Occam’s Razor by Avinash Kaushik

EricB’s recent post on his excellent blog Inside Analytics was on the topic of Analytics and Results. It covered two things (Eric correct me if I misstate anything):

1) Concern in the blogosphere and elsewhere around potential for misuse by Google of data they have from AdWords and Google Analytics and

2) Need for defining a new industry standard for measuring “conversions” or “actions”.

I started to write a comment on his post around the first point but it got so long that I thought it might be better off as a blog post.

Context and “Back Story”:

There seems to be some concern in the industry, newspapers and blogs around the potential for “mischief” by Google if you do Pay Per Click (PPC) campaigns as well as use Google Analytics to report on that data. The core premise being that since Google will have access to both your ad spend and return on that ad spend (hence value) they can manipulate the market to make more money (because they know how much you  are making from that 50 cent ad click). Or variations of this theme.

Exploring an Alternative Point of View:

The concern is coming from different quarters, from Google’s current competitors, from Google’s perceived future competitors, from general folks who seem to be genuinely worried. 

If Google wants to be profitable and they have access to your spend and, say for ecommerce,“order size”, it is a simple small step to go manipulate market / customers to make even more revenue from Search Engine Marketing (SEM) campaigns. Is it genuine? Are there any flaws in the thinking behind the opinions?

There are some significantly smarter people talking up these concerns surrounding Google AdWords and Google Analytics, but I am a bit mystified that some obvious points have been overlooked. At the expense of sounding naive here are three thoughts for you to critique (in no apparent order):

1) The mountain is very high (and is it really worth it?) :

Most of you who read this blog, and I, actually work with Analytics tools and I think we can safely say that this is a non-trivial challenge to overcome even when we use dedicated analytics tools and just for one company. Think integration of WebTrends and Omniture and ClickTracks etc with our PPC data and getting even half decent insights fast enough. It is really complicated, no matter how you look at it.

If we can’t even do it well for one company, ours, for Google to do it for the rest of the world and all the different business models and acquisition strategies is a non-trivial challenge.  Even though there are examples of extremely efficient arbitrage, specifically in the foreign currency markets, I am skeptical that it is “easy” for Google to find “insights” and do so in a timely manner to over charge us and do so while balancing that against real ROI Google would get for itself.

Now I’ll admit that if Google’s new mantra is “Only Do Evil“, they most definitely have the brightest collection of people to actually pull this off. But with all the eyes and hard core scrutiny on Google how would this story look on the front page of New York Times, and what would be the impact on the company’s future?

2) Single acquisition channel vs a world of many :

All the concerns raised assume that Google is going to be the only acquisition strategy option for all companies out there. This is far from certain. PPC is important but for most Fortune 1000 companies it is hardly all their spending.  In as much PPC competes against all other acquisition strategies that we have at our disposal (direct marketing, email, affiliates, SEO, bill boards, crazy tv ads etc etc).

If I run a business and suddenly I see that Google PPC is not as cost effective for me as an acquisition channel,  we will pour money into other channels that get us better ROI. 

The Internet is beautiful and in the past switching acquisition strategies was complex, expensive and hard to pull quickly, now it takes me 10 minutes to switch strategies (don’t ya love the web!).

3) “Efficient Markets” and helping oneself vs customers :

I believe in efficient markets and the power of markets to constantly find optimal ways for companies to reach customers.

Google is not a monopoly, it is not the only option out there, there are larger companies out there trying to compete with Google (though some are in a process of getting their act together :) and Google will have to compete with all of them to be a part of my acquisition strategy.

If they change their mantra to Only Do Evil and they mobilize 5,000 PhD’s to build artificial intelligence algorithms to mine my goal page data in Google Analytics to charge me more via AdWords , I’ll simply shift to Yahoo! or MSN or a company that I don’t know about today but is sure to come along.

Google is not omnipresent and it can’t rest on its laurels or bank its existence on a strategy to “rip off” its customers (us). To stay in business for a long time (and at $380 per share for stock) they are going to have to compete for my marketing dollars with all other options I have. For that to happen their strategy will not be “how to make the most amount of money From Avinash” but rather “how to make the most amount of money For Avinash at the lowest cost for him”. That will separate them from competitors, that is the difference, for any company, between a short-term strategy and a long term strategy.

A metaphor:

I recently gave a speech at Google at the nice Googleplex in Mountain View in Building 40. The reason I am being specific about it is because I spent almost four and half years working in those exact buildings when they were owned by SGI (Silicon Graphics Inc). 

When I joined SGI nine odd years ago there was a Business Week front page cover titled “coolest technology company on earth” (I am paraphrasing). Today SGI is almost bankrupt (and it truly breaks my heart because I loved that company).

As I walked in B40 for my Google speech it struck me that there could be a story in Business Week today with the exact same title and it would rightly apply to Google and they are in the exact same building.

If Google wants to avoid the fate of SGI (and it took SGI less than three years to go from the “coolest company” magazine cover to start layoffs), it has got to constantly keep innovating, stay relevant, fight in a dog eat dog world and most importantly maintain 1) a persistent focus on having the best damn customer experience for all that Google offers, search and beyond, and 2) be the best, and most competitive ROI, customer acquisition channel for companies.

The fastest way to a SGI like fate is to do the kinds of things the GA + AdWords concerns suggest, and I think Google is smarter than that.

Small but important point: 

Does this mean you should use Google Analytics? That you should link GA with AdWords? Or that you should not? All these are questions that you’ll answer for yourself and do what makes best sense for your individual company.

Full Disclosure :

• I think Google is a very innovative company and I have a favorable opinion of the company
  
• I know three people who work at Google, I think they are nice (this could cloud my judgment)
  
• I have given a speech at Google and they gave me a free drink (Odwalla Mango Tango)
  
• I have absolutely positively no insights into Google’s strategy and I have no inside information into Google Analytics or AdWords

So what do you think? Is this a very naive view of the world? Do you think Google can “crush” all competition and become the “king of the world” forever? Is there something obvious that I should have considered that I am missing? Please share your feedback via comments (and I have a thick skin so please be as brutal as you have to be).

(Eric I am sure you’ll agree this was a really long comment on your post! Thanks for posting something that stretched the brain. : )).

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PS: Hello from the beautiful and historic Hotel Del Coronado in Coronado, California. Stock photo below.

How many metrics can you call adorable?  Site abandonment rate is an adorable metric, to me : ), for these reasons:

• Money, money, money baby. IMHO there isn’t a metric out there that can tell you a lot so quickly and any improvement you make to it will directly and immediately impact the bottom-line.
• It measures the customer interaction in a very small number of web pages, probably one for cart and two to three for checkout. How many metrics out there can compete with that? Few pages, awesome optimization potential.
• Win-Win: By the time visitors fall into the influence of this metric they want to give you cash and you want that cash. How could that not be simply the best thing in the world?

Inspite of its absolutely adorable qualities it is surprising that this metric does not get as much prominence as, say, conversion rate (stop obsessing post, best practices post). People simply don’t seem to walk around with Abandonment Rate on top of their dashboards and consultants don’t center their pitches around helping improve this metric. My hypothesis is that

1. we don’t understand the true power of this metric 
2. we don’t think we can improve the four odd pages that this metric covers 
3. there is some confusion around around a standard metric definition and that does not help 
4. usually this number is really “high” (YMMV) and we are embarrassed to put it in front of senior management
5. there is no hype around this metric (hopefully this blog post will fix that! : ))

(While it is absolutely possible to apply this metric to a lead capture process, or other websites processes, for reasons of absolute clarity and maximum impact this post will focus purely on the metric in the ecommerce world.)

Metric Definition:

Site Abandonment Rate (in percent terms) = [1 – (the total orders placed on the website divided by total add to cart clicks)].

In english it is the number of people who intended to buy, by clicking on the add to cart button, to those who actually made it out at the other end, by clicking submit order. If on your website people purchase multiple items in the same session, trends of this metric will accommodate that behavior just fine.

The process that this metric measures on most websites is: click -> add to cart -> click -> start checkout -> create account (or login) -> click -> provide credit card -> click -> review order -> click -> submit order. Hence at its highest level the metric helps you understand how much money is left on the table by your customers.

I recommend this definition of the metric because few people measure the process described above end to end and if we measure it in silos (explained below) we tend to solve in those silos (cart and checkout). That is a problem because the most impactful solutions for improving this metric lie in end to end thinking.

There are no standards for Site Abandonment Rate that I am aware of (if you are please post in comments) but the range most brandished around is that the metric is usually between 50 to 70% abandonment. In my personal experience at different companies I have seen it between 25 to 55%. That should give you some range to think about.

Depending on the cost of items you sell on your website each percent point of abandonment could represent tens of thousands to millions of dollars per month in revenue. Hence my recommendation to have a almost irrational adoration of this metric.

Next Level Segmentation Recommendations:

Once you measure Site Abandonment Rate and know where you fall then it is time to segment. Two logical first level segmentations:

Cart Abandonment Rate (in percent terms) = [1 – (the total number of people who start checkout divided by the total number of add to cart clicks)].

In english this is the number of people who were motivated enough by your spiel to make a initial commitment to buy from you. They could do this for any number of reasons (saving the item for easy access, check shipping etc) but it is still a deeper interest than “browsing”.

In the context of your Site Abandonment Rate the Cart Abandonment Rate is very helpful because it will immediately isolate where most of the departures are occurring. Usually this should explain most of your Site Abandonment Rate because of the “relationship” with the visitor is fragile until this point (it is stronger than the “browsers” but still a bit fragile).

Checkout Abandonment Rate (in percent terms) = [1 – (the total number of people who complete checkout divided by the total number of people who start checkout)].

In english this is the number of people who decided to bail at the very last step of a very complex and complicated journey that is the purchasing process.

I have gone out on a limb in the past and have said that this number should be zero percent simply because there is no excuse for your website experience failing to deliver at this most critical of stages. Of course the number will never be zero but should be really close to it, after all can’t we all optimize the three odd pages that make a normal checkout experience to make it a flawless experience?

In context of your Site Abandonment Rate the Checkout Abandonment Rate will be a smaller number than Cart Abandonment, simply because if people make it this far they tend to get through (Important: YMMV).

So now you know your Site Abandonment. You have taken time to understand the distribution of departures between the cart and checkout processes. And sadly it turns our that your site is performing very sub-optimally!! Just kidding. : )

What could you do next?

Some suggestions on moving from simply reporting metrics to finding actionable insights, and taking action: 

• Segment the Abandonment Rates to really understand where your pain points are. As is always the case you are looking for anomalies in the data and differences in the Abandonment Rate for different segments and causes for those differences. This can be great source of actionable insights. Segmentation examples would include:
• By “campaigns” (this would include PPC, Pay Per Click, / SEM, Search Engine Marketing, and direct marketing and other campaigns you run)
• By Referring URLS (who is sending you traffic that might abandon at higher or lower rates)
• By Products (this is not obvious but you’ll find large differences in rates for different product, or product groups you sell)
• Love Multivariate Testing: Both the cart and checkout are absolutely perfect for multivariate testing. They are usually “page level” experiences and hence lend themselves to multivariate testing very well. Use your favorite vendor tool to first “modularize” the page then create variations of content for each module and then let the “recipe creation” process create different versions of the page, go relax for a day (or more depending on how much traffic you get) and identify what page works best for your customers.

  Remember there are hundreds of thousands of dollars at stake here so please give this testing process some love and a lot of attention.

• Challenge Fundamental Beliefs: If your Abandonment Rates are really terrible, step back to challenge some fundamental beliefs at your company. You can test these to prove if they move the right levers for your customers. These would be different for each company but some general guidance on what this could be:
• If you have “interruptives” in the process (buy this also please or upgrade for $5 etc), try to remove them and see what happens.
• If you don’t offer anonymous checkout, offer anonymous checkout. If you don’t offer an option to sign up for an account, offer that option.
• If you have a painful long checkout data input page, see what happens when you don’t insist on asking people to tell you the color of their eyes or some other expendable information.

Two minor best practice tips:

Think of these as things that have either been sore points for me personally or surprises that something so simple is so often overlooked, you can choose the reason you like best : ). 

• Investigate if there are simple things people are looking, information that is only in the cart or checkout process that could “falsely” get people into that process. Two examples:
• Shipping Costs: If people just want to know what the shipping cost make it easier for people to find shipping than having to go to checkout or add to cart. Not only will this reduce abandonment, and give you your real abandonment rate, but it also sucks for your customers that you make this painful.
• Delivery Schedule: How long will it take me to get the product? Do you have it in stock? Let’s not wait until the end to share this nice information.
• Check that your website is carrying through promotions correctly and reiterates in the cart and checkout process (in bold gigantic letters) the discounts that your customer was promised in the offer or on your affiliate site or your product pages or in your campaigns. It is amazing how many websites don’t do this simple thing well.

I hope you are convinced of the potential of this really simple metric to add to your personal pocketbook, and that of your company. It is really rare to get a metric that focuses on such a small part of the website experience yet holds so much power to help our customers as well as us.

Agree? Disagree? Did I miss something above? Have a tip to share that worked for your company? Please share your feedback via comments.

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Some of us have had opportunities to pitch our companies or services to clients. Almost all of us have had opportunities to sit through sales pitches from vendors and consultants. I have had the privilege of attending atleast 75 vendor or consultant presentations. It is amazing how often they turn out to be sad cases of hara kari.

Since very few vendors actually ask for feedback after their presentation, fewer still actually get anything even if they ask, here is my humble feedback on what to do right, or more precisely what not to do, in order to win that next big contract. If you think this is of any value to you I will accept tchotchkes in exchange. : )

[While it might not seem like it by the time you are done reading it, and you are a vendor / agency / consultant, this does come from a place of love – I want to give helpful feedback. While it might seem such experiences are an anomaly, they are not. While this might seem hard, I am sure you’ll agree large $$$ are worth an extra amount of effort.]

# 9 Manage your time efficiently: It probably took you a lot of persuasion to get into the building and make the pitch. Now you probably just have an hour or less to make the pitch. You probably have any where from five to ten client employees in the conference room. Please manage your time efficiently.

I am stunned that vendors have 30 slides and this is how the flow works 80% of the time: first five slides about the company’s greatness covered in the first half hour, then five more in the next twenty mins and then last twenty slides in ten mins.

This leaves no time for any decent understanding of your capabilities and no time for questions.

It shows a tremendous amount of respect for your client’s time and investment for you to cover all you wanted to and leave 20 mins in the end for questions.

# 8 Maximum of 12 slides per hour of time: This is a really hard one to do, even for me if I do a presentation. But I can’t think of a better way to force the evaluation of what your core value proposition is and initiate the kind of conversation you need to win the contract. This recommended number includes your intro slides and client list.

This number also encourages you to figure out what it is that your client really wants or cares about. It mandates a pre-presentation phone call / conversation with your “sponsor” in the client company to understand as much context, hot buttons and concerns as you can so that you can actually produce 12 slides that they care about (if you can pull it off cut a few of those slides and do a real living breathing demo).

I understand that this is a delicate balance because you want to tell them what you want to tell them.

# 7 Your client does not care what you think of yourself: A higher than preferred number of pitches start with the vendor “superstar” person (usually with the highest rank/title) spending the first 10 mins extolling their personal qualifications, organizations they are members of, newspapers they have been interviewed for, conferences they have spoken at and the fact that they have five horses.

No one usually cares. And you are eating into your limited time.

If you are important enough trust me your client has heard of you.

Spend 30 seconds on your background, three mins on your company history and offer to provide more information after the presentation if your client wants. Move on to the benefits you can bring to your client and how you can make the client insanely successful.

# 6 Be honest about your numbers (and in reply to tough questions): Vendor – agency – consulting pitches routinely involve stating how many clients they have, what the growth rate is, what the projected increase in head count is, how much share of market you have etc. This sounds obvious but be honest and transparent about your assumptions and context.

You definitely want to come across in the best light. But it is really lame to say you have 98% market share but not saying that it is market share in clients with only women employees or that your growth rate is 70% year over year but only for just one of your business lines or you have 9,000 customers but not saying only 12 are currently active, etc.

Remember that any half decent client will do many reference checks and they’ll find out and you’ll look bad.

We recently had someone walk in and in reply to our tough question “why did you lose your last three clients” the agency gave an amazingly honest answer and said what they are doing to fix the issue. You bet your bottom we are going to work with this agency.

# 5 Make sure you understand the questions: This is a small tip on numbers or questions in general from your audience. Wait until the question is asked, then make sure you understand it, if you don’t, ask for clarifications, then answer.

Two great benefits: 1) It shows clarity of thought on your end, that you ask for context and want to do a good job of understanding what is being asked. 2) It will make sure you answer the question correctly and you’ll look good.

Because typically the vendor thinks they can anticipate the questions, and they have done the pitch a thousand times they start talking before the question is even finished.

# 4 Don’t be a jerk: Most vendor presenters are sales folks, usually high up in their sales organization. In their little space they know everyone in the industry, have exceeded their sales quotas at every company and are Mr or Ms Slick Wille personified. This gives them a touch of (or usually a full coat of ) arrogance.

Resist the temptation to be a jerk, and if you don’t know if you are a jerk, give immunity to the person with the smallest job title you bring with you and ask him / her, they will tell you.

Vendors / agencies / consultants come in routinely and bad mouth their competitors, their rival methodologies, their rival tools, and their rival folks they don’t get along with etc etc. It is as if they can possibly make themselves look good just because someone / something else is bad or worse.

We had one guy come in recently and bad mouth all other vendors, a consultant we had been working with for months (and whom we liked) and he slammed two industry experts that are well regarded (who we have worked with in the past). All in a span of six minutes.

This vendor person was not stupid, he was really smart. But he left such a bad taste that we will never work with this company if we can help it (not now and not ever in the future in any place that employs me or any one else who was in that room).

Even if you think you are god’s gift to the industry (and it is true), even if you think you are right and everyone else is wrong, apply basic social skills and resist the urge and don’t be a jerk. Assume we, potential clients, know all vendors and people in the industry personally and will take offense.

# 3 Relentlessly focus on your unique value proposition: Logical recommendation after the above. Remember we don’t care about you, we don’t care how much of an expert you are. Throughout your pitch you should constantly and relentlessly focus on how your company, methodology, people, process provide a unique value proposition to us the client. Remember it is all about us.

Use real life examples, tie it to our company and unique business if you can, tell us why you are better than the other guy (without beating up the other guy), tell us how you can make us money, tell us how you can get us more customers and happier customers. Show a demo, give us reports, share industry comparisons, give us references.

At the end of the hour most people in the room will remember one or two things about you (because whether you like it or not you and your competitors have a large overlap in what each of you can do for us). Look at the deck you are pitching, is there one, or at most two, things that help you stand out. What is your unique and special value proposition?

# 2 Assume you are pitching to smart people: An astounding amount of vendors / consultants aim their pitches to the lowest common denominator, worse still they assume they are pitching to babies. This is wrong. Depending on who is listening to you it will appear to be either a waste of time, condescending, silly or that you have not done your homework.

Assuming you are presenting to smart people will ensure that your pitch is high quality, it will show differentiation and it will show tremendous respect for people you are pitching to. It will mean that you will anticipate tough questions and be ready for them (I have to admit a guilty pleasure is to pause a vendor in the middle of a deck, ask a very tough question and watch them get thrown totally off track, if they get back on track, and some do, it usually indicates quality thinking).

A small tip that is very effective here. Get your VP/CEO/Big Person With Title to kick off the meeting, set context and then hand off the presentation to your execution (smart) person. It looks rather silly that for every question that is a bit deep, even simple ones, the VP/CEO looks at the smart person (usually with a much smaller title). Just let them present the detailed slides, you’ll look good  and the presentation will go faster.

# 1 Remember clients don’t buy software / services, they buy relationships: Human beings don’t buy software or, worse, “solutions”. We are social beings, even in professional engagements we “buy” relationships. Sometimes it really does not matter how magnificent your software is (or for that matter how great you are and your accomplishments have been). Come prepared to deal with this.

While we are indeed buying software or service we will be dealing with your company and its people and tech support and email and all things human. Show that you will excel at the social part and be a great relationship for us to have.

This means being nice, this means bringing your employees we would want to work with, this means showing that our engagement will not be a bad first date, this means being charming and sharing real stories about how you have gone the extra step for other clients. If your client “likes” you, chances are that you will end up with a deal.

This of course means that if you get the contract you also have to deliver, but if due to any chances your software or service fails to deliver 100% or later there are bumps, the strong relationship will mean that the engagement will survive.

And as always here is a bonus recommendation…….

# 0 Under promise and over deliver: I worked for a few years at DHL in Saudi Arabia and this was an unofficial motto for us. Always under promise and over deliver, you can never go wrong.

The tendency in a sales pitch is to over promise (the answer to every “can you do this” is “yes”) because you do want to win the contract. But for a long term sustainable engagement you have to have something in the back pocket to wow your client. Promise to deliver the package before nine AM every day but do it at eight thirty AM every day and you have a customer for life.

I would love to hear from all of you as to what you think of this list, especially if you are a vendor. Is this helpful in any way? Do you already do this? Does this even feel real?

I welcome the same level of honesty as I have exhibited above (and if you want to post your comments anonymously that is ok as well for this post, I promise to approve all comments except spam for Viagra). Please share your comments.

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