions.

Establish Your Business Objectives

As a first step, it is important to identify the variables that will improve your business results. This might include bottom-line variables such as costs and revenues. What business processes impact your costs and revenues? Once you identify these, you can make site changes to achieve higher profits. Below are some questions for brainstorming that might help identify important metrics for analysis.

  • Are you attracting unique visitors?
  • Are visitors spending time on your site, and if so, where?
  • How well do you convert visitors?
  • Does your site navigation help visitors accomplish their intended actions?
  • How does the behavior of your customer segments differ?
  • What is your churn rate?

If you are new to web analytics, you might want to define one major objective at a time. Get your team to vote on your number-one marketing objective, and then brainstorm to identify the metrics that can be used to measure the performance of that goal. Limit yourself to five or six metrics to avoid the trap of analyzing too many variables at once. Once you identify a few top metrics that can be measured, analyzed and monitored, you can implement the changes that improve business performance. Don't forget to reevaluate over time it's is a continuous improvement process.

Set Key Performance Indicators (KPI)

Your KPIs are the measurable performance indicators that help your business achieve its goals by defining and measuring progress. As such, they are usually long-term goals. KPIs are always company specific. They are identified and monitored by your team of key functional personnel. As a reflection of your business goals, KPIs are instrumental to your success.

Say you want to identify KPIs for an e-commerce site with a major objective to increase conversions. Below are some of the key indicators you might want to track:

  • Site-wide conversion rate
  • New and repeat site-wide customer conversion rates
  • Percent of orders from new and returning customers
  • Average order value, site-wide and for new and returning customers
  • Sales per visitor

Once you have defined the right KPIs for your business, you should share them with your web team, including your sales and marketing people who drive site traffic and conversions. Look back at your current online initiatives. Do they support and drive your KPIs? What effect will your promotions have on the KPIs? You'll learn which initiatives to monetize based on the continuous analysis of your KPIs, allowing you to reprioritize your marketing initiatives. Having well-defined KPIs can change your current marketing mix for better targeting and an improved ROI.

Build ROI into Your Marketing Plan

Once you start using web analytics, you may need to redefine the way your marketing and sales people think and operate. It's always a good idea to encourage your managers to foster change and support new initiatives. To help you get there, hold monthly meetings to discuss performance metrics. Brainstorm for metrics that will help measure marketing campaign and website performance. You might eventually want to hold your department managers accountable for key metrics performance in their area of responsibility. By implementing such changes, you turn your website into the ultimate experimental lab. And this is a good thing. You can measure, propose and test changes -- then implement those that will improve your business performance. Web analytics reports give you raw power. You just have to experiment and learn how to use it, and the payoff makes it worth your time and investment. Don't be intimidated by web analytics -- use it to lower your costs and set record profits.

Discuss this article in the Small Business Ideas forum.
December 14, 2005

Paul J. Bruemmer has provided search engine marketing expertise and consulting services to prominent American businesses since 1995. As Director of Search Marketing at Red Door Interactive, he is responsible for strategizing and implementing search engine marketing activities within Red Door's Internet Presence Management (IPM) services.

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