Why the hype over web analytics?

Estimated read time: 4min.

What’s in it for you: see the importance of web analytics in a simple way.

Before going into why web analytics is important, I want to walk through a simple business that we can all relate to: selling lemonade at a lemonade stand. Lets use the 4Ps of marketing. Old school style.

Product -> Solution. Lemonade will quench the thirst on those hot summer days.

Price -> Value. Gotta price that lemonade right.

Placement ->Access. Where’s the best place to setup shop?

Promotion ->Info. What’s the deal and why is buying your lemonade now a must.

4 Ps. Check. Let’s Do This!

You set up your stand, get the sign up, the table in place, lemonade chilled, etc. You’re gonna make out like a bandit with all the quarters coming in! But wait. You see your arch enemy Jean Girard setting up shop down the street. If your lemonade stand is going to beat out your arch enemy Jean Girard’s lemonade stand across the street, you best get your A-game on. It’s on like Donkey Kong.

Gotta be in the right spot at the right time that gets high traffic, good customers, and deliver the right message to drive that person to drop the big $0.25 on a cup of your hand squeezed lemonade.

You look down the street and Jean’s killing it. For whatever reason, it seems like customers just keep on coming to his stand and you’re barely getting any customers. What do you do? Does your sign suck? Can people read it? Is the pricing way off? Is the offer not a good value? Are you in the wrong spot? Is he selling crepes?

If you’re a driven individual and savvy enough, you’ll tackle those questions.  First you might sneak over and check out what Jean’s doing. How’s he pricing his lemonade? Does he have a BOGO deal? The cups bigger? His spot easier for cars to pull over and buy? So many things to think about.

So one by one, you’ll start to make the changes. Make a new sign. Haul your shop to a different spot. Change your pricing. Hopefully all the hard work pays off and you start to reap the rewards!

Hopefully you can relate to the this scenario.

Now let’s think about this for an online business. The basic concept remains the same with the lemonade stand. The differences are that it’s online and you can make changes FASTER & MORE ACCURATELY. Unlike the pain-staking effort of moving your lemonade stand all around the neighborhood, making new signs, changing prices on the sign, etc, technically online… you can make changes almost instantly.

What do I mean by more accurately? Unlike the lemonade stand where you’ll reach a point after a few places that it’s just too much work, you’ll be able to adjust where your online ads are being displayed, how they are being displayed, which images to put on your landing page, etc, very quickly.

Traditional marketing is OLD SCHOOL.. or more like not being able to track your marketing efforts is old school.

@avinashkaushik recently tweeted this out. “$60 billion of ad spend on 300+ US channels is decided based on viewing habits of just 5000 US households.”  Not sure where he got the $60 billion… but lets say it’s close or even half.

Wow!  That is a whole lot of generalizing and assuming to be dropping so much money on. To me, that’s like saying out of the $15 dollars I have to invest in my lemonade stand, I’m going to spend $12 on a nicely laminated sign that is permanent. What if you’re value proposition isn’t good? Your sign is targeting the wrong people. That would be a disaster. Mike Honcho is going to eat up all your business!

The web supplies us TONS of data and by utilizing the right tools and analyzing correctly, you’ll be able to create that ultimate lemonade stand. You can see how many visitors came to your site on which days, which hours of the day, from where, how long they looked around, which promotions are out performing others and where, etc. So much knowledge you can gain.

That’s like being able to have like 10 different signs that can instantly be changed out, be able to transport your lemonade stand instantly to various locations in your neighborhood, keep an accurate tab of where the most foot traffic is at what part of the day, etc.

Knowledge + Speed + Strategy = Power. These days, the ‘knowledge is power’ thing doesn’t sit well with me. I’ve seen too many companies sit on data and not take any actions or took too long to take actions because the strategy was not in place.

If you go to Overstock.com and look at a few watches, there’s a good chance when you’re on another site after leaving Overstock.com which happens to be serving up ads, the Overstock ad will have those exact watches you were looking at in the ad. That’s creepy… yet effective.  It catches my attention every time. This is an example of how online marketing has evolved since the days of the lemonade stand.

With the ability to retarget ads or change the user experience on a site depending on who the user is makes stuff like TV ads or newspaper ads start to look silly in how ‘un-targeted/smart’ they are.

Especially with the recent recession, companies need to spend the marketing dollars more wisely. This is why companies are shifting more of their offline dollars to online. Because it’s that much better and effective? Maybe… maybe not. More importantly, online allows for a much more comprehensive level of understanding of how effective the marketing efforts are. If you’re a CMO and you want to keep your job, you better prove the marketing budget you are spending is resulting in positive ROI.

So why the hype over web analytics? Knowledge + Speed. Hopefully you’ll have the strategy part. Then you’ll have POWER.

Recommendation: if you’re interested in learning more about web analytics, I HIGHLY suggest reading the books by Avinash in my ‘Recommended Readings’ to the right. Especially the Web 2.0. Awesome read.

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