Analytics seems to come up in nearly all how-to articles about digital marketing – and with good reason. Analytics is the basic foundation for business problem-solving and decision-making. Without analytics, companies have no way of knowing how their marketing dollars are being spent or whether their marketing campaigns are successful or not. When changes do need to be made, analytics can help companies make better decisions, setting them on the right course.

Of course, analytics alone can’t solve all problems or answer every question; it can’t automatically make your business more successful. The key to success, rather, lies in your ability to analyze the data you get from analytics. Raw data, statistics, and reporting (the byproducts of analytics) are ultimately useless if you’re unable to understand and use that information to solve business problems.

Analysis and analytics are easy to confuse. Even though they’re separate practices and disciplines, they go hand-in-hand. After all, a problem is harder to understand (analyze) without any data (analytics).

To illustrate how this partnership works, consider the following situation: Let’s say you spent $5,000 last month and received 10 new rentals. You might think, “Hey, that’s pretty good! $500 per rental isn’t too shabby. Since the lifetime value per rental is $15,000, that’s a decent return on investment.”

Then, you look at the analytics and see that only $2,500 of your initial investment actually contributed to the rentals. The other $2,500 drove nearly zero reach or conversion. In other words, you just wasted half of your investment! Your ROI – though it seemed pretty good at first – could’ve been doubled.

Analytics gave you a crucial insight. Now, here’s where the analysis begins. Let’s say 75% of the $5,000 you invested was spent on driving traffic to your website through social media, paid ads on search engines, and partnerships with your online affiliates. The remaining 25% was spent on content and gift card promotions.

You discover that none of your partnerships resulted in rentals, and only half of your paid search ads and social media placements drove rentals. Why is this?

Answering the “why” of a problem depends on your analysis. Analytics can tell you your total marketing spend, conversions, and sales; it may even show you that those numbers have changed compared to last month and/or last year. However, analytics can’t tell you how the change occurred without analysis.

Nevertheless, to reach the point where you can begin analyzing, you first need to have a strong foundation in analytics. Otherwise – if you ignore analytics – you risk investing in marketing channels that don’t drive sales or contribute to your overall brand awareness and reach.

Understanding Analytics

Some business owners hesitate to invest in analytics because they believe it’s costly and requires a team of specialists to manage – but it doesn’t. Gathering data, statistics, and reporting is fairly simple and cost-effective now with the free, user-friendly tools that have become available. Although setting up your analytics platform correctly does take time initially, it shouldn’t require much management after that.

Analytics is especially easy to use to measure digital marketing campaigns, because you only need to focus on three data points: reach, conversions, and cost. Understanding these three key points will help ensure that your marketing dollars are producing optimal sales.

Let’s take a closer look at what each of these data points means:

1) Reach basically measures how many opportunities you’ve had to convert potential customers into leads/sales. For example, when a user visits your website or views one of your ads, that visit or view is counted as part of your reach.
2) Conversions are the number of important actions that users you’ve reached have taken. A conversion doesn’t measure every action – only the ones you care about most to drive sales. Example conversions include ad clicks, phone calls, completed lead forms, total purchases, etc.
3) Cost is just that. How many dollars were spent to drive users to your website and convert them into sales? This measurement includes cost-per-lead, cost-per-lease, cost-per-customer, etc.

Accurately measuring reach, conversions, and cost through analytics is vital for knowing whether your marketing strategy is effective or not. For that reason, if you’re starting to use analytics in digital marketing for the first time, your aim should be to strengthen your understanding of these points.

From there, you’ll be ready to set up and/or improve your analytics. It’s important to set up your analytics system properly, since a stronger system will give you better data. This improved data will, in turn, give you more insights to make your analysis more powerful and accurate.

To set up a solid analytics system, you’ll first need to focus on discovering how people find your brand and access your website. In the next segment, we’ll help you get that information, as well as continue to build up your analytics system. To learn more about setting up an analytics system, move on to Part 2!

Beginner’s Guide to Analytics in Digital Marketing:

Part 1: Analysis vs. Analytics

Part 2: How to Use Analytics Successfully