Waikato Business News July/August 2019

WAIKATO BUSINESS NEWS July/August 2019
27
The wrong KPI that many
directors are using
THE DIGITAL WORLD
> BY JOSH MOORE
Josh Moore is the head marketing fanatic at Duoplus, a
Hamilton-based digital marketing agency that helps clients
across NZ grow faster. www.duoplus.nz
Last month I had two different clients
call me to say their board of directors
were deeply concerned about the drop in
conversion rate on their website.
Both times I had to
explain that, although
the overall conversion
rate had indeed dropped, the
directors were incorrect in
their conclusion that something
was wrong. They were
actually misunderstanding
the figures – and more importantly,
were focused on the
wrong figure.
It wasn’t their fault. Few
directors have been trained in
understanding digital marketing
analytics, and what figures
they should be comparing.
The truth was, if we fixed
the “problem” that the directors
were concerned about, it
would actually hurt the company’s
sales.
The role of a board of
directors is governance. As
such, they need to review
overall high-level figures that
give them a sense of whether
the company is heading in the
right direction. Their job is not
to get into the nitty-gritty detail
that day-to-day managers need
to take care of. Instead, their
reports should be high level,
but with enough detail for
them to either be confident
things are working well, or be
able to raise concerns in areas
where things appear to be
going off track.
In both cases, the board of
directors were doing their job
– they were looking at some
overall KPIs and were raising
genuine concerns where the
KPI showed a decline in its
performance.
The problem was, however,
that the KPI they had chosen
was not the right one to be
using.
In both situations, the KPI
figure shown to the board was
the overall website conversion
rate, with month on month
comparisons. As a first impression,
that sounds like a robust
KPI, but it can actually lead to
bad decisions.
It was true that both websites
had seen a sharp decline
in the overall website conversion
rate – which is what
raised alarm bells. However,
sales had increased.
One of the two clients has
an ecommerce store, so we’re
able to measure their exact
Agility key for
tech start-up
There’s a technology
start-up at Waikato
Innovation Park whose
workforce have something in
common – they are all graduates
of the University of
Waikato.
Torutek is an R&D-focused
organisation where the team
members pride themselves
on both their agility and their
ability to meet customer needs.
The staff work on a variety
of projects: facial recognition
systems for helping problem
gamblers; indoor security and
tracking systems; Internet of
Things (IoT) and edge computing
solutions; and hi-tech
consultancy services.
Last year Torutek launched
a University of Waikato scholarship
for an undergraduate
student studying either a Bachelor
of Engineering (majoring
in software engineering) or a
Bachelor of Computing and
Mathematical Sciences. This
year they’re offering the scholarship
again.
The scholarship is worth
$4000 and includes the opportunity
for a paid summer internship
at Torutek. Quenton Buser
was the inaugural recipient and
he has spent the summer working
at Torutek enhancing their
core systems and gaining valuable
experience across the full
development stack.
Another intern, Luke
Schwarz, is about to start the
final year of his computer science
degree. He’s been working
on developing an embedded
safety device which can
keep track of mobile workers
within large buildings and
facilities. Schwarz says the
work experience has been fantastic.
“My learning has gone
crazy!”
Company directors Chris
Yu, David Leaver and James
McCosh all graduated from
Waikato with Bachelor of
Engineering (Hons) degrees
majoring in software engineering.
McCosh says the young
business is establishing a reputation
for creating solutions
that seamlessly blend software
and hardware. “Software is a
great enabler,” he says. “But
often, software alone can only
take you so far. One of our key
advantages is our ability to
develop custom hardware and
software solutions to solve the
really tricky problems, which
in turn delivers the maximum
value to our customers.”
In developing their maiden
product, Torutek worked with
New Zealand gaming trusts,
sales through analytics. Their
sales from our digital ad campaigns
had just achieved their
best month ever. Yet their conversion
rate was down.
The other client is a
leads-focused business,
because sales happen offline.
Their leads had showed very
strong growth. In the month
the directors were concerned
about, their leads were 140
percent more than just four
months earlier – so leads had
more than doubled. Yet their
overall website conversion
rate was now half of what it
was those four months prior.
How can that be?
The short answer was that
we had increased the amount
of display ads (image ads) that
were being run for these clients.
Display ads are different
from Google search ads,
because if you search for
something on Google you are
shown text-based search ads
that match what you were
searching for. Whereas display
ads are image ads that
sit alongside articles or other
content on websites. Display
ads appear on news sites, blog
sites, TradeMe and millions of
other sites online.
The downside of display
ads is that traffic from these
ads have a much lower conversion
rate than other forms
of traffic.
But the upside of display
ads is that this traffic is very
cheap, they put your company
in front of your target market
which builds awareness, and
you get leads and sales from
them. While a much smaller
percentage will buy or enquire
straight away, other users will
return later and convert.
When we increased the
amount of display traffic coming
to the websites it had a
direct result of decreasing the
overall conversion rate. However,
it also helped increase the
number of sales/leads from the
sites, for the same amount of
money spent.
If we had followed the
directors’ concerns and tried
to fix the overall conversion
rate, it would have been easy
– just turn off display advertising.
However, this would have
decreased the total amount of
sales/leads they were getting
from their advertising spend
each month.
So, if the overall conversion
rate is not the right KPI,
what figures should directors
look at?
Firstly, for ecommerce
sites, I recommend directors
ask for the Return On Ad
Spend (ROAS) figure. This is
the total cost of ads divided
by the total revenue generated
from those ads. For example,
From left, Quenton Buser, Caine Jameson, Chris Yu,
James McCosh, Ryan Jones, Jessica Xiao, Dave Leaver.
the Ministry of Health, the
New Zealand Gambling Commission,
treatment providers,
and another New Zealand company
called COMS systems,
to create a facial recognition
solution for problem gamblers.
The product, known as
Guardian, matches a person’s
face against a database of
self-excluded problem gamblers,
so that if they turn up to a
gambling establishment they’ll
be spotted and turned away.
“The entire process is voluntary,”
Yu says. “A problem
gambler must sign up for the
list. It’s a way for them to protect
themselves and it makes it
easier for all parties to comply
with and meet their obligations
if you spent $1000 on digital
ads and this generated $5100
in ecommerce revenue, your
ROAS is 5.1. The higher the
number the better the return.
Alternatively, for lead-focused
businesses the best KPI
would be the Cost Per Acquisition
(CPA) – which is the
total ad spend divided by the
number of leads. If you spent
$1000 on ads and received 20
leads you have a CPA of $50
per lead.
These are excellent toplevel
figures directors can
compare month to month.
The above figures only
show the performance of
online advertising, so it is still
helpful to include a KPI that
will show the overall website
performance across all traffic
sources.
To do this, I recommend
directors look at a filtered
overall conversion rate. This is
simply the overall conversion
rate but with display ads traffic
filtered out. This will give
directors a reliable conversion
rate figure that can be compared
month-to-month.
If directors, CEOs or managers
look at the wrong figures,
it can lead to making bad
decisions that can hurt company
growth. But by choosing
the right KPIs, good decisions
can be made that can result in
long-term success.
under the New Zealand gaming
laws.”
Guardian is currently active
in more than 30 gaming venues
and has proven to be a very
effective tool in reducing harm
caused by problem gambling.
Yu says one of the advantages
in being small is that they
can respond quickly to requests
or ideas, use their skills to take
a new or emerging technology
and apply it to a real world
problem, and turn that solution
into a product that can be sold
to other customers.
McCosh says Torutek tries
to make sure their staff are
happy, healthy and engaged.
“We have a high-performing
team of very talented individuals
who are passionate about
what they do, and our job as
an employer is to make sure
that they enjoy coming to work
every day.
“Engineering is as much
about people as it is about
problem solving. If you are
trying to solve a problem without
thinking about the customers
or the stakeholders, you
aren’t going to succeed. Business
is the same; whether it is
colleagues or customers, what
matters most is people.”
For more information on the
University of Waikato Torutek
scholarship go to: https://www.
waikato.ac.nz/scholarships/s/
torutek-software-engineering-scholarship
Pedalling for
prostate
Cyclists are encouraged to start
training now for the third annual
Pedal4Prostate at Hampton
Downs on Sunday October
13. The 196 cyclists who took
part in last year’s event raised
more than $137,000 for the
Prostate Cancer Foundation.
The event is open to teams of
two to four riders (or superfit
individuals) and this year
sees the introduction of two
new categories – E-Bike and
Over-60s. On offer is a range
of prizes including a trip for
two to Hawaii for the entrant
who raises the most funds.
Pedal4Prostate is open to
everyone over the age of
16. Registrations are open
now. For more information
and to register, visit https://
pedal4prostate.org.nz/
$20,000 gift for
first birthday
A significant financial gift was
‘the cherry on the top’ at the
Waikato Women’s Fund’s
recent first birthday ‘cake
breakfast’. The fundraiser
was attended by 140 guests,
who heard from speakers
Ninakaye Taanetinorau and
Professor Margaret Wilson.
Both pointed to the struggles
women and girls continue to
face and mapped out their
hopes for future generations.
Fund Committee member
and Momentum Waikato
trustee Pam Roa then
announced a $20,000 gift to
the Waikato Women’s Fund
from Momentum Waikato.
“This means that our Fund
now has $92,000 in pledged
donations, well on our way
towards our goal of $200,000
by June 2020,” she said.
HGB makes
appointments
Hamilton-based strategic
marketing consultancy HGB
has appointed five new team
members. Strategic marketing
consultant James de Clifford
has joined from Unitec, along
with marketing consultant
Monique Kimber-Bell from
Livingstone Building NZ,
marketing consultant Amy
Walsh from Wove Social,
Hanna Nicholls from Zealong
Tea Estate, and recent
Ara Institute of Canterbury
graduate Adhish Prakash.
LIC boosts
profitability
Livestock Improvement
Corporation (LIC) has
announced its financial
results for the year ending
May 31. Reporting a
significant increase in
profitability, as well as new
records in strength of balance
sheet, operating cash flow,
and total revenue, the co-op
will return $15.6 million in
dividend to shareholders.
This fully imputed dividend
equates to 10.98 cents per
share and represents a yield
of 12.2 percent based on
the current share price of
90 cents. The dividend is up
from 1.71 cents last year and
is the largest the co-op has
paid since 2013. Board chair
Murray King said the result
was in line with expectations
and reflects a turnaround
in the co-operative’s
performance and profitability.