Tuesday, 28 February 2012

4 Approaches to Estimate Cost for Multi-Channel in Google Analytics

4 Approaches to Estimate Cost for Multi-Channel in Google Analytics

In last post we have explored how to leverage the Assisted Conversion Reports in Google Analytics for advanced analysis based on ROI. Special thank to Shailendra Dubey in pointing out a missing puzzle in that article, which is, before calculating the Return On Investment, we have to know the Total Cost Spent on each of them. So let's have a quick post to discuss about my practice in estimating the cost of different channels.

In general, we have 4 approaches to deal with the costing problem....

1. On-demand Costing Estimation

The most convenient one among all five of estimations. As most of the Paid Media, particularly those facebook advertisement and google adwords, would help you to keep track on how much you have actually spent in total on either Channel, Campaign, AdGroup and even Keywords level. Other paid advertising services like edm (both promotional or retentional) and sms are also charged based on how many you have sent, so these costing could be easily calculated even in a daily basis.

Suitable for cpc-based ad., including banner ad., facebook ad., Adwords, Covario, and even edm (email marketing)

2. Agency-oriented Costing Estimation

How about we have out-sourced the advertisement? Leveraging agencies for short-term contract or extra talents is always one of the approaches within the marketing industry. Especially in Hong Kong we have a lot of one-stop service providers, who helps companies to strategize their digital present. One typical our-sourcing services is Copy-writing on online communities, a.k.a. "Seeding" or "Buzzing" in some places. Agency of these will help you to "spread the good words" across different media, and they will usually charge you based on either how many content they've created or pageviews achieved. Regardless whether this act is ethical and legal (some countries do ban this practice), just like other agencies, the performance report would usually be "aggregated". So make sure you ask them to break down the details, say the amount of KPI that they've achieved, in channel, domain and campaign level, and then based on the ratio of KPI each item has contributed to estimate the individual cost.

Suitable for: any out-sourcing projects, like strategic media-buy, and viral copy-writing (external network), etc.

3. Labor Costing Estimation

Some company treasured their owned media, so they usually delegate a team to handle on the marketing efforts across those media. This is usually found under the social media era, like Starbucks, they've a team to support all social channels including Twitter and Facebook and even their innovative community, My Startbucks Idea. But hey we have a team to support all channels, how could we break it down? Easy, ask the team manger to count the man-hour of how her team that spent on each channel, and again divide the total team spending by the man-hours and bingo, another cost estimated!

Bonus Tips: remember the Assisted ROI that we have demonstrated last time? Indeed, traditionally in-house marketing, especially the recently up-rising social media team, has been treated as a Cost Center because of failing in driving Direct Revenue. With the cost and the Assisted ROI model, the social media team manager could now easily present to the board room that how good they are helping the business. Tell them this fact, those managers would be very happy to calculate all these for you ! (as a hero like you finally help them to become a (Indirect) Revenue Driver!)

Suitable for: in-house marketing/PR teams, particular social media, company blogs, and even online customer service (Indeed !!! Retention is part of the sales cycle !!!)

4. Maintenance Costing Estimation

You may start wondering, how could we estimate costing for traffic like Organic or Direct one? You won't believe this as this one is the easiest to get. Personally i consider organic and direct are the contextual effort that your site is performing, so the possible source of cost would definitely go to the "maintenance cost" - all the cost that keep your site running. Thus this includes the cost in terms of server infrastructure and hosting, Content Management cost (labor cost!),  and possible SEO cost (for organic traffics, but usually goes with content management). One could also take the initial site development cost into account, by considering "how long the site would depreciating its value to zero", i.e. if you design a website for $3,600 and would properly do a complete revamp after 18 months, then the site itself will be depreciating at a rate of $200 per month, which will be one of the basic costs of your site.

Suitable for: you website (direct and organic traffics). :)

[Bonus] Nearest-Substitutes Costing Estimation

Will there be some channels or items we could not even get the actual costing at all? Yes, all those from Earned Media. Let says you a restaurant owner, and because of your hard work, excellent service and delicious and quality dinning earn you a customer review on Yelp. Now that positive review keep bringing traffics to your website, and some visitors do converted (assisted or directly), so how could we estimate the cost of this? Shouldn't it be zero? (but then it will make the ROI equals to infinity!)

No. Think this way: you have spent time on training your waiters, spending time on decorating details, and interviewed for months just to get the best chef in town - all these investment are what makes you Earn those conversion! Now think the opposite, what if you don't invest in the best chef but just someone in town, no training to waiters just blind management, and you just enjoying your interior design since day one? Will these still earn you a positive review? If your answer is negative, then the difference between them is the cost of that continuous traffic.

One could also think about the monthly cost that require to maintain the restaurant standard and divide that by total customer served that month, this also reflect the costs of that channel or item.

In economic terms, we call this Opportunity Cost. :)

Suitable for: anything that's not working previously. :P

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So that is for the Costing estimation. Personally i think that there's no absolute answer in determining actual costing for Multi-Channels, particularly because we are now facing a very complex conversion funnel. While cost estimations like the above approaches might not provide us an accurate picture on the business, but they do allow us to take a step forward and let us consider things like Assisted ROI for Multi-Channel Analysis using Google Analytics, not to mention this turns some units in cost center into revenue drivers... :)

Now it's your turn. Do you think that the above cost estimations are sufficient? Or you have a better approach to deal with this paradox? Do share with us in the comment !! (A good one would even featured on coming posts !!)

And don't forget to us and  subscribe us if you enjoy this post !

See you next time,

Posts you may also interested in:
Advanced Multi-Channel Funnel Analysis using Google Analytics 
6 Steps to Crack a Complex Business Report into Actionable Infographics 
16 Pinterest-Clones in China (and More's Coming) !!

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