Posted on 3/29/2017 in Digital Marketing
There are many KPIs and metrics available that people use to measure digital marketing success. I consider many of them to be useless in determining whether anything is going right. Does a high number of pages views or sessions mean a site is great? Not really. I would gladly take a site with 100 views and sales of $1M over a site with 1M views and sales of $1M. My point is – there are lots of metrics out there that people hold up as being important. However, I find over and over again one metric that is constantly ignored and that is Goal Value.
What is Goal Value?
Goal value is a dollar value assigned to the completion of a goal in Google Analytics. I firmly believe that if you can’t assign a dollar value to the completion of a goal, then it has no business being a goal – make those non-valued activities events. You assign the value where you create your goals, under Goal Details. However, you will use a slightly different process if you are an eCommerce site – but the concept is the same.
If you are practicing good marketing using data-driven decisions, you should be able to calculate this value very easily. If your conversion metrics are non-existent, then that should be your first priority! Come back here after you know what your conversion rates are for each step of your funnel.
How to Calculate a Goal Value
Let’s use the example of ACME Service Company, a service-oriented company with a single contact form on their website. Their average service contract is $1,000. On average, 500 people complete the form each month, and approximately 3% of the leads that complete this form result in a service agreement. So how much is each contact form completion worth?
|Avg. Order Value||$1,000|
|# People that complete the contact form||500|
|% Form completions that result in sale||3% or 500 * 0.03= 15 people|
|Total revenue derived from form||$1,000 * 15 = $15,000|
|Goal value per form completion||$15,000/500 = $30|
Now, this assumes that the only lead source is the contact form. This is where some companies may get caught up because they may not know the conversion rate for just the contact form. We can talk about collecting lead sources in your CRM or sales system on another day. But even if you have rough numbers for the above, that’s ok.
Let’s talk about a more complicated marketing funnel. In this case, there are maybe 2 forms – a Contact Us and a Demo Request form. In this case, let’s use an average order value of $1,200. Because you are an awesome data-driven marketer, you know that 20% of the people that complete a contact us form will also ask for a demo request. And you know that 50% of those asking for a demo, will end up closing a deal. So your goal values are calculated as follows:
|Avg. Order Value||$1,200|
|# People that complete the contact form||500|
|% Form completions that result in Demo request||20% or 500* 0.2= 100 people|
|% Demo requests that result in sale||50% or 100 * 0.5 = 50|
|Total revenue generated by all demo requests||$1,200 * 50 = $60,000|
|Goal Value per demo request||$60,000/100 = $600|
|Goal Value per contact form completion||$600 / 5 = $120|
Of course, if you have an eCommerce site, your process will be a little different. But for everyone else, just work your way through your typical sales process. I certainly understand that there are often many paths that lead to a sale closing and I would just choose a typical one. The actual dollar value doesn’t really matter. The most important factor in the number above is that the demo request form is worth 5x more than the contact us form. Even if you don’t have hard metrics from your systems to calculate these numbers, you should be able to estimate the ratio of the value of one form over another. You can always adjust these as you get better numbers.
How Do I Love Thee (Goal Value)? Let Me Count the Ways…
Think of Page Value as a measure of how hard a page is driving revenue for you. Page values are calculated automatically by Google Analytics based on how far away the page is to the conversion goal. The main factor that plays into this value is the number of Page Views. So on an eCommerce site, the store checkout page will have a higher value than the homepage. You will see this value in the Behavior > Site Content > All Pages report in GA. It will appear in the far-right column.
What I would do here is to look at the data sorted in 3 ways:
- Default (sort by Page View): I would look at the top 10 pages and track the page value over time. Performing conversion optimization on these pages could have a major impact on the revenue generated because of the volume of traffic that goes to these pages.
- Sort by Page Value (highest to lowest): You will need to filter out the pages with the highest values as those will be the actual conversion page. What you are looking for are those pages that are in the $20 – $50 range? Are there opportunities to drive more traffic to those pages? What about those pages that are causing them such a high value?
Paid Advertising ROI
Paid advertising can be such a money pit and it can be difficult to really understand what campaigns are really positively impacting your business. So many people just leave it to how many clicks or how many conversions, but don’t look at the revenue returned by PPC. When looking at the Acquisition > Adwords > Campaigns report, you can attribute actual revenue (for eCommerce) or estimated revenue to each PPC campaign.
When evaluating this report, you will understand which campaigns are performing well and which ones need help. If an ad is getting a lot of clicks, but not a lot of valuable conversions, then that indicates that you may need to consider pointing to a different landing page or optimize your landing page. Perhaps you use a different landing page (that has a higher Page Value above) to link your ad too if it is appropriate.
Knowing where to spend time and money is a question asked by every digital marketer and the days of using our “gut” to guide us are long gone. One of my go-to reports in GA is Acquisition > All Traffic > Channels.
In here, you can see a nice summary of how each channel is contributing to the bottom line. It easily provides conversion rates and which channels are driving the most value for the business. From here I can drill down and look for the specific reasons for success or failure and find learning opportunities to help the struggling channels.
So while these are only 3 reasons that I love Goal Values, there are still many more ways that Goal Value is used in reporting. It will help you talk intelligently to upper management about what is (or isn’t) happening in digital marketing and it will put things into language that they can understand. Of course, there are other metrics that I love too, but this one will always be my favorite.
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