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November 28, 2017

Why We Should Stop Focusing on Click Through Rates

The world keeps evolving and so does the way ROI is defined and derived by any organization. Advent of technology has enhanced the way we speak with our customers and how we consume the rich data they have left us when they casually crawl through our website or any other medium for that matter using the internet. Thanks to the same technology, the ever changing needs of the consumers has pushed the advertisers and business owners to adopt to all new levels of metrics and parameters to give them a clarity on how their online advertising will yield results.


We have a large number of metrics which provides insights on the marketing campaigns results. One of them being CTR - Click Through Rate, which used to play a very pivotal role, when it comes to assessing the health of a PPC campaign. It used to - thanks again to the dynamic nature of consumer behavior and the evolution of the way metrics are being looked at. This blog is an attempt to explain why CTR is moribund but not dead. The Focus has now shifted to a metric which is more or less the aggregate measure of the ROI itself. The CLICK. 

In this Blog post, we'll delve deep into the realms of the metrics' used in PPC campaigns, and understand their impacts of focusing only on CTR. As of today, CTR is looked at as one of the primary parameters in measuring the effectiveness of a PPC campaign. It was religiously believed, that more the CTR, the better the campaign's performance will be. This may not necessarily be true, while it may be important for organizations to know the CTR, but this does not necessarily make the PPC campaign effective. Higher the CTR doesn't always promise higher ROI. Let's understand why.

Understanding Click through Rate: 

Click Through Rate or CTR is defined as "the number of clicks received by an ad divided by the number of times the ad is shown (impressions), expressed in percentage" 

CTR happens to be the most useful of all the metric's since recently. Historically, CTR has always been that fancy metric which captivated the fascination of the digital marketers and their clients, as it showed the overall effectiveness of their ad - the number of times the ad was clicked out of all the times it was displayed.  


So why CTR is important? 

It directly or indirectly tells us how relevant the adcopy - that is written to the keyword - has triggered the same ad. Because the basic understanding is that if the ad is not relevant to the Keyword that triggered, then there wouldn't be any click. 
Isn't it enough?

No, it is not enough. Focusing only on CTR will not help anyone to increase the actual ROI for the advertiser. At the end of the day, CTR will only give us smart cues on how relevant a campaign is but doesn't help in understanding the relevance between the actual ROI and the campaign's supposed performance.

Really!!! So Why Not CTR - What happens during optimization? 

As we all know, CTR is calculated as the result of division of clicks and its impressions. On a practical note let's understand how that can be tricky.
Let's assume that we are running 3 search campaign and below are the vitals of that campaign at different time periods.

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Looking at the above scenarios, one would assume that the one having the highest CTR has delivered the highest ROI to the advertiser. But that's not the actual case. When we have 10000 impressions and just 1 click, the CTR is 0.01%. Though the CTR is too low we are allowing the ad to get more and more exposure and increasing the probability of getting the second clicks higher. But when the CTR was 1%, the impressions we had were just 100, i.e. we had restricted the way the ad was showing up by reducing its exposure. Hence, when you optimize a campaign for CTR, there's a very high risk of restricting it from gaining maximum exposure - resulting in missing all those probable clicks that could have got converted. 

By definition, more the IMPRESSIONS - lesser the CTR and vice versa. So when somebody is trying to optimize a campaign based on the KPI/Parameter CTR, it is highly possible that while trying to increase the CTR, the person who is running the campaign might end up reducing the overall impression share of the campaign. Which is just not good! 

This is because, the basic steps that are done, to increase CTR , like changing the match type from phrase to exact etc. will effectively increase the CTR but greatly reduce the impression share.  

Reduction in the impression share will definitely increase the CTR figure to exponentially heights, but when the Impression share decreases, the exposure the ad is supposed to get decreases resulting in less clicks i.e. less ROI.

Thus we'll end up concentrating on a parameter which does not help us delight our customers. So we should not put CTR in the forefront and start optimizing a campaign. It is ok to look at CTR to understand the relevancy of the keywords and the ads, but making it the reins of the campaign will result in lesser ROI. Instead we should look at increasing the number of clicks,on a monthly basis. We could use the CTR to keep us relevant but the primary focus should be on Clicks.

So What's Next?
With CTR getting less effective than what it used to be in a PPC campaign, it has pushed the marketing companies and the advertisers to evolve and look for something that will help them serve their ever changing needs of their customers' and their ROI  - The CLICK. 

The Click denotes the end result an advertiser is looking for from a marketing point of you. And in a PPC campaign as the name suggests we pay the search engines per each click and it becomes an inevitable parameter to be tracked keeping the CTR as its balancing wheel. 

Case Study:
In one of our current engagement where we do end to end campaign management for one of Australia's largest online marketer, the primary KPI was to reach a CTR of 3%. The engagement struggled to achieve the KPI in the beginning months but went on to achieve and surpass the set target comfortably. The trend that was noticed was that, when the optimization was done towards increasing the CTR, the impression share reduced considerably and the clicks started reducing. The KPI had a financial implication which restricted the campaign managers from experimenting or to implement industry best practices.

Once the trend was noticed, it was explained to the client that CTR as a KPI is not helping the end users. By concentrating on CTR, the number of clicks that is received for that campaign has reduced considerably and it posed an imminent danger of the end customer threatening to cancel his marketing campaign because of Low ROI. The clients agreed and CTR was completely removed as a KPI and the engagement concentrated on clicks thereafter. 

Conclusion:
As the world keeps evolving, let's evolve the way we define and derive the ROI to our clients. Focusing on the right PARAMETER will help us in delighting our customers. Even if we need to educate the customers on what is the right KPI/Parameter, we should. CTR helps, but it's time for us to move  on to something more relevant to the actual ROI  - The Clicks. 


November 23, 2017

SSCs have evolved. They are the future and will stay around for a reasonably long time

Across industries, the Global Business Services trends are noteworthy and for decision makers, there are more questions than answers.


Most organizations with global operations are still thinking about whether Shared services is the right model for them or not. Across industries, the Global Business Services trends are noteworthy. Shared service is a streamlined way of working to support business process execution within an organization.  For decision makers, there are more questions (and of the new kind) than answers. Only organizations with deep pockets have perfected the science and art of shared services over the past decade 

A few observations from industry :

Deep pockets. Do I have the money to invest and try?

  • Top organizations in the world - P&G , Microsoft, Google,  Shell, ExxonMobil have recognized the value of shared services for a very very long time. These are companies with deeper pockets who have had the luxury to try , fail and try again to improve the model 
  • Involve the expertise to leapfrog the SSC maturity journey. After all , there is an advantage being a mature adopter against the risks of an early adopter of the SSC model

Go East - or stay stuck with higher costs. Is there an option?

  • Technology has disrupted this trend completely. With the possibilities of running connected operations from anywhere in the world, we see more and more companies embracing near shore models for cultural fit and proximity advantages.
  • Over the next 4-5 years, expect the unexpected. Transactional processes will be automated using RPA Bots and it will still be profitable to provide oversight with a nimble global organization

Build, Buy or Co-create. Do I have the ability to run a Captive Shared service on my own?

  • Not everyone is an expert. Companies flourish not because they improve their SLAs on operational processes. They flourish because they do their best innovating and disrupting in their industry.
  • Shared services have largely focused on support functions in Finance and accounting, procurement support, order to cash etc.  One of our clients recently coined a nice quote- "Give time back to business. Let them do best,what they are good at"

Managing change. How do I take people along to embrace new way of working?

  • ·Organization culture was nonexistent when the client started its business. There is always a first time, and this needs the right expertise and guidance to manage involvement and change for its stakeholders. Again - it's painful but not impossible. It's important to get the slicing right first time.

Sustainable SSCs are not for cost - cutters

  •  Deploying an SSC can provide a cost advantage. 6 of 10 clients I speak to , indicate SSC as a new way of working that will foster innovation , bring predictable performance and consistency with cost reduction being one of the factors.  What do you think?

 



 

November 22, 2017

The cost of switching suppliers


While procurement stakeholders state that switching suppliers in a business represents a cost of change, shouldn't the question be whether there is a cost involved in not switching suppliers?

 

 



Years ago I attended a strategic procurement negotiation training and while we were discussing various change management topics, a fellow participant stated to the group that switching suppliers always involves a cost of change i.e. administrative cost, as well as time and efforts to implement the change in the business. We were all familiar with this statement and in fact, we hear this comment fairly regularly from procurement executives and business stakeholders.

Obviously there must be a good reason for switching supplier(s), as long term partnerships and strategic agreements have to be in place to secure the business and it doesn't have to be systematic, as giving longer term contracts to a supplier is an important lever in a negotiation. 

However, the trainer replied: And what is the cost of not changing a supplier?

Despite the fact that I have been in procurement for quite a while, I suddenly realized that he was making a very valid statement and a good statement to make towards the business, who are often reluctant to switch suppliers. In terms of messaging towards the supplier and supplier conditioning, the potential outcome of the negotiation is significantly reduced, if incumbent suppliers know that they are rarely replaced and challengers are rarely awarded with new business. Additionally, newcomers bring generally a fresh eye and are performing significantly better than an embedded supplier, which is the essence of sound competition.

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I would be curious to know what your opinion is about this.

November 7, 2017

Risk Management in a Cashless World

The banking industry has witnessed quite a few milestones after India's independence.The changing landscape of the banking industry requires us to question - what are the regulations and guidelines that govern the industry.  


The paradigm shift that the announcement on 9th November (demonetization) brought to the Indians, is probably one of the biggest milestones that would define how the country conducted future monetary transactions. While it is an exciting journey for the industry and for customers alike, it is also a journey that many Indians are unaware of, for the loopholes and risks it brings - the risks that are not very keenly observed across the spectrum of banking transactions.  

Banking Landscape 

The banking industry has witnessed quite a few milestones after India's independence. The landscape has always been with few basic elements and assumptions:

  • Bank is where people would go for depositing and withdrawing cash. 
  • Transactions for purchase of goods and services can be done with only cash / cheque and DD. 
  • Having a bank account is required only for businessmen and people earning a salary credited in the account, 
  • Bank accounts are not for housewives, elderly or children. 
However, over a period of time, dependence on bank or customers having to go to bank reduced with advent of ATMs, credit cards and internet banking. 

Just for the datapoint, as per media report, within a month of the announcement, digital transactions went up by 400-1000%. Referred from the resource available at RBI website, this clearly shows the dependence on cashless transactions (or digital transactions as bankers would prefer to call it) and faith in new age working that Indians are showing. 

Table  1 - Digital transactions as per RBI resource
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The changing landscape of the banking industry requires us to question - what are the regulations and guidelines that govern the industry.  

Regulatory and Legal Framework 

While banking industry is governed by Banking Regulations Act (1949) and RBI guidelines, changing business model also brings in the IT Act of India (2000) to the fore.  
Any digital transaction these days, have multiple parties involved and multiple layers of infrastructure passing the information back and forth, making entire transaction that much complex and that needs a few key questions to be answered :  
  • How do we maintain integrity of transactions in digital payment system and make the transaction environment safe, thereby ensuring trust of both regulators and customers?  
  • How do we manage multi-factor authentication and secure the data at the point of origination till the end? 
  • How do we alert the payer, payee, bank and other stakeholders in case of any breach? Can this happen real-time? 
  • What is the risk of failed transaction, unauthorized transactions, exposure to the bank or payment platform owner or anyone linked in providing the services? 
  • How do we ensure privacy and no unauthorized usage of information? 

Digital Payment Channels and Risks 

With digital transactions through mobile wallets, online transfer thru IMPS etc. and traditional POS channels, key risks to be analyzed in light of above questions are 

Physical Security Risks 

Risk of the physical devices - POS terminal, card itself and network components is extremely vital. If the customer has setup a mobile app on the phone, security of the phone and awareness around it is pivotal for customer insuring the money. 

Operational Risks

The transaction processing, how the transactions are handled at backend systems, how transactions integrity is maintained by the systems and processes, how the maker-checker and segregation of duties is maintained are some absolutely crucial validation points. 
IT Risks
This spans across the spectrum - at the bank, at the merchant, at the customer and data in transit. 
  • Key Stakeholders
  • Key questions that arise are
  • Who owns the infrastructure?
  • Who possesses customer information, including Personally Identifiable Information?
  • What is the authentication mechanism? - Important consideration in any payment authorization is - who you are and what you have. In layman terms - identifying yourself and then keying the secret identifier - PIN, biometric etc.
Following are the key stakeholders in the digital payment ecosystem and what information do they collect, process, store and what are the implications of misuse. 

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Concluding Remarks 

It is amply clear that the risk, liability and exposure of data collection, storage and retrieval is huge.  And while technology has brought ease to doing business, it also has brought inherent risks. These have to be known and then mitigated. And while the focus of the bank may remain ARPU (Average Revenue Per User), the industry and regulators have to look at the entire ecosystem rather than looking only within their own span of control in protecting customers' interests. 


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