Welcome to 2020 Rewind! In this series, we’re taking a look at the year that was and the wonderful shows and podcasts that had me on as a guest this past year. A fair amount of the time, I’d rather read than listen, but podcasts, live streams, webinars, and videos were how we made media this year. So let’s get the best of both worlds; 2020 Rewind will share the original episode and show it aired on, and provide you with a machine-generated transcript from the episode.
2020 Rewind: Measuring Social Media Marketing ROI with Michael Stelzner and the Social Media Marketing Podcast
Summary: A lot of people confuse ROI with ROAS because they don’t know what they spent on social media. If you’re a marketer, you need to know what your ROI is based on and how you can use it to make better decisions.
Listen to the audio here:
- Got a question for You Ask, I’ll Answer? Submit it here!
- Subscribe to my weekly newsletter for more useful marketing tips.
- Find older episodes of You Ask, I Answer on my YouTube channel.
- Need help with your company’s data and analytics? Let me know!
- Join my free Slack group for marketers interested in analytics!
What follows is an AI-generated transcript. The transcript may contain errors and is not a substitute for listening to the episode.
Michael Stelzner 2:16
Today, I’m very excited to be joined by Christopher Penn. If you don’t know who Chris is, you need to know who Chris is. He is the chief data scientist at Trust Insights. He also hosts the in ear insights podcast, his latest book is a AI for marketers, Chris, welcome back to the show.
Christopher Penn 2:36
Thank you, I was gonna say if you don’t know who I am, you need to come to Social Media Marketing World this coming year will be my seventh year.
Michael Stelzner 2:41
Whoo, that is so cool. And Chris is Chris is probably one of the most technical and analytical people that I know. And we’re gonna address a topic that I’m excited about because I know many of you, including myself have a challenge with this, which is how the heck do we calculate our return on investment for social and from marketing in general, but in particular, for social? So, Chris, what I would love to ask is, first of all, why do you think that tracking ROI for so many marketers is difficult.
Christopher Penn 3:15
So and this gets into sort of the definition of ROI, we need to understand what this thing is because in a lot of cases, especially for executives, they tend to use it as a catch all term that means results, which is totally not what it is. ROI or return on investment is a mathematical equation is a financial equation is expressed in dollars. And the outcome is typically a percentage. And the formula is immutable. It is earned minus spent in parentheses, divided by spent. So the money you earn minus what you spent to earn that money divided by how much you spent is return on investment. And it’s a financial term, right. So it means that you have to know what you earned what you spent. Now if you for example, you have spent 5,000 and earned10,000. But your return on investment is 50%. For every dollar you put in the machine 1 50 came out. This is so hard for marketers for a couple of reasons. One, marketers don’t do a great job of understanding what they spent. And two, marketers don’t do a great job of understanding what they earned and how their work helped a company earn money. It sounds so simple, doesn’t it? Like earn my misspent divide by spent Yeah, like a grade schooler should be able to do that exactly. But think about what goes into all these. So what have you spent? Now when you think about social media marketing, Mike, and I think about spending What do you think when you see the words spent
Michael Stelzner 4:49
Facebook ads is the first thing that comes to mind.
Christopher Penn 4:52
Facebook Yep, hard dollar cost is what marketers think about. And there’s the direct dollar spent Facebook ads, Google ads, Twitter ads. Grant that’s and so on and so forth. We say ads a lot. But what else goes into your marketing, you pay for a website, you pay for electricity you pay for in your case in office, right is a nice building. That’s the big one that people miss. Employees cost money. Every minute that an employee is doing something on social media is an opportunity cost, that employee could be doing something else may not be, you know, it could be sales, it could be admin could be something. But this, when you start to unpack spent, you realize it’s a really tangled web, your internet access, your hosting costs, your software costs, all those things go into spent. So when we talk about social media ROI, a part of that means you’re probably taking someone from the finance department out to lunch, to ask them a whole bunch of questions about what marketing spends. And then of that, what does social media spend for those hard and soft dollar costs? So that’s half the picture. And that part alone takes some research takes some getting into some getting used to right. So here’s the other half, what did marketing earn. And this is where everything goes off the rails for most marketers, because of a lack of understanding, a lack of availability and a lack of information about attribution done well done properly. And we’ll talk about this in more depth in a bit. You don’t know most marketers don’t know how much they help bring in revenue earned to the company. So if you don’t know what you earned, and you don’t know what you spent, you can’t do ROI, right? There’s simply no, no way to do it. And so what marketers tend to do instead, is they default to something much simpler like return on adspend, which is a different calculation, different math, different formula and everything. And again, people tend to kind of conflate return on investment and return on adspend. They’re different formulas. Likewise, when executives say, what’s the ROI on your on their marketing, and they’re just looking for, like, how many leads do we generate? That’s not ROI? That’s, that’s results. And results are important, but not the formula we’re talking about.
Michael Stelzner 7:16
Got it. So and this is fascinating, as you know, we’ve been running a research study for Oh, my gosh, since 2009. So I don’t know, many 10 or 11 years. And measuring ROI has always been one of the top challenges that marketers have faced even today, which is kind of fascinating, because it seems like for sure, in 2020, it’s a lot easier to measure some of these things than it was 10 years ago, wouldn’t you agree?
Unknown Speaker 7:43
It should be? I mean, we have
Michael Stelzner 7:45
all the analytics tools now, right? The social platforms like Facebook provides their insights, and you’ve got Google Analytics and people understand, at least some sense of them do understand how to track things using UTM parameters. I mean, it seems that we’re in an age of data. So maybe we have too much of it, maybe we don’t know how to make sense of it. What’s your thoughts?
Christopher Penn 8:04
So I like that expression that you just use there, we’re in an age of data, that’s like saying, we’re in an age of ingredients, right? Well, if you don’t know how to cook, then all the ingredients don’t matter, right? You have a pantry full of ingredients, and you don’t know how to cook, guess what you’re going to McDonald’s.
Michael Stelzner 8:18
So yeah, are you gonna have some nasty food.
Christopher Penn 8:22
But if you are saying, we’re in the age of data, and you have all these analytics, and data from every platform, great, if you don’t know how to analyze data, you are functionally in the exact same position, and you are resorting to whatever you can hack together, as opposed to knowing how to cook lets you use those ingredients, it always comes down to three things, right, you got to have the ingredients, you got to know how to cook, and you got to have the right, you know, pots and pans and stuff to be able to do it. If you’re missing any one of those things, you’re out of luck. So you need the knowledge, you need the tools and you need the resources. The same thing is true with marketing data, right? You need the data, you need the tools, and you need to know what you’re doing.
Michael Stelzner 9:01
So let’s zoom in a little bit on the social side of this, right. So obviously, we’ve got the paid stuff, which is a little easier, I would guess, to track the Earned or at least spent. But what about the organic social side of that? I mean, doesn’t that get a little even more confusing?
Christopher Penn 9:19
It can, believe it or not, it’s actually getting simpler to measure organic social because organic social media performs so badly. That is effectively a zero and effectively for about half of our clients. Okay, return on organic social media is zero. It does nothing for them.
Michael Stelzner 9:37
Does that mean we shouldn’t do it? I’m just curious what your thoughts are on that?
Christopher Penn 9:40
Well, so there’s two parts to that. When we say social media, particularly organic social media, we have to broaden our definition of what constitutes social media. This is a fun little rat hole to go down. When you say social media, a lot of people instinctively think Facebook, Instagram, Twitter, YouTube, right? The big obviously that’s a social network. That was what we’re talking about. But think about what social media is, by definition, social media and a social network is something that has value because of the network effect. If you write a blog, and you do read a blog over social media examiner.com, it has intrinsic value, right? It has value, that post has value. And that blog would be there, whether or not five people read it, or 5 million people read it, right. Obviously, there’s more business value to your 5 million people read it, but it would still be there. A social network by the network effect only is valuable. with other people. It’s like owning Well, nobody owns a fax machine, back in the day for those who don’t have gray hair. So it’s like owning a smartphone or a telephone, right? If you were the only person that has a phone, guess what? It’s useless, right? Once two people have a phone. Now you can call each other for those odd times when you want to talk to another human life. And the more people who get phones, the more valuable your phone becomes, it’s the network effect. Social media is the same thing. The more people who join a social network of any kind, the more valuable it becomes, because the people are the product. And the people are the value. So what’s a social network? It Yes, Facebook, yes, YouTube. But think about everything else where you have those interactions. If you are a programmer, GitHub is a social network where you can exchange code and ideas. Other people’s Stack Overflow is a social network. Reddit is a social network. Heck, even some of the adult entertainment sites are social networks, people can interact and leave comments and do all sorts of things. So if we broaden our minds, to what our definition of a social network is, then suddenly organic social media starts to look an awful lot like referral traffic instead of social. And it then becomes part of our attribution equation again,
Michael Stelzner 11:53
got it? So what I’m hearing you say, I think this is what I’m hearing you say is that when you share something on a social platform, and people engage with it, and or share it or click on it, then that is something that has some thing that can be measured? Is that what I’m hearing you say?
Christopher Penn 12:13
Exactly, think about it, you have Slack, slack is one of the biggest social networks in the world. Every slack instance is different. But it’s a social network, right? A Slack channel with you only in it is boring, right? discord is a social network, Twitch is a social network. Dungeons and Dragons is a social network World of Warcraft is a social network. And these are all places where you can create, interact, engage, share, like, comment, all these things, these behaviors are social networks. Now, this raises an interesting problem. If you are a marketer, and you’re trying to figure out what’s the social network for my niche, or my vertical, you have got to get really good at things like UTM tracking for Google Analytics and stuff. Because in many cases, these niche social networks don’t integrate with analytics of any kind. They don’t, they may not even have analytics, and nor do they have any interest in providing them. And if you don’t do it, you’ll have a bunch of traffic coming to your website or your own properties. And you will have no idea what’s coming from in Google Analytics, that it’s called direct. When you see direct traffic and Google Analytics substitute the word don’t know, because there’s no attribution data. For those of you who use services like Slack, when you share a URL in a Slack channel, and someone clicks on it, there are no tracking codes. slack doesn’t append any. And so when that visitor goes to your website, they show up as direct the sources direct and the medium is none. Google says I don’t know where this came from, I have no idea. So I’m going to say it’s direct traffic, and there’s no attribution. And that means that you as the marketer now have no idea is is what I’m doing in the slack channels where I’m engaging, is that working? So the only way
Michael Stelzner 13:57
you would know is if they became a customer. And you asked, How did you find out about us, right? And then you’d be able to attribute that attributed somehow at that point? Exactly. Right. All right. So we talked about ROI is earned minus spent. So if I earn 10,000, I spent 1000. That’s a net of 9000 divided by the amount spent, and that ratio that you come up with is the ROI is what I’m hearing you say, is that correct?
Christopher Penn 14:21
That’s exactly right. That is ROI.
Michael Stelzner 14:23
Now, what do we do? You know, with that information, right, but we’ll actually I know, it sounds so simple, but like, it’s not that simple, obviously, right? When we start thinking about all these channels, right, Chris, we’re talking about not just one channel, most businesses are using many different channels, they’re using Twitter, they’re using YouTube, they’re using Google Instagram. Some of these channels don’t even allow you to track traffic off site, but how do we like attribute properly where that urn came from?
Christopher Penn 14:51
Before we talk about that, let’s back up even one more step. Okay, and talk about when you should be using ROI. Okay. return on investment. As a comparative metric, right? If I say my return on investment on Facebook is 70%, my return on investment on Twitter is 50% is comparative metric or my return on Facebook is 70%. This month, but last month, it was 90%. You care about return on investment. When you are in a a stable business environment, meaning you’re not trying to aim for growth, you’re not trying to do something crazy. And efficiency is the most important thing. You have maybe limited resources, you have1,000 in your social media ad budget, and you want to know where can I get the biggest bang for my buck? That is when ROI matters. Ah,
Michael Stelzner 15:40
yep, I love this keep going.
Christopher Penn 15:42
And you have to add is always a comparative metric to say like, the ROI of a Facebook ad is 42%, with nothing to compare it with it like so what right that that means nothing, by itself, it always has to be accompanied by something else, or compared to something else. When you compare across channels, like the art, if your ROI of Facebook is 25%. And the ROI of Google ads, say is 44%. Logically, if you focus on efficiency, you should be doing Google ads and Facebook ads, right. However, there are going to be times when ROI simply does not apply right now. And we’re not going to get into any of the meat of this because that’s entirely other different podcasts. Right now, we’re ramping up towards elections in November of 2020. There is no ROI of an election, there’s a binary outcome, if you’re a candidate, you either are elected or you’re not. But there is zero ROI because there is not a financial outcome. And so you would have to use other metrics to gauge the effectiveness of what it is that you’re doing. But fundamentally, there’s no earned, other than I won the election, right? So that’s an example. Another example would be if you are, say, a nonprofit, like a church, and you care about things like community engagement, guess what, that’s not 1 outcome, because there’s no dollar outcome, ROI simply does not apply. So you have to be clear about what your goals are, and how you’re going to measure those goals. And if those goals are not expressed in a monetary amount, ROI does not apply. Don’t try to use it just it’s not going to go well.
Michael Stelzner 17:16
Well, this is this is where it gets really interesting, because let’s just take Facebook ads. So many times, at least here internally in Social Media Examiner, we will take a look at our UTM parameters for the ads that we’re spending. And we’ll just we’ll see how much did the ad cost us to run? And how much revenue did it generate? And that’s all we look at. But that’s not the entire equation. If we’re truly looking at ROI, we’re skipping a whole bunch of stuff, aren’t we?
Christopher Penn 17:43
You sure? Are you are measuring return on adspend? What revenue do we generate from our ad spend, you’re doing return on adspend. And that’s not a bad thing to do. Because it’s a very simple equation that allows you to understand more easily, you know, how your ads are performing return on ads ad spend, or Ross is simply your your earned divided by your spent right very different equation.
Michael Stelzner 18:06
And when we ignore the cost of the either the agency right that we’re working with, or the employee and or both if we’re using both right? and other aspects, we might be actually losing money,
Christopher Penn 18:19
right? Yes. So and that is one of the greatest dangers of return on adspend. Because people conflate it with ROI. ROI takes into account the cost of earning the money, whereas return on adspend does not have any of that in that’s one of the reasons why when you see people talking about return on adspend, the numbers seem astronomically high. Like the general best practice, the general accepted best practice for return on adspend is your return on adspend should never go below 400%. So for every dollar you put into an ad, you should get4 back the the generally accepted best practice for return on adspend is aim for 500% ROI. Because you’re not taking into account all those other costs, you’re only looking at the ad spend and the revenue generated from it.
Michael Stelzner 19:02
Well, and you’re also assuming that you have a high profit product as well, right? Because if you’re selling a product that doesn’t have a lot of profit in it, you could actually be losing money. Because take Social Media Marketing World, we know how much it costs us per ticket because it costs millions of dollars to put on that event. So if we don’t actually look at the the net profit, right of that unit that we sell, then we’re also not looking at I don’t know, I mean, is that am I going deeper down a trail here is that part of ROI as well.
Christopher Penn 19:30
So that is ROI. And that is not a return on adspend. So you’re right. If you’re only focused on return on adspend, you could be losing your shirt literally, because you have negative ROI even though your return on adspend is positive.
Michael Stelzner 19:43
Got it. So just a shortlist of the things we should consider is obviously the cost of whatever the product is that we’re selling, right? Especially if it’s a product that has a high cost, right? labor. What else I mean what are the other basic things that we should consider when we’re calculating the actual costs
Christopher Penn 20:00
So most larger organizations will have essentially sort of what is a an admin overhead cost of an employee. So you’ll have your employees salary, and then you’ll have that overhead. And that is something that you can then amortize out to essentially, you know, if you have an employee and you know, 50% of their time is spent on social media, you have that employee salary, which if you divide by 2080, gives you their hourly rate. And then you have the overhead costs, which is typically, you know, if you’re in the United States, because we have a really jacked up healthcare system, your cost of health care is going to be, you know, up to 25 30% of that employee’s salary costs. So add those two together, divided by 28. And you’ve got the effective hourly rate, and then essentially, your cost for social media of that employee. However many hours they spend on social media times that effective rate is what you’re spending and time is money resource opportunity costs on social media, and that goes into your costs as well.
Michael Stelzner 20:57
So generally speaking, do you find that it is the labor that tends to be the biggest cost with most of the people you’re talking to? Or the cost that’s most often overlooked?
Christopher Penn 21:07
It’s the most overlooked one. And it is certainly the largest one because again, people don’t think about opportunity costs. They don’t they think about that hard dollar spent, I got a gift 1000 bucks to Zuckerberg, Alright, fine. They don’t think about Okay, and how much time did it take you to set up that that 20 part Facebook ad campaign? If you do ROI? Well, sometimes what you figure out is, we should just be hiring an agency or contractor or somebody to do this for us because a we’re not good at it. And B, it’s a much higher opportunity cost to try and grow that capability rather than just outsourcing it. The general rule of thumb that we always say to clients is if it’s not part of your core business, and there’s a high opportunity cost, spend the hard dollar, so you get the soft eyes back and you get people focused back on what they’re supposed to be doing, which is your product or service.
Michael Stelzner 21:56
So what else do we need to be thinking about? I think that you had told me about this new attribution tool from Google because it sounds to me as if part of this problem is also properly attributing the outcome. Am I right?
Christopher Penn 22:09
Oh, yes. So a big part of that earned part is the attribution is how much did social media impact conversions? When you look at standard Google Analytics, you will see five attributions built in first touch, last touch, linear time decay, and model based or position based, those are the ones come out of the box, most of those most of the time are not useful, because they offer a very limited view of the customer. Think about what somebody goes through in your case, when somebody is considering Should I go to Social Media Marketing World? What does that customer journey look like? They talk to friends, they do some research, they read reviews, maybe they read past blog posts, they check out your social media feed, they go to YouTube, and maybe watch some session videos from previous shows. They asked in a Facebook group, hey, has anyone ever heard of this conference is it worth going to, and they talk to their boss to get approvals, they talk to their boss get approvals. So there’s many, many, many, many, many steps to a essentially what is a high for them a high risk transaction, that’s their customer journey. And it’s going to look wildly different from person to person, when you use the built in models and Google Analytics, and you defaults to last touch, meaning that whatever the last thing somebody did, May was they saw the Facebook ad, they clicked on it, and they bought their ticket in stock, Google Analytics, that Facebook ad gets all the credit for converting that customer. But we know, we know there was way more to that. But none of those other interactions were given credit, to have the models linear and time decay, try to distribute credit to other interactions that Google Analytics can see as a way of essentially saying, with the linear model, we don’t know what’s working. So we’re just going to give even credit to every single interaction and assume that every single interaction is equally important. And the one that built in is the most useful is time decay, which essentially is a half a seven day Half Life, meaning that if you did something the last seven days, like click on a Facebook ad, that’s going to get the lion’s share the credit, but the longer your customer journey goes back in time, the more will give credit to channels of the past, but it’ll be diminishing amounts of credit. So maybe if you’ve clicked on a Facebook ad, nine months ago, that ad will get a tiny little bit of credit. But the email that you just opened last week, that’ll get much more credit because there’s an assumption with time decay models that that recency matters. So those are the ones that are built in Google Analytics, they all suck.
Michael Stelzner 24:32
Well, let me ask you this, which one should we be using? Because even though they all suck, I would imagine most of us are limited to those right?
Christopher Penn 24:38
So it’s funny, you mentioned that there are some options. If you can’t use anything else, and you have no capabilities whatsoever. time decay is the least bad of the models. If you have no capabilities, no advanced analytics, and you’re not and you’re just not good with the software, just choose time decay and stick with that that will least help you understand like from an assisted conversion perspective, the different impacts of various channels.
Michael Stelzner 25:03
Wait real quick, just to be clear, do we find this all this stuff is under the assisted conversion section right under the conversions category? Is that right?
Christopher Penn 25:12
That’s correct. On the left hand side is the fourth menu down.
Michael Stelzner 25:14
Now what’s the default one, it’s not time decay, or is that the
Christopher Penn 25:17
last touches the default one
Michael Stelzner 25:19
I see. But it’s still not going to changing, this is not going to have any impact on your UTM data, right, you’re still going to see the last touch stuff when you look at your UTM is right or wrong.
Christopher Penn 25:28
Also, UTM data just attaches attribution information to that particular visit that session, if you come to my website five different times with five different mechanisms. In the data, I’m going to see five different UTM. Right, I’m going to see you open that you clicked on the email, you clicked on my Twitter post, and so on, so forth. And that’s recorded in essentially the logs within Google Analytics. The attribution models, essentially take those logs, digest them down, and then apply the model that you choose to help you decide is a channel working for you or not, but the data is, is all there in its raw state inside Google Analytics,
Michael Stelzner 26:05
but the e commerce the money, right that actually came in that you’re tracking? Is that going to get distributed differently if you choose time decay? So for example, you open an email, you clicked on it, and then later you saw a Facebook ad, the Facebook ad was last, with the time decay thing set? Is that going to have any impact on me still being able to go into see whether in Google Analytics with that Facebook ad brought in the full value? Does that make sense? When I’m asking?
Christopher Penn 26:30
It makes sense. What you’re asking if you’re looking at either act assisted conversions, or you’re looking in the model comparison tool, it will make a difference? Because it will tell you, are you giving too much weight to one channel or another too much importance? What percentage of that dollar deserves to go to Facebook or Twitter or to email? So there is some that those models do apply there?
Michael Stelzner 26:52
Okay. Okay, so I took you off down a little trail. So you were saying interesting that you ask time decay is the least bad? were you about to say something else? Is there something new coming from Google or what so
Christopher Penn 27:02
that is not coming from Google, it’s new in the interface as of about a month ish or so. On the left hand side, towards the very bottom, you’re going to see a new little button called attribution with a little beta tag next to it. That is Google’s, what slightly watered down attribution 360 products. So if you’re familiar with the history of Google Analytics, they bought a company called Adama tree A number of years ago, had a machine learning based attribution system. And first, they sold that, you know, attribution 360 for reassuringly expensive costs to mostly major corporations. And they have since taken and watered it down. And now it’s available to everyone to at least try out and it allows you to to build what’s called a data driven model, using a machine learning algorithm called Shapley game theory, to essentially try and figure out again, what channels are getting credit. And the way it works. The simplest analogy I can make for how Shapley game theory works is that it’s like a poker game. If two people if you and I sit down at a poker game, we play poker together, I may bet a certain amount, you may bet a certain amount and you know, the game goes away. And then let’s say, let’s say Phil marshawn sits down at the table, right? And Phil’s a high roller, his behavior will automatically cause us both to probably bet more than we would just playing with each other. Right, right. And so the more people who sit down that poker table, not only does each person change their behavior, but the table as a whole, change his behavior as you go around the table. And so Google Analytics with this attribution product was sent essentially does the same thing. If Facebook sits out the table, and email sits down the table, and Twitter sits out the table and YouTube sits down at the table, is the conversion more likely to happen when Twitter sits down the table or not? Is the conversion more likely to happen when YouTube sits down at the table or not? And by gathering this data, it helps to assign a better understanding of the importance of each channel not only by itself, but also in relation to other channels to say, you should do more of YouTube and less of Instagram.
Michael Stelzner 29:09
Fascinating. One question I have for you is, we are finding that it’s harder and harder. Emails a big part of what we do have a very big list like I don’t know, 375,000 people, we’re finding that we’re getting less revenue off of our email. But when we don’t send email in a week, we get less revenue overall. And when we do we get more, but it’s not attributed to email. So I’ve come up with a hypothesis that sending an email is better than not sending an email because there is some sort of compounding effect. Because it seems like no matter what, when we send an email, we get more sales. It could be the word of mouth effect. I don’t know. But how do we attribute it for something like that?
Christopher Penn 29:55
So now you’re starting to get into behavioral attribution and that is it entirely on next level. So there’s two things going on there. One, how clean are your tracking codes in your emails?
Michael Stelzner 30:08
Very clean. Every single one is custom.
Christopher Penn 30:10
I got all UTM tags, and they’re everywhere. They’re all working.
Michael Stelzner 30:13
Yes, absolutely positive. We are like, we’re crazy fanatical about that every single email has a custom UTM and sometimes even more than one inside the same email.
Christopher Penn 30:22
And do you have a marketing automation system is tracking at the individual level? That whether the person opened? Yeah, drip? And have you done a segmentation to compare the people who opened emails to the people who stopped not opening emails to see if they’re the ones who showing up at the website and buying more stuff?
Michael Stelzner 30:37
Yes, I think we have. But I don’t think we do it as often as we probably should.
Christopher Penn 30:41
Right? That’s the first place I would start. And that’s something you could do, you know, painfully in a spreadsheet, where you’re going to get a cleaner answer, but it’s going to require a tremendous amount of legwork. And technology is with a different kind of machine learning technique that takes all of your marketing data, every activity that you’ve got going down to ideally day level, if not our level, but ideally day level, and puts it in what is effectively a gigantic spreadsheet with the outcome from that day as sort of the target the response column on the far right hand side of the spreadsheet, you know, number of tickets sold that day, for example. And then there are some really good tools that will essentially build a custom machine learning model one of those tools that I recommend full disclosure, my company is an IBM Business Partner, we earn money, if you buy from us, blah, blah, blah, there’s a tool in called IBM Watson Studio, auto AI, and you load your giant, huge, enormous table in there. And you tell Watson, tell me and build for me a predictive model for what sells tickets. And Watson Studio will go through and analyze every possible combination of variables email sent that day press releases sent that day tweets about you that day. I mean, whatever you put in direct mail pieces, phone calls that people made, the number of times that film or song played banjo that day, whatever the case, whatever data you have you put in there, yeah. And it comes up with a model and tells you the what’s called predictive importance, how important are the different variables in combination or alone towards that outcome? And you may find that just the act of sending email has a mathematical relationship to that outcome.
Michael Stelzner 32:25
Yeah, cuz it’s, it’s looking for the correlation between all these things is what I’m hearing you say, right? And it can predict the likelihood that this this thing results in a better outcome than something else? Is that what I’m hearing you say?
Christopher Penn 32:36
This thing, either by itself or in combination? Because one of the things that can happen, and we know this as humans as individuals, is that that email me but the stimulus to go do something else, like read a blog post? Oh, yeah, I forgot. You know, it’s gonna be the Social Media Examiner blog. And then you see the thing on site and then late, and then the retargeting kicks in, you’re like, I gotta go, I need to go buy my ticket. So there may be three or four things at work together that create that lift.
Michael Stelzner 33:04
Fascinating. So what about attribution windows? This is always a fascinating thing for me, like, should they be seven days? How many days? Should they be right? At what point? Is it decay enough? That we just ignore it?
Christopher Penn 33:16
It depends I, which is something I say all the time. The the generally accepted best practices how they’ll ask you assume it’s not confidential, how long from first touch to bought the ticket is your sales cycle in days?
Michael Stelzner 33:32
It’s kind of highly variable. It depends on whether or not the person works for someone else, or is buying it on their own behalf. Like they’re an independent consultant. I think generally speaking, it could be as little as seven days and as much as 30 days.
Christopher Penn 33:47
So I would take the operand, 30 days, doublet, 60 days, that’s your attribution window for everything. Ideally, if you can break your audience down to that granular level, then yeah, you apply it you have different attribution windows per audience segment, which you can do in Google Analytics, if you can segment your audience with user ID. If not, that’s fine. The worst case scenario is you find the longest reasonable conversion window, you double it. And that’s your attribution window.
Michael Stelzner 34:13
So tell everyone does Facebook and does Google allow us to alter the attribution window? What’s the default? And how do we change it?
Christopher Penn 34:21
So the default attribution window in Google Analytics, the campaign timeout is 30 days which you can extend out to 540 days Facebook, I don’t know I don’t spend a whole lot of time on Facebook,
Michael Stelzner 34:34
nothing to decay and Facebook is much faster, possibly, and maybe we don’t need that kind of a window.
Christopher Penn 34:39
It depends on how you’re using Facebook for if you’re using Facebook, and you’re using a lot of the retargeting features, you could be looking at just as long a window especially for higher, higher risk purchases. I know some higher education institutions have literally multi year windows, right. They’re trying to woo students as they interact. At a high school just develop brand awareness. And then, you know, they know they’re not gonna make a school decision for three years. It depends.
Michael Stelzner 35:08
So, in Google Analytics, where do we go to change the attribution window? Do not
Christopher Penn 35:12
that’s in the property, it’s going to be in settings session and campaign setting timeouts. I’m doing this from memory, because I don’t have it open at the moment. But it’s, it’s in there, it’s in the profit. Got
Michael Stelzner 35:24
it. So what I’m hearing you say is, we should probably double what we think is the typical window, just so that Google Analytics is properly tracking stuff? Is that what I’m hearing you say?
Christopher Penn 35:36
Right? Well, it should be double what your oper and sales cycle is, so that you’re catching the anomalies, you’re catching the outliers on the upper end, because of the attribution, you know, if someone converts in seven days, and you attribution windows 30, oh, no big deal, right? You’ve caught 100% of conversions. But if your attribution window is seven days, and it takes someone nine days, you’ve lost the two days of information that I
Michael Stelzner 36:00
think we may have shortened our attribution windows. So I think that might explain some stuff too, right? Because like, obviously, if the buying cycle is longer than we think, then we ought to make sure we’ve got the attribution window open long enough. That’s really interesting. Yep. So I know, we’ve gotten really techie here, I want to bring it back to the human level. Not that we’re not but you know, off of Google Analytics, and on to the boss, right? So how do we talk to the boss about ROI, those marketers that maybe struggle talking to the boss,
Christopher Penn 36:30
it depends on who the boss is.
Michael Stelzner 36:33
Let’s just take the worst case situation and talk through that.
Christopher Penn 36:36
So the worst case situation is you’re talking to the CFO and the CFO is a financial person. If you do not present ROI in a financially correct manner, you’re going to get your backside handed to you and your budget cut to zero. That’s the worst case scenario.
Michael Stelzner 36:49
So how do we what do we need to present to them so that we can confidently say the work that we’re doing is justifiable?
Christopher Penn 36:57
First things first, you need to understand what is the goal of the company, if the company’s goal is growth like you want, you have to be able to show growth in audience and do not show ROI, show the growth numbers that you’ve put on the board, or, hey, we put 500% more leads in the hopper this quarter than we did last quarter, right. That’s what if your company’s goal is growth, that’s what people want to see. If your company’s goal is efficiency, again, going back to the function of ROI. If your goals company’s goal is financial efficiency, then that’s when you trot out ROI. But more importantly, not only do you try to ROI, you try it out. Here’s how we measured all AI through whatever reporting period you’re in. And here’s the decisions we made along the way to maximize it. We were 14 days into our 90 day campaign and we saw Facebook’s ROI ROI was declining. We stopped Facebook, and we pivoted to YouTube, and we’ve got higher ROI. When you’re talking money to the money people, you want to show that you’ve made the most responsible use of their money possible by focusing on the highest ROI. And that’s how you use this stuff. You show people I did the best that I could with the pile of dollars you gave me Give me some more and let’s see if we can continue to improve this.
Michael Stelzner 38:10
Now let’s take this scenario where you’re talking to a boss who’s not a CFO, not super techie. How would we talk about ROI to that person who might be just more subjective in their decision making?
Christopher Penn 38:20
subjective actually is the worst because in a lot of cases, somebody has a very strong opinion that is not backed up by data. And you may as well just bang your head against the wall. If the boss says I don’t like Facebook, Facebook is the worst. ROC Zuckerberg Mark Zuckerberg black, Vladimir Putin are in charge of Facebook. Okay, cool. So here’s he at that point, you don’t even talk about the channels, you just talk about the results you got like, hey, the the number one question that I like to tell people is this. What are your KPIs? Right, and by the way, reminder, KPI meet is the number that you need to get a bonus for or you get fired for everything else is a metric. What is your boss KPI? What are they going to get fired for? Or what are they gonna?
Michael Stelzner 39:01
Or whether they’re going to get kudos for Right,
Christopher Penn 39:03
exactly what are they going to get there that year. And bonus for it once you know that that tells you what metrics you need to be presenting, because they are being held accountable to a p&l. For example, thing, guess what ROI has to be part of your reporting, because your ROI impacts their p&l on both the profit and the loss side, if they are measured on gross revenue, and nothing else, don’t show ROI show that you boosted the growth, right. And all you need there is the Earned side and maybe return on adspend. So the metrics you choose to present to the boss are should be based on what your boss cares about. And that’s been the truth forever. But when if you were to look at all the major metrics that like a CMO or a VP or or whoever is being measured by the top line numbers, take all the metrics that you know ROI website visitors go and say how can I draw a solid line between this and my boss’s number and if you can’t make it causal relationship. Don’t show it to the boss,
Michael Stelzner 40:03
Chris, tell people what you do and who the ideal people are that you work with.
Christopher Penn 40:09
I am the chief data scientist of Trust Insights, we are a call ourselves a lot of things. But I say we are a marketing data detective agency. If you’ve got a marketing data mystery, we’re gonna come in and help you solve that mystery, whether it’s Google Analytics, attribution, whether it’s building a machine learning model for advanced attribution, whether it’s Hey, what happened last month? Or did we set this thing up correctly, we tackle that for all of our customers, our customers are wildly different. We have a chain of progressive mega churches, as one of our customers, we have a large automotive as another customer, we have a one of the largest retailers on the planet as a customer. And what they all have in common is they know they have data, it kind of going back to where we started, they have the ingredients. In some cases, they have like, brand new Viking stainless steel kitchen, but they can’t cook. So they say can you come in and cook? Can you come in and and show us how to cook? Or can you tell us like, why is this thing not working? Well, because your goal, you’re trying to make his soup and you’ve got a frying pan, this is not going to go well. So the marketing data equivalents of that that’s what we do?
Michael Stelzner 41:19
Where can people find you?
Christopher Penn 41:21
You can find everything you need to know about this at Trust insights.ai.
Michael Stelzner 41:28
And if people want to reach you on the socials, where would you send them?
Christopher Penn 41:31
I’d send to my personal website, Christopher S Pen COMM And I would encourage people, if you get a chance, please do come to Social Media Marketing World. I’m going to be talking about social media ROI at the show. But I try as much as I can to be there for the entire conference. So if I’ve said something that is of interest to you, and you’re going to be there anyway, come up and say hi.
Michael Stelzner 41:51
Awesome. Chris, thank you so much for sharing your insights and wisdom and demystifying a lot of the ROI stuff if you will, for me and
Christopher Penn 42:00
our audience if I demystified it or made it worse.
Michael Stelzner 42:03
Thank you again.
Unknown Speaker 42:05
Michael Stelzner 42:06
Hey, don’t forget to get your tickets to Social Media Marketing World get a chance to hang out with Christopher Penn me and so many others. Simply visit Social Media Marketing World dot info, and if you cannot travel, get your virtual ticket. If anything was mentioned in today’s episode, and you didn’t grab it, we took all the notes, social media examiner.com slash 390 new this podcast, hit the subscribe button. This brings us to the end of another episode of the social media marketing podcast. I’m your host, Michael stelzner. I’ll be back with you next week. I hope you make the best out of your day. And MAE social media continue to change your world.
Unknown Speaker 42:47
The Social Media Marketing Podcast is a production of Social Media Examiner
You might also enjoy:
- The Biggest Mistake in Marketing Data
- Understand the Meaning of Metrics
- How I Think About NFTs
- Is Social Listening Useful?
- How To Start Your Public Speaking Career
Want to read more like this from Christopher Penn? Get updates here:
Get your copy of AI For Marketers