How do you know your digital efforts are working? Do you have a number? A metric? Are you measuring everything under your digital transformation budget?
At Vokal, what we like to do is determine the total margin impact from digital for a specific product or solution.
We do this by looking at acquistion, activation, engagement, retention andd transaction metrics - aka AAERT metrics.
So let’s play a little math game.
First, identify the software solution or service offering you have that’s core to the success of your business. The application or service that your business cannot thrive without.
Now, ask the following questions:
1. How many of your customers have “digitally” adopted your product?
2. What is your digital engagement score, a.k.a. your customer engagement score?
3. What percentage of revenue is generated from digital from this solution?
From these questions, we should get the following metrics that every CEO should focus on.
1. Percentage of digital adoption
2. Digital engagement score
3. Percentage of revenue through digital
These three metrics should help you understand if there is an opportunity to produce a higher ROI.
Let’s walk through all three of them.
Percentage of digital adoption
If your solution is physical + digital, then this is a great metric to measure. Once you measure this metric, you should ask this question: What would happen if more of our customers adopted our digital solution?
Would our costs go down?
Would customer satisfaction go up?
Would we acquire more customers?
Would our customers spend more with us?
Would they be more loyal to us?
Would we be able to solve more of our customers' challenges?
These are all great questions to ask and then execute against to understand your ROI.
Digital engagement score
Do you know how your customers engage with your core digital product? Are they happy with it? Are they engaging with it? Does it matter?
There are a lot of ways to calculate “customer engagement,” so what we typically do is figure out a scoring system as a benchmark.
It could be time on your website/app, or it can be how many times a certain activity is performed that leads to a sale.
Whatever it is, you should define it immediately.
Percentage of revenue through digital
The percentage of revenue generated through digital means should be going up. Plain and simple. If it’s flat or there isn’t a focus to drive everyone to your digital products and experiences, then something is most likely not right.
Keep this number close to you, and keep it as a core metric for your core services in addition to the rest of your service offerings. There is no holding back on trying to increase this number.
Your margins should be going up because of digital, not down.
Software is eating the world, and you have a rare opportunity to use all the tools that digital gives us to increase your ROI. It’s never been easier to run experiments and see what a fast-acting, test-everything attitude can have on your organization.