This post originally appeared on LinkedIn Pulse.
The accusatory cry of “fake news!” has been echoing around the country, whether it’s the president railing against mainstream news networks or everyday people coming across sensational stories on their social feeds. In response, Google and Facebook have both recently announced efforts to eliminate fake stories and ads in order to protect consumers.
However, late last year Facebook had to admit to accidentally spreading a different kind of “fake news”. They admitted that they had been reporting views of video advertisements incorrectly, which had led from anywhere from a 60-80% inflation in numbers reported to advertisers. Regardless of how this problem came about or was fixed, the fact remains that marketers can never truly be sure whether the numbers reported by any advertising platform are correct. Like so many sensational stories we see flashing across our screens every day, it can be impossible to truly “fact check” things like clicks, views, or engagement. Even if we knew they were true, what does it really mean to your business that a particular Facebook user watched your 30-second video from start to finish?
The good news is, there are more tools and data to help marketers uncover marketing ROI than ever. The bad news is, most marketers are not using them. So instead of working to show the real business value that our campaigns have created, we focus on glitzy metrics that make us feel good, like views, clicks, likes, follows, and shares. We throw our efforts into things like building the customer experience, customer journey mapping, and lowering customer acquisition costs. Great—but where are the facts?
These fluffy “feel good” metrics are like many stories we see on our social feeds today. They might be somewhat true, but they are designed to validate what we want to believe. You can show your CMO that you acquired 10,000 new customers through Facebook last quarter at a cost of $50 each, but let’s ask the REAL question here: How valuable are each of these new customers to your business? Once you do the work of digging into that metric you might find that those same customers represented an average of $10 each in revenue. On a positive note, you might find out that 5,000 customers acquired from Google paid search at twice the acquisition cost show three times the return over their lifetimes. Sure, it takes a little more effort to perform this analysis, but once you see these numbers, it greatly diminishes the importance of traditional metrics.
In a time when marketing accountability is increasingly coming into question, it’s more important than ever to show what’s working and what isn’t. And the one hard and fast metric that can show you whether your marketing initiatives are working is customer lifetime value (CLV). If you measure it carefully and correctly, CLV is a way to validate many of the other tactics we just mentioned. Then you can change the nature of the conversation from trying to quantify the value of a “wow” emoji to creating the most financial value for the organization.
When you clear away the clutter and focus on customer lifetime value, you can-
- Find the actual value of your customers beyond the pure marketing statistics like site visits, likes, or email opens. Then you can prove the REAL value of marketing to the organization with hard numbers that connect directly to the bottom line instead of defending your investments using “soft” engagement-oriented statistics.
- Dictate the proper allocation of marketing resources. Perhaps you can save money by eliminating what you thought was an important acquisition channel altogether. Or perhaps by showing your CMO how much real value your department has brought in through your efforts, you can get your budget increased.
- Evaluate campaign ROI. While you should absolutely measure acquisition costs, that number alone is fairly meaningless. Once you compare CAC to the value of the customers you have acquired, then you have a number that can help you make better business decisions.
Remember, no matter how great your formulas are for figuring out marketing ROI, if you don’t have the right data, it’s simply garbage in-garbage out. You have transaction data at your fingertips, so you should fully leverage it instead of making business decisions based on measures that you can’t trust.