How Marketers Can Use Data When Picking Vendors

There are many marketing aphorisms about budgets, and in digital many of them run something like this: "I know some of my vendors are ripping me off, but I'm not sure which ones."

I love my 13-year-old son, but I sure wouldn't let him write his own report cards. But that's what a lot of people get with their vendor service-level agreements (SLAs). If your vendor has its own reports, focused exclusively on that vendor's work and its impact on your digital performance, it can be hard to get the big picture. Harder still when you don't know where the data is coming from or how it's being calculated.

It may seem obvious that marketers need to make data-based decisions, but I work with plenty of executive stakeholders who struggle to uncover the information they need to make the smartest buying decisions. As a result, I've seen a lot of wasted time and money spent on tools that no one needed, no one understands, and no one uses.

[IT and marketing are becoming digital business buddies, but they lack data and UX skills. Read Digital Business Skills: Most Wanted List]

Every business with a website has a web analytics tool, but there's not a lot of understanding behind how analytics tools are used. They might be used as measurement tools for basic web stats like visits or bounce rate, but they aren't used in a trusted fashion for business performance metrics like revenue or cost of action (e.g., cost of sale, cost of visit, cost of add to cart).

Over the past five years, I've seen more and more responsibility for enterprise software purchases moving from the IT department and into the laps of marketers. If you're a marketing exec without training on the right kinds of questions to ask for IT procurement, it can be a pretty big problem. What's the best way to decide what tool will give you the most useful information with the fewest headaches? And once you've made your decision, how can you be sure your data is accurate and useful?

How is a modern digital marketer supposed to make an informed buying decision? Here are the three steps we recommend to all our clients.

1. Know how fast you can "run a mile"
If you have a trusted and accurate understanding of performance data, you're in a position where you can buy things to boost performance. As an example, if you're thinking about changing paid search vendors, can you say with certainty that you understand and trust your web analytics data in regard to site conversion? (Trust in this case includes agreement and signoff from the finance department -- trust me, it's important.) If you know how fast you run the mile, you will know if the tools you buy increase your speed.

Tactical supporting tip: Use your website macro conversion rate (e.g., sales, leads generated, successful logins) as a baseline, and figure out which specific metrics connected to this number the new vendor will impact. (Feel free to ask the vendor.) Use the three months of prior data and the same time period for the previous year as performance comparables.

2. Know the baseline metrics and goals for your purchase decision
Sticking with the paid search decision in point 1, do you know how effective your current efforts are at traffic generation? And this isn't just a question of conversion rate; it also involves the average-sized purchase, gross margin, and new customer levels. Can you break it down by landing page effectiveness and return on spend? If you don't have a clear set of criteria for winning with each new technology purchase you make, you leave yourself at the mercy of the account manager. Even more importantly, with strong baselines and goals, you can make yourself an immediate high-value customer. Agencies and vendors love clear goals, because it allows them to win with you.

Tactical supporting tip: If you are having a hard time classifying what "winning" would mean for the new vendor, take its "real" cost and triple it. When I say real cost, I mean what you pay the vendor, plus what it costs to maintain the vendor. This number can be used as a basic criterion for winning. In a given month, did the new vendor probably make three times more than you spent?

3. The performance shotgun
When you know how fast you run a mile, and you know what your baselines and goals are to run the mile faster, you can negotiate in confidence. Here at Napkyn, we recommend to our Analyst Program clients that they include a 90-day proof-of-concept clause in contracts with all new agencies and vendors, with that clause tied to their performance against the defined goals.

If vendors cannot help you run faster in a way that is proven in the tool of record, they get fired. There are clear lines tied to performance from before the sale is made, and they are carried through the lifetime of the relationship.

Tactical supporting tip: When you negotiate a 90-day clause with a new vendor, also give it your criteria for what winning looks like, along with any additional criteria for which it needs to plan as it brings you on board. Not only will this give the vendor a clear and much-appreciated set of parameters, but it's also likely to ensure you get the vendor's best support and account management staff.

In reading these three points, you can see there are varying levels of effort. Point 1 takes a lot of work, and point 3 takes almost none. Following this model will put you in the driver's seat with your vendors, tighten their focus around performance, and give you peace of mind (and leverage) when it's budget season.

You can use distributed databases without putting your company's crown jewels at risk. Here's how. Also in the Data Scatter issue of InformationWeek: A wild-card team member with a different skill set can help provide an outside perspective that might turn big data into business innovation (free registration required).