In my earlier post, I have discussed some basics of Google Analytics (GA). We’ve gone through some sections of GA and understand how to use them. We went deeper to understand acquisition, behavior & conversion (ABCs) and how to decipher the information.
In this post, I would go a step further. Here is what you’ll learn:
- Understand that the numbers means nothing until we put them into chronological order to understand the trend
- How to make investment decision based on a few measurement metrics.
Understanding the trend
With the understanding of individual channel’s performance, it would mean nothing with regards to your daily job. A number tells nothing until you put them into a trend, across time. Let’s assume that your job is to write blog / articles on a website. A 80% bounce rate would mean nothing to you. If you check the monthly bounce rate for the next 6 months, you will see whether the bounce rate is decreasing (means that your content is getting more relevant) or increasing (you might need to check the content you create).
Let’s try to understand the trend from another example, let’s assume that you’re selling something on the website. If you pull-out the monthly data and finds out that your conversion rate is dropping. You might need to check if you’re acquiring the correct customers (demographic, geographic-location etc) and whether your products are enticing enough (pricing, quality etc). If the conversion rate is increasing, instead of celebrating, you need to find out what have you done right and what your competitors are not.
Putting money into perspective.
If you’re from an organization, chances are revenue and profit is very important to you. As always, every organization invest money hoping to see results from it. This is the same as website. I will introduce a few metrics to track your website performance from money’s perspective.
Cost per Acquisition (CPA)
This is probably the first metric you would want to report if you’re a marketer. In a nutshell, what this means is how much spent per visitors who visits your website. Here are a few examples:
- If you spend $5,000 to do paid search (e.g. digital advertising) and you received 50,000 visitors / sessions. Your CPA is $5,000 / 50,000 sessions = 10 cents. You’re spending 10 cents per visitors.
- If you spend $1,000 for a social media campaign and you received 5,000 sessions. Your CPA is $1,000 / 5,000 sessions = 20 cents. You’re spending 20 cents per visitors.
This metric is useful to know which channels or campaigns you’re investing brings you the cheapest amount of money per sessions. Notice from my examples above, imagine you’re not tracking CPA, you might find the $1,000 social media campaign more palatable than a $5,000 paid search. Yet the more expensive paid search are more effective in terms of CPA.
Cost per Conversion (CPC)
As mentioned, all website has a purpose. It is always better to understand the cost involved to reach the goal. Similar to CPA, CPC measures dollars spent per conversion. Going back to my examples before:
- If you spend $5,000 to do paid search (e.g. digital advertising) and you received 1,000 conversion. Your CPC is $5,000 / 1,000 sessions = $5. You’re spending $5 per conversion.
- If you spend $1,000 for a social media campaign and you received 500 conversions. Your CPA is $1,000 / 500 sessions = $2. You’re spending $2 per conversion.
We can now see how much money spent to bring a conversion in each channel. In the above examples, I did such a way that now, the seemingly cheaper but cost more per acquisition, is better in terms of conversion.
Return of investment (ROI)
ROI is probably the most important measurement of when comes to profit; or sometimes we call it the bottom-line. ROI measures revenue / costs. This is particularly easy to track if your website sells goods or service. For websites that does not sell things, it is important to put an amount into each type of conversion.
For example, if your company provides swimming lessons. Due to technicality and availability issue, your visitors can’t transact directly on the website. You can do a simple math and estimation to put a number into each enquiry. You can assume that out of 10 enquiry, one signs-up for swimming lesson. Each swimming lesson would earn you $50 for 10 sessions = $500. Therefore, put $50 per enquiry based on the assumption above to calculate your ROI.
Going back to the scenario where your website sells things, we can track how much money earned from each channels. Again, let’s go back to my examples above:
- If you spend $5,000 to do paid search (e.g. digital advertising) and you received 1,000 conversions. From these 1,000 conversions, you earned $20,000. Your ROI is $20,000 revenue / $5,000 = 4:1. You’re spending $1 to earn $4 in paid search.
- If you spend $1,000 for a social media campaign and you received 500 conversions. From these 500 conversions, you earned $10,000 Your ROI is $2,000 revenue / $1,000 spent = 2:1. You’re spending $1 to earn $2 in social media campaign.
With these examples, which channel would you invest?
There are more topics we could discuss when comes to web analytic. Part 1 and part 2 of this article provides basic information to get you started with Google Analytics. It is important that you understand the four main tabs “Audience”, “Acquisition”, “Behavior” and “Conversions” of information provided in Google Analytics. Using Acquisition’s overview tab, you’re able to decipher various channels’ performance and putting them into a trend to understand whether the website is improving (or needs to improve) in performance. Finally, putting money into equation, it is important to understand the money invested and the results it brings; this gives an informed decision on managing budget.
Let me know if you have questions by dropping a note in the comments section below. I’m more than happy to answer them.