In programmatic advertising, learning algorithms are the engines that power a campaign, while key performance indicators (KPIs) act as rudders, keeping campaigns on the right course.
However, the faster you're going, the more important it is to make sure you're pointed in the right direction.
How do you determine the right direction?
First, think about how your company makes money. If you're in the insurance business, your company makes money by writing insurance policies and cross-selling other policies.
The most valuable customer is one who buys a lot of policies but almost never files claims. Thus, it would make sense for companies to focus solely on this type of customer. Yet, many companies are still working with pre-programmatic KPIs, hoping to get the maximum number of leads at the lowest price.
But not all leads are the same. Thousands of leads that generate little to no revenue are not the same as 100 leads that are worth $1 million each.
A smart algorithm can quickly weed out a huge number of unqualified leads, allowing the company to quickly find the truly worthwhile ones. Pre-programmatic KPIs can't.
Are your campaigns suffering from pre-programmatic KPIs?
A lot of KPIs are based on traditional segment buying, which is like dragging a big fishing net behind a boat and catching whatever you can. Programmatic is like having a million super-intelligent hooks that can zero in on the most desirable fish in real time.
Here are seven keys to setting smart programmatic-era KPIs:
1. Identify how your business makes money. Smart advertising is all about generating incremental revenue that you would not have gotten without it. Reaching people who were going to convert anyway is a waste of money.
2. Get very specific about what kinds of customers you want and do not want. Over time, a machine-learning approach delivers far more of the customers you want and far fewer of the ones you don't.
3. Remember that cheap is not a synonym for "efficient." Don't mistake the lowest CPM for efficiency -- and don't get too excited about getting the lowest possible cost-per-acquisition either. These are often easy levers to move, but success is not about moving levers -- it's about driving outcomes. You will be far better off spending more for highly qualified leads than spending less for lots of marginal ones. That said, sometimes leads are the wrong KPI entirely. A better KPI might be "signed policies from high-value customers." What good is even the most high-quality lead if it never turns into revenue?
4. Get really good at understanding what you can measure well today and know how accurate your attribution partners are. The more refined your sense of fractionality, the better. For example, if you show a prospect a video and three Facebook ads, you need to really understand the incremental value of each.
5. Make sure you are properly tying attribution to actual business impact. The better you get at doing this, the more effective you will be at driving the most valuable customers into the sales funnel. The most sophisticated -- and most successful -- brands know the business value (shopping cart, revenue over time, lifetime value, etc.) in detail and very close to real time.
6. Connect silos. Find the people in your organization who best understand predictive lifetime value and also the people who have the analytics and technical chops to tie that information back to an individual prospect in all types of media. These people are rarely in the same department, and often do not know each other. Getting these functions working together is a powerful combination.
7. Make sure that whoever is buying your media is intimately connected to what really drives incremental business results. If you give your agency a pre-programmatic KPI and it doesn't deliver results, it's not the agency's fault. You were optimizing to the wrong goals. Make sure your agency has the right KPIs and the right incentives. You get the results you're set up for, so you might as well set yourself up for success.
If you're not satisfied with the results you're getting from programmatic, take a hard look at your KPIs and consider whether or not you are optimizing for the right things. Aligning your KPIs more precisely with where you want to go will make a huge impact on your business.