Marketing Productivity Metrics-Idiot Theory
We all have acknowledged the importance of brand awareness as a road to successful customer acquisition. Marketing is no longer art — it’s a science. Measuring performance against key metrics has become an essential aspect of every marketer’s life. Metrics such as awareness and advocacy have an inherent weakness, they focus more on the outcome than the process of reaching the goal. Usually, brand and service managers get confused as to why their scores go up or down. Usually, results changes aren’t followed up by any marketing intervention. Both managers do not communicate with each other about the data and carry out their analysis. Due to organizational commerce, companies often fail to see any correlation between awareness and advocacy. Let me share metrics or measures that will help marketers to drive customers successfully from awareness of the product to sales(act) and finally to advocate about the product.
PAR and BAR
There are many metrics like Search Engine Conversion Ratio, Social Media Engagement Score, Visitor Conversion Ratio for the website, Social Media ROI, ROE, CPA, CPM, CPC, the bounce rate for emails, unsubscribe rates, and the list goes on.
In line with the five ‘A’s, the most important component to the success of any business:
- Purchase Action Ratio (PAR)
- Brand Advocacy Ratio (BAR)
PAR measures how good companies “convert” people who are aware of them into purchase action. BAR measures how good companies “convert” people who are aware of the brand into loyal advocates.
Purchase Action: Calculated as the number or percentage of people in the market who purchase from the brand.
Spontaneous Awareness: Calculated as the number or percentage of people in the market who spontaneously recall the brand when a particular category
Spontaneous Advocacy: Calculated as the number or percentage of people in the market who spontaneously recommended the brand to others.
In 2014, we took a sample size of 10,000 customers of Idiot Theory. We saw a brand recall of 92.4%(9240), out of which we saw 2342 people were repeat customers and 1056 advocated Idiot Theory to their friends, family, and colleagues. That means the BAR for Idiot Theory was 0.11 or 1056/9240. Idiot Theory sales might look promising to many people, but they looked rather poor as we weren’t able to convince 7658 customers to make their second purchase sooner. We looked into the data and ran a few algorithms to understand the buying patterns, customer response, and demographics. We ran a few algorithms like ANOVA and Linear regression to understand why 75% of the customers didn't make a second purchase. Idiot Theory being a premium brand was always focused on selling conceptual products that weren’t found in the world market. On one hand, we could measure the productivity of the spending, particularly to generate brand awareness, on the other hand, we were worried about low-performing areas due to the product catering to a niche audience.
We looked into the KPI again and changed the marketing campaign to address the new and existing users about the new collection ‘Chaiwala’, which was a talking point in India in 2014, thanks to our Prime Minister Mr Narendra Modi. Though the collection was planned for a later release, it was preponed by a few months to capture the market sentiment. Idiot Theory sales jumped 3 times in the next 3 quarters. Brand awareness and advocacy saw a substantial rise in the next financial year. Thus we can consider brand awareness a proxy for marketing investment. PAR and BAR are indeed better measurements for the return on marketing investment(ROMI).
Decomposing PAR and BAR
After drawing insights from the previous example, we should break PAR and BAR into their elements. In a DuPont analysis, ROE has been seen as a product of three major parts; profitability(as measured by Chaiwala collections profit margin), asset use efficiency(as measured by collection turnover), and financial leverage(as measured by brand equity multiplier). While comparing brands, higher profitability, more efficient asset, and higher leverage stems from higher ROE. Higher profitability and a more efficient asset are key to better ROE. Better ROE due to higher leverage needs to be examined carefully to determine whether the company is over-leverage or under-leveraged.
Breaking PAR and BAR can give additional insights that assist us in understanding better when some data may be missing. Other formulas may be,
Low conversion rate
A low conversion rate from the appeal to ask is a sign of low curiosity for any brand. That means customers do feel that is worthy researching about it deeper. This usually happens when a company fails to have a conversation or create content that would communicate with them.
A low conversion rate from ask to act for a brand indicates low commitment. That usually happens when people talk about your product without making a purchase, which means the company has failed to convert confirmed cases into sales. It might have happened due to the marketing mix(four P’s -product, price, place, promotion) flaw, which has led to low conversion.
A low conversion rate from act to advocate for a brand indicates low propinquity. That is one of the biggest worries for any brand, the customer has made the purchase but due to lack in quality, design, tech, or price, they don't advocate the product/brand to anyone or do negative publicity. If the ratio of the act to advocate increases then the brand should do a survey and go back to the drawing board and improve the product to increase the propinquity level.
If you try to break down the elements, PAR and BAR scores reflect the process rather than just the outcome. Building a loyal customer base is a long process of design, appeal, curiosity, commitment and finally building propinquity.
With BAR, showing the outcome, the ideal BAR score is 1. The goal is to go through the entire 5 A’s without dropping out.
A lower conversion rate across the 5 A’s int reveals a bottleneck. A bottleneck will reduce the productivity of the entire customer path, and determine the touchpoints that need improvement. Altering the bottleneck will improve PAR and BAR.
In the real world, a perfect BAR score of 1 rarely occurs. Most of the time the few customers always drop out and don’t complete the entire five A’s.
Trending GoBeyond.ai articles:
1. Best Practices for Managing E-Commerce Customer Service
2. The Coming Disruption to E-Commerce Search
3. 21 of the Best Competitor Analysis Tools to Increase Website Traffic
Driving Up Productivity
One way to attain a more loyal advocate is by improving awareness. The digital medium is one of the best ways to increase awareness at a minimal cost. Connectivity through the various online channel will trigger the conversation and communicate about the product that many might not have heard of. Idiot Theory while launching their new collection asked the influencers to create content about the product that would, in turn, create conversation among their followers. Research tells people tends to trust strangers or influencers about the feature of the product rather than the brand itself. Influencers are thought leaders, industry experts, celebrities, and others with large followings within the digital environment.
Online content is something that cannot be controlled by anyone. The same goes for how we cannot control the sentiments that are being posted on social media pages, we don’t practice deleting negative comments or harsh feedback since it’s rude to the customers, we usually address them privately as much as possible. We would try to settle things in a private chat room and finally request them to give the brand a testimonial on how their problem was resolved swiftly.
Building customer conversations around brands has its benefits. It allows companies to reduce their marketing cost and increase their marketing productivity. But companies cannot rely on customer conversation. Every now and then they have to run an advertising campaign to avoid the risk of creating content that would turn west and try to influence the conversation from outside. An alternative way to create loyal advocates is to improve PAR and BAR scores by improving the critical touchpoints of the customer path from awareness to advocacy.
Increase Attraction
If most people are aware of your brand but do not find it appealing then the brand has an attraction problem. Brand awareness is directly relevant to the strategies you use to build and grow that awareness, as well as how you can assess and adjust your campaign. Building and growing a brand requires an inclusive and comprehensive strategy, built for the modern marketing landscape.
So what makes your brand appealing in this digital age, where customers are surrounded by technology-based interaction. The brands that are humanized become more appealing. Customers are increasingly looking for a brand with whom they can connect at a human level. So when Idiot Theory was creating their brand communication, they made sure they connect with a particular set of audiences whose opinions mattered but were not heard. The tagline of the brand was;
‘Everyone is an idiot. And idiots have their own theory!”
Idiot Theory brand voice made people feel connected, cool, and calm; it talks like a best friend, a person with an opinion(good and bad) that are heard by the brand and create product accordingly; it is warm and welcoming; it treats its customers like a family member(Idiot Family). It has an on-the-go attitude; it is ready to accept customers anytime, 24 hours a day, 7 days a week.
It is expressive of individuality and encourages simplicity and freedom. You cannot go alone in the brand-building process, nor should you feel that you are required to do so. There are others out there who can help increase your reach. By leveraging influencers and other brands to build creative partnerships, your reach is multiplied many times over.
Optimize Curiosity
Curiosity is the desire to learn, and understand new things, and know how they work. If I describe it in marketing or product terms, it would be deprivation that comes from a gap in information about the product.
Curiosity comes from laying out information without giving out too much. In this digital age, most of the company drive success by creating good content. Idiot Theory made content that connected with the common man and art enthusiasts.
It ain’t always necessary to show the product to generate brand awareness, engaging, and informative content talking about the concept can enhance a lot of curiosity. A brand can create content on social media, blogs, press releases, videos, etc. plays a vital role, it has to be engaging, creative, and short. Make sure that the content isn’t misleading. All the content will direct you to the brand website or product, it has to be searchable and shareable.
Increase Commitment
Increasing customer commitment requires Omni-channel marketing, which provides an integrated online/offline experience for the customers regardless of touch points. It involves a website, a retail store, a mobile application, and a presence in other e-commerce portals. Usually, customers aren’t channel-agnostic, they don’t think in terms of channel, they would appreciate a seamless experience in all the channels and appreciate answering customer requests and inquiries.
When we started the online e-commerce business, the cost per acquisition was around Rs. 80 for Rs. 400 t-shirt and Rs. 900 for Rs. 5000 jackets. After 6 months of understanding the customers and the keywords that worked well for the brand, we could reduce the CPA by 42% approximately. As our brick-and-mortar business was contributing to about 73% of the total business, online sales were slowly growing. We saw customers started to have a higher commitment when we combined both the silo, so we decided to combine the marketing budget for both silos to optimize the spending with a unified goal of providing the best customer experience.
Increase in Affinity
As brands are humanizing, customer engagement is indeed becoming an important factor post-purchase to create positive advocacy. Idiot theory was well known for delivering a handwritten note to the customer with every purchase they made. Once the customer had an issue with the shorts, we got it picked up by a local tailor to get it fixed and followed up till the customer was happy. We then surprised the customer by sending a t-shirt that would look good with that shorts. The customer was so happy with the customer service and product designs that she gave us an order for 200 bean bags the simultaneous next week. The objective is to gain the trust of the customer which will help in good advocacy and repeated business.
In essence, PAR and BAR allow marketers to measure the productivity of marketing activities.
Marketing is telling the world you’re a rock star. Content Marketing is showing the world you are one.
Don’t forget to give us your 👏 !
