Forrester is projecting that internet sales will reach $204 Billion this year.  That’s a big number and growing in large part because the web has taken accountable, direct-to-consumer advertising to a new level.  While we previously used TV, radio, and print advertising to target general demographics (say 25-45 year old females) we are now able to use the web to target extremely specific demographics (someone doing a key word search for “weight loss supplement”).  Practically that means you may pay more money per impression BUT due to the fact that the advertising is specific and targeted (and efficient), you theoretically have the potential for higher ROI on your marketing dollars.

Sounds like the holy grail of advertising right?  Well, not exactly.  Just as we struggle to accurately measure and account for TV response calls (and consider unique callers, CS calls, junk calls, etc.) the web has also had its own difficulties.  You’d think that the powerful internet would at least be able to tell us how many people visited a site but as reported in the New York Times that is not always the case:

How many people visited Style.com, the online home of Vogue and W magazines, last month? Was it 421,000, or, more optimistically, 497,000? Or was the real number more than three times higher, perhaps 1.8 million?
The answer — which may be any, or none, of the above — is a critical one for Condé Nast, which owns the site, and for companies like Ralph Lauren, which pay to advertise there. Condé Nast’s internal count (1.8 million) was much higher than the tally by ComScore (421,000) or Nielsen/NetRatings (497,000), whose numbers are used to help set advertising rates, and the discrepancies have created a good deal of friction.

As a marketer, this may leave you befuddled but take heart.  As we’ve discussed on this blog before, the key to metrics based management is to define the metrics and then consistently track and manage to those metrics.  Here’s what that means for the web:

Get consistent and get accountable. As highlighted by the NYT you could run metrics reports for a website from three different platforms and get three different numbers for unique visitors.  How do you deal with this?  Get consistent by having a single tracking platform and get accountable by requiring your web providers to operate on your standards.  There are some excellent free options for this (Google Analytics, Index Tools) and even better paid alternatives (Omniture).  Figure out what meets your needs and then deploy it across your websites.  The beauty of these metrics platforms is that they can be deployed on both INTERNAL and EXTERNAL sites.  This is the only way to create a consistent, level, and accountable playing field so you really know what’s occurring on your websites.

Know what to track.  The first time you log into a platform like Google Analytics you might feel overwhelmed.  Visits, sources, keywords, adwords, pageviews…the list goes on.  Now if the goal for your site is to simply build brand awareness, then you’ll be looking at an entirely different set of criteria.  If your goal is commerce (which we assume it is) then figure out both your core metrics and supporting metrics.  One example of a good core metric is Revenue/Visit.  This takes both conversion (orders/visits) and AOV (average order value) into account and allows you to quickly see your overall trend for the web.

Tracking by media acquisition channel.  In the early days of the web there was a lot of easy money for DR Marketers.  Paid search and banner advertising were the hot new mediums and TV driven campaigns enjoyed exceptional performance as they already had great brand awareness.  Many marketers (including myself), didn’t know or didn’t care to really understand the full intricacies of their web business, so they’d rely on a service provider who would charge very low, or free, setup fees (DR marketers, often times to their demise, are really attracted to FREE),  in exchange for a percentage (sometimes as high as 30-50%) of every order.  This model works great if you have insanely high margins but it fundamentally doesn’t consider the internet as both an order taking medium and a customer acquisition channel.  The customer who comes to your website (or finds it via google) because they saw your product on TV should be completely separated from the customer who found your product advertised on a weight loss forum and clicked through to your site.  While paying 30% for the customer coming from the weight loss forum, it does NOT make sense to pay 30% for the customer who came to your site because they saw your TV ad which you already spent a lot of money on.  This may seem like a trivial point but it is absolutely critical that you distinguish your customers by media acquisition channel and not only by ordering channel. Pay close attention to your metrics but be sure to do so in a way that allows you to make this important distinction.

Test, Test, and then Test Again.  The internet provides quite possibly one of the inexpensive and accurate ways to conduct true A/B tests. When you test an A/B script at a call center you’re confronted with many potential variables (agent mix, training, compliance) but on the web you have the opportunity to normalize many of these variables and use consistent metrics to make comparisons.  Take advantage of it!  Don’t be afraid to test new offers, new creative, A/B site splits or e-mail splits and in the end roll those learning into your overall marketing strategy.

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So, you’ve made the phone ring, your call center has done a bang up job closing your calls and you’ve been able to decrease your cancel/decline rate – you’re golden, right, sales complete? Wrong – you’ve made the phone ring and processed the sales but how efficiently is your product getting to your customer? This is a metric many people are guilty of over looking. Can YOU answer the following questions?

1.    What is your average cost to ship your product
2.    Are you using the best shipping carrier mix (UPS, USPS, FedEx, drop ship, etc.) to get the lowest average ship cost for your campaign?
3.    What is your average package refusal rate?
4.    What is your average incorrect address rate?
5.    What is your average package in transit time?

If you are unable to answer these questions you need to contact your fulfillment provider (or your friends at KPI) for assistance in getting these answers. The fulfillment metrics above should be measured and managed to (i.e. fulfillment scorecard) as they have a direct impact on the profitability of your campaign.

But why else are these specific metrics important?

First and foremost, as with other campaign metrics, if you are actively managing the numbers you are able to quickly spot a potential issue before it becomes a major problem (wouldn’t you like to know all of your packages are getting delayed BEFORE your customer service team gets slammed).  This applies not only to fulfillment but in other aspects of your business as well. It also provides you with another way to “wring out the towel”.

When evaluating shipping methods you should consider: what zones do you ship to most, what is your goal in transit time (what is communicated to customers), weight of your product and various marketing/branding considerations. You may decide to go with multiple carriers to optimize your savings. There is no “right” shipping carrier cost. You should evaluate your industry average and manage to what your specific campaign breakeven allows for.

Your refusal and incorrect address rates can be important indicators of whether your sales force is really getting the job done. Are they able to get accurate information from customers? Are they closing the sale based on the merits of your product or are they using pushy sales tactics? If a customer feels they are being pushed into a sale or are not given adequate information they may be more likely to refuse a package without trying it. You should decide on an acceptable level for these metrics and manage to it. If the rates go beyond, you should consider first if there is an issue with your shipping method and/or carrier. If not, your next course of action is to evaluate your call centers sales tactics, agent product knowledge, and scripting. You may need to “beef up” sections in your script to help your agents communicate the benefits of your product to your customer.

You should also evaluate your average in transit time for your product. Outline a timeline and manage to it. Your customer service agents and sales agents should know and effectively communicate the timeline to your customers. If you’re telling customers they will receive their package in 3 -5 days and they receive it in 10 – 13 days you’re asking for problems. Complaints will come into the customer service department (raising CS costs) but you may also see an increase in chargebacks, Better Business Bureau and Attorney General letters (raising merchant costs and red flags).

When deciding on acceptable fulfillment metrics for your company remember there is no one size fits all. Work with your fulfillment provider when developing your scorecard and hold them accountable for the agreed upon goals. Once this has been implemented you should reevaluate your metrics on a regular basis. Are you achieving your metrics and/or do they need to be tweaked?

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A reality check

Call centers, IVR platforms, blended live agent/IVR solutions, and dynamic call routing platforms are expensive. With the high cost of media and persistent downward pressure on profit margins, picking the “right” telemarketing solution can be the difference between having a direct marketing hit and a case study miss.

In the realm of direct to consumer marketing, telemarketing costs can be higher than the cost of the product being sold, and are typically the 2^nd or 3^rd biggest expense behind the cost of media. Sales commissions, talk time fees, set up fees, script development, custom reporting and programming charges all conspire to drive up the cost of doing business “direct” for marketers.

Some good news

We can expect more and get more from our investment.

With some informed selection, a collaborative and accountable work style and an uncompromising focus on results (vs. activity), direct marketers can expect (and achieve) truly great results from their telemarketing partner(s).

So, looking to change call centers? Test a new one or link two or more together? Want to test that automated attendant, intuitive speech recognition / IVR solution? Think a blended approach makes sense? Here are some considerations for choosing the “right” type of solution and getting the most out of your investment:

1. Offer type - soft offer or hard offer? If price is not mentioned in the ad (i.e. “soft offer”) for a “risk free trial” or “call now to find out how…” or “call now for your free…” offer, live agent call centers are the best. So-called soft offer call centers are in essence your commissioned sales force, and they are skilled at the art of selling – they’ll inform and persuade the curious callers to take your offer. When price is mentioned in the ad (i.e. “hard offer”), callers are typically more ready to “buy” (they already know what they’re going to get and how much it should cost them), and therefore do not require as much “selling” (when compared with soft offer callers)…the key for this type of offer (and caller type) is efficient order taking, which means less art and more science is required at the point of sale. Live agents can get the job done, but consider the automated attendant options – test both and compare results. The benefits of automated attendant platforms (i.e. 0% abandonment, 100% script adherence) can be compelling, and can be a nice complement to the live agent strategy.

2. Medium (and media plan), messaging - TV short form (“spots”), TV long form (infomercials or “shows”), print, radio or direct mail? Broadcast or cable? Local newspaper or national magazine? First class mail or bulk rate? You get the jist – the point is: the combination of messaging and medium drives various caller (and potential “buyer”) profiles as well as the “call curve” for a specific ad impression.

An understanding of caller profiles (i.e. their demographic, psychographic, geographic info) is important input to selecting (and optimizing) a telemarketing solution.

As an example, if you’ve got a mature (i.e. baby boomer and older) and evenly skewed male/female caller profile responding to a soft offer, long form radio show for a relatively high ticket (i.e. north of $150) dietary supplement, it is likely that a purely automated attendant telemarketing solution would yield unacceptably low conversion rates; in contrast, the same caller profile directed to a boutique (i.e. small, few clients, highly trained and well-compensated agents) soft offer call center is likely to be converted at least twice as frequently.

An understanding of the “call curve” (i.e. call volume and timing relative to ad impression – low to high, impulse or delayed; call density – number of calls over a time interval, say, per half hour) is also important when considering telemarketing solutions. As a for instance, direct mail and print advertisements typically generate a fairly smooth and predictable call curve, with a large percentage of those calls generated during the daylight hours of Monday to Friday – good to know if you’re the call center manager in charge of scheduling and staffing, and great to know if you’re a call center owner because you know that overnights and weekends are (generally) more difficult and more expensive to service.

In terms of handling high call volume as well as high call density (or “spiky”) call curves, the larger call center companies (with more “in house” capacity, typically across multiple physical centers, and even continents/time zones, but sharing the same “in house” telecom and technology backbone) and automated platforms are typically best at (consistently) delivering the service levels marketers require (and that media buyers love). That said, call management technologies that provide call routing options (whether third party, stand alone like Intellimedia’s www.intellimedia.com or those offered by a combination of call center and their telecom carrier) can be employed to daisy-chain (or hub-and-spoke) multiple small call centers together to create a larger ‘virtual’ call center and thus absorb more calls.

3. Initial media budget, spending growth plans – both affect call forecasting (read: demand for your telemarketing partner’s capacity, including live agent scheduling) and call service levels (read: your telemarketing partner’s capacity, including live agent scheduling). Over communicate the growth plans (and changes in plans) with your telemarketing partners – consider developing a collaborative planning model where media buyers and telemarketing work together and interact directly. Track forecast accuracy, call service levels (read: call answer rate, or one minus the abandonment rate) and make updates to call projections and staffing models regularly.

4. Outcomes and results – define success with your telemarketing partners. Calculate, articulate and then communicate the “success metrics” and “service level” expectations you have for the marketing campaign as well as for the telemarketing partner. Develop a scorecard with specific KPI’s – metrics along with their calculations – and their targets (i.e. revenue per unique call in; minimum performance as measured weekly needs to be $45 excluding third party cross sells). Consider tying compensation to performance. Expect call centers to record all calls, provide compliance reporting – monitor and spot check the process to your satisfaction. Ensure 100% call dispositioning – know where every call that hit the switch ended up…have programs in place for recovering all of the “leakages” (i.e. every call that hit the switch that didn’t result in an order is a leakage). Lastly, expect full transparency and accountability of the call reporting, order management, payment processing and data movement (i.e. data file transmission of media results to media buyers) processes.

5. Recommendations - good sources for referral of leading telemarketing solution providers include trusted business partners and other marketers, colleagues in your industry peer group and “ecosystem”, as well as trade associations such as the Electronic Retail Association (www.retailing.org), Direct Marketing Association (www.the-dma.org). In particular, we’ve found that media buyers and production companies (whether for print, TV or radio) are typically in the know about “what’s hot and what’s working”; “telemarketing consultants” and “campaign management companies” generally have fact-based and empirically supported recommendations as well.

In general, my suggestion to those shopping around for telemarketing solutions is to do three things: first, do your homework – be ready to articulate your business objectives and then translate these into measurable success metrics / service level expectations for your prospective telemarketing partner. Second, when considering recommendations for telemarketing solutions, perform your own due diligence or work with someone who’s independent and objective – be critical of unconditional and unqualified recommendations and be clear about the motivation (financial, personal, other) for the referral. Lastly, test and learn – set up a controlled test (or set of tests) and learn firsthand what works with your combination of marketing variables and the chosen telemarketing solution.

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Let’s face it. It is not rocket Science and I am not spilling any secrets when I say that in the direct response industry the only way to effectively gauge and control performance in a call center is to manage by a defined set of metrics, or better yet by KPI (key performance indicators and pun intended also)

One of the biggest challenges is finding an organization that operates under the same interpretation and the same definitions of those metrics. Especially when you are dealing with multiple call centers. That challenge, at times, seems a step closer to rocket science.

For the most part, each center manages by using the same set of metrics. We might refer to them differently…Is it Average Order Value or Average ticket? Do we track Revenue per Call Received or Answered?

A few of the standard metrics being:

On the sales side, we have Conversion (Sales) Abandonment (calls that didn’t get answered) AOV (Average order Value) RPC (Revenue per call) MER (Media Expense Ratio) etc…

On the customer service side, we have Re-order Conversion, Average talk time, Abandonment, AOV, Saves (Customers who were retained after requesting for refund/return) ASA (Average Speed of Answer)

As previously posted blog Where the rubber meets the road, discusses the hybrid employee solution, regardless of whether your employees occupy the seats on the sales side or the customer service side, the measures in which we track performance and success are and should always be the same.

With the technology of today, we have the data at our fingertips. Real time web reporting that can be so addicting we get caught sitting at our desks for hours just hitting the refresh button.  Gone are the days where we have to request reports, and wait a significant amount of time to receive them before we can do our analysis on campaign A and campaign B. The secret of success isn’t whether we can get enough data to analyze anymore, but whether we can dissect the data, and whether we can trust it’s accurate and can we truly use this data to measure performance and implement changes. Are the call centers using the same definitions for short calls (is it under 30 seconds or under 26 seconds?) for our “apples to apples” comparison?

To be great at this business, you have to be a data geek. Just accept it now; it will be easier in the end. With all this visibility to data it can be easy for some managers and trainers to get lost in it. At first glance, it is impressive when the new hire trainer can tell you within a few moments, what the average order value was for the new hires for the past month and how many calls they dropped within that same time frame. If you want he can even give you these results by supplier, by day, by hour, by minute…Heck, I can get all these numbers myself in just a few clicks…..But what does all of this mean though? When you are drilling down to miniscule details of your metrics are you really getting the big picture?

The sense of urgency becomes in getting the right metrics program in place so you can eventually understand the minimum number of measures that give you a clear understanding of the state of your company. It all comes down to a formula.
I read somewhere once that the average customer service department tracks at least 25 metrics. While each of these metrics may be useful to trend internally, tracking these items and having the data to support these metrics does not really answer the question how is my call center or company really doing? These 25 metrics make up a somewhat redundant list of statistics and can really be rolled up under 5 KPI’s (key performance indicators) 1) Cost per Call 2) Customer Satisfaction 3) First Call Resolution 4) Agent Utilization (what I like to refer to as BIS =butts in seats) and 5) Overall Call Center Performance

So why is less more in this case?

Defining goals for each KPI is critical in tracking call center performance. Having 5 performance metrics to manage instead of 25 definitely streamlines your process making it easier to:

1. Identify strengths and weaknesses within your department(s)
2. Provide necessary training and cross training for agents in opposing departments, as well as support to give your agents the power of knowledge.
3. Establish performance goals for both individual agents and as a team
4. Consider the potential benefits of introducing a performance based incentive plan to motivate and compensate your agents
5. Implement new processes and policies in place to overcome specific obstacles (IE talk time increased due to lack of training on a new order management system)

Once you have a set of measures that you can benchmark against other companies to understand where the existing opportunities lie and where you need to create opportunities to move toward, you are better positioned to add staff or other resources before you get caught short-handed.

Most importantly, once you have a grasp on the above, you have a solid platform for experimenting with the fundamental changes you make to your existing business operations. Only then can you accurately evaluate the effectiveness of the new approaches you take and be rid of the ones that don’t.

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We’ve all heard the scoop on our competition from some other industry source.  Supposedly their campaign is generating millions in sales, has a 3.0+ MER,  40% web conversion, has an average of 5 turns of continuity…AND only a 2% return rate.  You start to beat yourself up over the harsh reality that you are nowhere near any of these numbers, and it can be a bit discouraging.  Well, two months later their show goes off the air and you hear the company has gone belly-up.  What are we missing here?  Well, my initial guess is that the supposed “scoop” was probably a combination of white lie, some exaggeration, and about five different definitions of each metric being referenced. One of the key reasons we have metrics is so that we can compare ourselves to others, however, one of the main reasons we resort to faulty comparison is because we are not comparing apples to apples. The correct comparison of metrics is often called benchmarking.  Our dear friend Wikipedia defines this as:

The process where you compare your process with that of a better process and try to improve the standard of the process you follow to improve quality of the system, product, services etc.

How to benchmark

Okay, so you are interested in benchmarking.   Where do you start?

Before you can compare yourself to others you need to compare to yourself.  It may be intuitively obvious but nonetheless necessary that you know your KPIs (Key Performance Indicators), know how you’re trending, and know what you’re trying to achieve.  If you have not done so yet then define all of the metrics for your business and begin methodically tracking each one.  Learn what affects them, learn how to improve them.

Seek out real data, not hearsay.  I could tell you that my campaign converted at 60%, 47%, or 36% last week.  All numbers could be true but are meaningless unless I tell you exactly how I measure conversion.  My suggestion is that unless you have a reliable means to get real, rich, data you should focus on the simple things that could be useful in your decision making process.  Example: you have a weight loss product and you know your media agency has a similar product and are running a large TV campaign.  If you are able to reliably determine from your agency that their creative runs at 50 CPK (Calls per thousand in media spent) and you test a show that runs at 20 CPK you can save yourself a lot of time by immediately focusing on better creative.  The reason I would choose a metric like CPK is first, that it’s a good indicator of your front end creative success, and secondly, it’s a measure that your media agency should reliably know.

Dig in to the minutiae and test. So, what if you’ve figured out your metric and also figured out you’re lagging behind your competitors.  What can you do about it?  My suggestion is that you dig into every little detail of both your campaign and your competitors.  There is no silver bullet out there but we at KPI believe that systematic diligence and testing will pay off in the long run.  Look at other websites, call other call centers, sign up for other continuity programs.  Be careful not to assume whatever they’re doing is better than what you’re doing, but also be sure to never stop testing.  It’s the only way to improve.

The future of benchmarking

Several weeks ago Google announced something pretty revolutionary: the addition of benchmarking tools to their Google Analytics platform.  Basically what this boils down to is that anybody who chooses to share their data will be able to see how they stack up against other competitors in their industry vertical space.  What makes it so powerful is the fact that it is real data coming from real sites and that it is a common standard (no fudging of the definition of MER is allowed!).  Personally I think this will be the future of benchmarking in the DR space.  We will no longer have to distill the hearsay from truth; instead technology providers will serve as data aggregators.  Companies that so choose will be able to objectively and confidentially know how they stack up against the competition and in the end we’ll all be better because of it.  And isn’t that the point?

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I’ve probably had ten people in the last week ask me “what does the KPI (in your name) stand for?”.   No, it’s not our initials, nor does it stand for Knowledge, Power, Income (not sure how they came up with that one).  It actually stands for Key Performance Indicator (well, there are a few others like Kuwait Petroleum International).  Wikipedia defines KPIs as:

Financial and non-financial metrics used to help an organization define and measure progress toward organizational goals.

We at KPI Direct are firm believers in the use of KPIs or what we’ll call metrics-based management (so much so that we put the acronym in our name).  You could even go so far as to call us the metrics dorks (that’s how much we like this stuff).   So, after I answer the first question about what KPI stands for, in many cases the next question is “what is a key performance indicator.”

One of my favorite examples is found in Good to Great in the discussion of Walgreens.  One of their keys to success was the fact that they had a clearly defined central metric for their business:  Revenue per customer visit.  Every strategy, every initiative, every department strived to maximize this core metric.  Now, that’s not to say they didn’t look at many other metrics like rev/square foot, merchandising efficiency, repeat visitor revenue, etc. but all of these metrics tied back to their core metric of revenue per customer visit.  From the CEO down to the cashier, everyone knew that if they maximized that core metric, then the business would be in good shape.

I’ll admit that some of this may seem very much like consultant speak - all great in theory, but not useful. I would argue the opposite: clearly defined business metrics allow not only crystal clear insight into your business, but are incredibly practical.  Why? Because every person, vendor, or initiative now can clearly be looked at through the lens of the core metrics.  Whether you are hiring/firing, selecting vendors, or launching a new program you can carefully evaluate, measure, and manage based on your clearly defined metrics.  Believe it or not, your employees and vendors will work better when they know exactly how they’re being measured and how the organization overall is being measured.

What we hope to do over this series of blog posts is dig deeper into what are the metrics (KPIs) by which to manage a direct response business and show how clearly defined metrics make management easier.   Some of the areas we hope to cover include:

• Call Center Metrics
• Media Metrics
• Fulfillment Metrics
• LTV Metrics
• Web Metrics
• Benchmarking Metrics

This list is subject to change - feel free to share your thoughts.

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