Scenario #1: Reporting Data

Lets pretend that I sent you an email that nicely communicated that you earned  $75,000 last year. In this email I broke down how $65k was from your salary, $5k was from your bonus and $5k was from some stock dividends.

How much is that email worth to you?

What if I included pie charts and graphs that compare your income to the average person in your state and showed your income growth over the last 5 years? What’s it worth to you now?

My best educated guess would be something close to $0.

Actually, it would probably have negative value because I wouldn’t figure that out for free. My time is worth something after all.

Scenario #2: Using Data to Drive Action

Now, instead of just telling you what happened last year, what if I also told you that your three co-workers, who are not nearly as capable or experienced as you, earned 30% more than you did? Also I just looked up that old extra car that you haven’t driven in 4 years and you could probably get about $10k for it on eBay – not to mention a cost saving on registration and insurance once you get rid of it.

What is this new information worth? Well, if you successfully ask for and receive a 30% raise and sell that car, my email was worth $17k (before taxes)!

There’s Only Value in Analytics if You Act on It

Everybody has web analytics nowadays. Google gives it away for free (or at least in exchange for your data) and even provides you with an easy-to-read dashboard right out of the box. But if all you’re doing with your data is simply reviewing it and keeping score, then I hope you’re not paying too much for it. There’s little value in that.

Now, if you hire an analyst to dig into your data and discover something that could help increase your web conversion or optimize your ad campaign mix, that’s worth something. Assuming you act on this newfound information, this analytics stuff can have some serious value.

Of course that analyst probably won’t be free, but if don’t hire her, you’d never know what to improve. You might simply keep doing what you’re doing, missing a ton of opportunities along the way. Or worse yet, you might take action based on somebody’s opinion and make a bad move that hurts your business.

What About A/B Testing?

What if you asked for a raise and didn’t get it? You could still try selling that old car and  gain something, but that’s not really the point. At the very least, if you don’t get the raise you now learned that you’re underpaid and what you may be worth in the job market. You have new knowledge that gives you options and puts you in a better position. If you never tried for that raise because you didn’t know what you were worth, you’d be stuck where you were and not know what you’re missing. That’s called being a sucker.

Testing is the smartest action to take when you have an insight that may help you reach your objectives faster. Even if you don’t get what you hoped for, at least you’ll learn that it wasn’t a good idea and not go down that path.

Get a win or avoid a loss – it’s still some ROI in my book.