I’ve found it’s best to break our metrics down to three levels in order to make the most of them.

1. KPIs
The first and highest level of metrics contains the Key Performance Indicators or KPIs. I believe strongly there should be relatively few KPIs — maybe five or six at most — and the KPIs should align tightly with the company’s overall business objectives. If an objective is to develop more orders from site visitors, then conversion rate would be the KPI. If another objective is about maximizing the customer experience, then customer satisfaction is the right metric.

In addition to conversion rate and customer satisfaction, a set of KPIs might include metrics like average order value (AOV), market share, number of active customers,  task completion rate or others that appropriately measure the company’s key objectives.

I’ve found the best KPI sets are balanced so that the best way to drive the business forward is to find ways to improve all of the KPIs, which is why businesses often have balanced scorecards. The reality is, we could find ways to drive any one metric at the expense of the others, so finding the right balance is critical. Part of that balance is ensuring that the most important elements of the business are considered, so it’s important to have some measure of employee satisfaction (because employee satisfaction leads to customer satisfaction) and some measure of profitability.  Some people look at a metric like Gross Margin as the profitability measure, but I prefer something deeper down the financial statement like Contribution Margin or EBITDA because they take other cost factors like ad spend, operational efficiencies, etc. into account and can be affected by most people in the organization.

It’s OK for KPIs to be managed at different frequencies. We often talk about metrics dashboards, and a car’s dashboard is the right metaphor. Car manufacturers have limited space to work with, so they include only the gauges the most help the driver operate the car. The speedometer is managed frequently while operating the car. The fuel gauge is critically important, but it’s monitored only occasionally (and more frequently when it’s low). Engine temperature is a hugely important measure for the health of the car, but we don’t need to do much with it until there’s a problem. Business KPIs can be monitored in a similarly varied frequency, so it’s important that we don’t choose them based on their likelihood to change over some specific time period. It’s more important to choose the metrics that most represent the health of the business.

2. Supporting Metrics
I call the next level of metrics Supporting Metrics. Supporting Metrics are tightly aligned with KPIs, but they are more focused on individual functions or even individual people within the organization. A KPI like conversion rate can be broken down by various marketing channels pretty easily, for example. We could have email conversion rate, paid search conversion rate, direct traffic conversion rate, etc. I also like to look at True Conversion Rate, which measures conversion against intent to buy.

Supporting metrics should be an individual person’s or functional area’s scorecard to measure how their work is driving the business forward. Ensuring supporting metrics are tightly aligned with the overall company objectives helps to ensure work efforts throughout the organization are tightly aligned with the overall objectives.

As with KPIs, we want to ensure any person or functional area isn’t burdened with so many supporting metrics that they become unmanageable. And this is an area where we frequently fall down because all those metrics and data points are just so darn alluring.

The key is to recognize the all-important third level of metrics. I call them Forensic Metrics.

3. Forensic Metrics
Forensic Metrics are just what they sound like. They’re those deep-dive metrics we use when we’re trying to solve a problem we’re facing in KPIs or Supporting Metrics. But there are tons of them, and we can’t possibly manage them on a day-to-day basis. In the same way we don’t dust our homes for prints every day when we come home from work, we can’t try to pay attention to forensic metrics all the time. If we come home and find our TV missing, then dusting for prints makes a lot of sense. If we find out conversion rate has dropped suddenly, it’s time to dig into all sorts of forensic metrics like path analysis, entry pages, page views, time on site, exit links, and the list goes on and on.

Site analytics packages, data warehouse and log files are chock full of valuable forensic metrics. But those forensic metrics should not find their way onto daily or weekly managed scorecards. They can only serve to distract us from our primary objectives.

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Breaking down our metrics into these three levels takes some serious discipline. When we decide we’re only going to focus on a relatively small number of metrics, we’re doing ourselves and our businesses a big favor. But it’s really important we’re narrowing that focus on the metrics and objectives that are most driving the business forward. But, heck, we should be doing that anyway.

What do you think? How do you break down your metrics?

”Happy Anniversary, honey.”

The budget conscious movie producer drops the script on the table and stares at the director.

“Do we really need the close-up of Owen’s face? The set-up for those shots adds a ton of extra cost. And the bacon close-up? Really? Does that really add anything to the story? Are we going to sell even one less ticket if that shot is not in the movie?”

But the director insists, “Yes, we have to have those scenes. They add the emotion and visceral impact that is required to tell the story, to let the audience feel Owen’s love. They are as essential to the story as the dialogue. Those shots are the difference between a professional film and a home movie, and no one will pay to see a home movie. They may not list the close-ups as the reason they don’t like the movie, but trust me, they’re a much larger factor than you think.”

The director is right. (And don’t worry, this post will eventually get to the retail relevance.)

I’ve been reading a lot about how our brains make decisions. Books such as How We Decide, The Hidden Brain, and Switch all explore the two parts of our brains that combine to formulate our decisions. Scientifically, those parts of the brain are the neocortex and the amygdala. In Switch, the Heath brothers call them the Rider and the Elephant; others call them the rational brain and the lizard brain. Whatever we call them, our decisions are the combined effort a conscious part of our brains that control our rational thinking and an unconscious part of our brains (the Hidden Brain) that controls our emotions.

Think you don’t make emotional decisions? Think again.

It turns out that without our emotional brains, we wouldn’t be able to make decisions at all. In How We Decide, Jonah Lehrer recounts the story of a man whose brain injury caused his amygdala to stop functioning. As a result, he was utterly incapable of making even the simplest decisions in life. Without an emotional brain to push him toward a decision, his rational brain simply went into analysis paralysis.

Our brains are extremely powerful, but they’ve got a lot going on. As a result, they basically compartmentalize processing power and take shortcuts when encountering situations that seem similar to past situations they’ve encountered. While this compartmentalization is generally very efficient, it has its drawbacks. Here’s how Shankar Vedantam explains it in The Hidden Brain:

The conscious brain is slow and deliberate. It learns from textbooks and understands how rules have exceptions. The hidden brain is designed to be fast, to make quick approximations and instant adjustments. Right now, your hidden brain is doing many more things than your conscious brain could attend to with the same efficiency. The hidden brain sacrifices sophistication to achieve speed. Since your hidden brain values speed over accuracy, it regularly applies heuristics to situations where they do not work. It is as though you master a mental shortcut while riding a bicycle—bunch your fingers into a fist to clench the brakes—and apply the heuristic when you are driving a car. You clutch the steering wheel when you need to stop, instead of jamming your foot on the brake.

Now imagine the problem on a grander scale; the hidden brain applying all kinds of rules to complex situations where they do not apply. When you show people the faces of two political candidates and ask them to judge who looks more competent based only on appearance, people usually have no trouble picking one face over the other. Not only that, but they will tell you, if they are Democrats, that the person who looks more competent is probably a Democrat. If they are Republicans, there is just something about that competent face that looks Republican. Everyone knows it is absurd to leap to conclusions about competence based on appearance, so why do people have a feeling about one face or another? It’s because their hidden brain “knows” what competent people look like. The job of the hidden brain is to leap to conclusions. This is why people cannot tell you why one politician looks more competent than another, or why one job candidate seems more qualified than another. They just have a feeling, an intuition.

This same “leap to conclusion” occurs when people visit our websites. They come to our sites with a preconceived notion about what a quality website looks like, and many times those preconceived notions have much to do with the types of design elements that many “rational” thinkers would equate to the frying bacon close-up described in the movie scenario above. It’s hard to imagine how a rounded borders versus straight borders might effect someone’s likelihood to convert, but it will because the hidden brain is making lightning fast decisions about a site’s credibility based on everything it sees and how closely what it sees matches up to its past experiences with what it found to be credible websites. A customer will not likely point to border type as a reason she didn’t buy; she’ll just feel uneasy enough about the site that her ultimate decision to buy will go negative.

Conversely, the right design can play a huge role in increasing a site’s credibility and turning that decision to buy in the right direction. For example, there have been numerous experiments conducted over the years that show how the price of a bottle of wine can genuinely affect people’s taste. In his blog, Jonah Lehrer discusses the wine experiments and “The Essence of Pleasure” and shows how paying close attention to the “essence of a product” or a site, like “Coors being brewed from Rocky Mountain spring water, or Evian coming straight from the French Alps” can actually lead to a change in sensory perception. This, of course, is what good branding is all about and it can absolutely make the difference between new customers further engaging with our sites or bouncing off to another site.

Since customers won’t generally be able to tell us about specific design elements that are causing them discomfort, we need to use various techniques to help us get to the heart of the truth. Multivariate testing can be a great way to understand the immediate value of different designs. Combining multivariate testing with a predictive voice of customer methodology like the ACSI methodology used by ForeSee Results (shameless plug) can really help us understand the long-term brand impact in ways that simply multivariate tests alone cannot. It’s critically important to understand our customers’ perspectives on design in context with their overall future intentions in order to get to a truth of design’s impact that even the customer could not tell us directly.

Metrics and methodologies can point us in the right direction, and then we need to hire and trust talented, professional designers to do their thing. In the end. high-quality, professional design speaks well to the hidden brain and leads to enhanced credibility. Enhanced credibility facilitates a better selling environment. So, yes, we really do need the frying bacon close-up.

What do you think? How is design treated in your organization? What tips do you have? Or are you not buying it?

Heck, I’ve also written a white paper and blogged about social media.

Don’t get me wrong. I think social and mobile are important opportunities for us to improve our businesses. I just don’t think we should focus on them to the exclusion of some of the core aspects of our sites and businesses that still need a lot of work.

The level of our success with any of these new technologies is going to be limited by the effectiveness of our core site capabilities and constrained by any internal organizational challenges we might have.

Here are some topics I’d love to see get a little more press and conference content time:

• Usability
  From my vantage point at ForeSee Results, where I can see customer perceptions at many different retailers, it’s clear that our sites have not come close to solving all of our usability issues. In fact, I’ll go as far as saying improving usability is the #1 way to increase conversion. I’m currently reading a book called “The Design of Everyday Things” by Don Norman. The book was written in the ’80s (I think) so there’s no mention of websites. Instead, he talks a lot about the design of doors, faucets and other everyday objects and, most interestingly, the psychology of we humans who interact with these things. The principles he discusses are absolutely relevant to web page design. Other books, such as “Don’t Make Me Think” by Steve Krug and anything by Jakob Nielsen are also great sources of knowledge. I’d sure love to see us cover these types of topics a little more in our conferences and trade mags. Also, how do different retailers approach find and solve usability issues? In the end, if the experiences we create aren’t usable our social and mobile strategies won’t reach their potential.
• Organizational structure
  How often do we come back from a conference with great new ideas about implementing some new strategies (say, a new social media or mobile commerce strategy) only to run into competing agendas, lack of resources or organizational bureaucracies? Discussing and writing about organizational structure doesn’t have the panache of social media or other exciting new frontiers, but there’s little doubt in my mind that the structure of our organizations can make or break the success of our businesses. When we were first setting up the organization for the new Borders.com, we spent a LOT of time studying the structures of other companies learning about the pros and the cons from those who lived through different schemes. It was hugely useful and more interesting than you might think. Mark Fodor, CEO of Cross View, just wrote an excellent piece for Online Strategies magazine that discussed the hurdles involved in going cross-channel and included a very good discussion about the need for mindset shifts. I’d love to see these topics further explored in interactive environments at industry conferences.
• Incentives
  Books like Freakonomics make strong cases for the fact that incentives drive our behaviors. I’d love to hear how other companies set up their internal incentive structures. And there are multiple types of incentives. Certainly, there are financial incentives that come in the form of bonuses. But there are also the sometimes more powerful social incentives. What gets talked about all the time? How do those topics of discussion influence people’s behaviors? How do all those incentives align with the needs generated by new strategies to maximize the power of social media or mobile commerce?
• Data/analytics storytelling
  We have so much data available to us, and we all talk about being data driven. But how do we get the most from that data? How do we use that data to form our strategies, support our strategies and communicate our strategies. John Lovett of Web Analytics Desmystified wrote an excellent piece on telling stories with data recently. There are also several great blogs on analytics like MineThatData, Occam’s Razor, and the aforementioned Web Analytics Demystified. I’d love to see more discussions in trade mags and conferences about how to get the most from our data, both in analyzing it and relating the findings to others.
• International expansion
  We used to talk a lot about international, but it doesn’t seem to be a big topic lately. Yet the opportunities to grow our businesses internationally are immense. So, too, are the challenges. Jim Okamura and Maris Daugherty at the JC Williams Group wrote an absolutely excellent white paper late last year on the prizes and perils of international expansion. Jim did have a breakout session at last year’s Shop.org Annual Summit, but I’d love to see more discussion from retailers who have gone or are going international to learn more. Or it would also be good to hear from those who simply ship internationally or those who have decided to stay domestic to learn more about their decision making processes.
• Leadership
  Leading lots of people and convincing big, disparate groups to do new things is hard. I just read the book Switch: How to Change Things When Change is Hard by Dan and Chip Heath. There are some amazing tips in that book about implementing change in organizations (and in other parts of life, for that matter). I would love to see more discussion of these types of leadership topics that help us all implement the changes we know we need to make to take advantage of new opportunities like social media and mobile commerce.

I know a lot of these topics are more business basics than retail or e-commerce specific. But the reality is we need to be our absolute best at these business basics in order to implement any of our new ideas and strategies. I personally always enjoy talking to other retailers about some of these basics, and I certainly never tire of reading books that expand my horizons. I’d love to see more about these topics in our conferences and trade mags.

But these are just my opinions. I’d really love to know what you think. As a member of the executive content committee for Shop.org, I’m actually in a position to influence some of the excellent content that my good friend Larry Joseloff regularly puts together. But I’d love to know if you agree or not before I start banging the drum. Would you mind dropping me a quick comment or an email letting me know if you agree or disagree. A simple “Right on” if you agree or a “You’re nuts” if you don’t is plenty sufficient; although, I certainly appreciate your expanded thoughts if you’d like to share them.

Please, let me know what you think of my little rant.

ComScore reports online retail up 4% for the holiday season. While an increase is always nice, this is a much lower growth rate than online retail has seen in the past. And last year’s comparison base was far from stellar. ForeSee Results shows a significant drop in customer satisfaction year over year. Since satisfaction is predictive of future financial results, a drop is concerning.

But still, I wondered how sales could be up at all if satisfaction was so far down.

A deeper look at the ComScore data shows the Top 25 retailers growing 13% while “Small and Mid Tail” retailers are declining 10%. Satisfaction scores are also split, but the differences we’re seeing seem to be more based on those retailers who are continually improving their sites versus those whose cost containment measures have slowed or stopped improvements. It appears that the retailers who closely measure the effectiveness of their sites from their customers’ perspectives and continuously improve their customers’ experiences are the retailers with increasing customer satisfaction scores. Those retailers who didn’t improve customer experience this year are suffering declining satisfaction scores. Many of those in the Top 25 are the retailers who have continued to enhance their customer experiences. Those enhancements are not only helping them to increase their sales, but because of the high visibility and usage of those tops sites, they’re also raising consumer expectations of all sites.

Customer satisfaction can be best defined as the degree to which a customer’s actual experience meets his or her expectations. Therefore, rising expectations can depress satisfaction scores if customer experience improvements don’t keep pace.

In the rapidly changing world of online retail, stopping or delaying improvements is like treading water in a swimming race. While you may temporarily save some energy, you will fall hopelessly behind and your only hope of catching up is spending a lot more energy than you likely saved treading water

Growing online retail businesses realize and fully embrace the need for continuous improvements, and they also realize that online retail in general is far from producing the level of customer experience truly necessary to provide excellent self-service shopping experiences. I recently heard Robin Terrell, Managing Director of John Lewis Direct in the UK (and Amazon alum), say “If it ain’t broke, you ain’t looking hard enough” in a talk about the need to improve customer experience. It’s a brilliant statement, and I totally agree with what he was saying.

So, “improving customer experience” is a huge and vague statement. Where do we start?

1. Recognize that it’s broke and you ain’t looking hard enough
   We’re still in our infancy in online retail, and we’ve got a long way to go. We too often try to increase our sales by generating more traffic and don’t spend enough time converting the traffic we’re already got. Often, the obstacles to conversion are not the big, shiny, whiz bang functionality; they’re lots of little things that add up to big problems. Those problems are hard to see without a concerted effort, as I discussed in more detail in my Tree Stump Theory post and other posts on conversion.
2. Truly learn how effective your site is from your customers’ perspective
   We can all identify lots of improvements we’d like to see on our sites, but it’s the improvements our customers most need that will drive our best growth. So understanding where we are and aren’t effective from our customers’ perspectives is critically important, but difficult.Focus groups and usability labs can be very helpful, but they can’t be our first or only methodology because it’s not possible to project learnings from a small group of people onto our entire population of customers.

   First, we need to quantitatively understand our effectiveness in the eyes of our total population, and that requires a statistically solid customer polling and analysis capability. Blatant and shameless plug alert: I’ve had great success using ForeSee Results in the past for exactly this purpose. Once we understand problem areas at a macro level, we can add a lot of color by interacting directly with customers in focus groups and usability labs. More details on this process can be found in my post entitled “Is elitism the source of poor usability?”

3. Consider getting some help from usability professionals
   Usability audits are different from usability labs. Usability auditors are professionally trained to understand how people interact with websites. Many of them have degrees in Human-Computer Interaction, a field that truly seeks to understand how people interact with software. These types of people can really help to identify problems with our user interfaces that untrained eyes have trouble seeing but which regularly obstruct customers from accomplishing their tasks.
4. Put in place a process to continuously improve
   This is really about budgetary and project management mindset. We must just accept the fact that we can’t tread water in a never-ending swimming race, and our only chance of competing is to keep swimming. We have to build our staffs, our budgets and our processes with the recognition that competing in the marketplace means continuously improving our customer experiences. Which leads to …
5. Wash, rinse, repeat
   Since the leaders in the marketplace are running this same cycle, we cannot rest. We must continue to recognize our sites are broken, continue to measure our effectiveness from our customers’ perspectives, find problems, fix them and begin again.

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We’ve got a lot of data that shows that retailers who best satisfy their customers generate the best financial results. I suppose that statement doesn’t sound like rocket science. But understanding that satisfaction has a direct relation to expectations and that our customers’ expectations can change independent of what we do on our own site is important. The leaders are continuously improving their sites, and they’re improvements are raising our customers’ expectations. We’ve all got to swim harder to keep pace.

What do you think? What’s your view on the marketplace? How have you see customer satisfaction affect your business?

It’s important to remember that our sites are really self service software applications, and they’re very likely not as intuitive as we think they are. Referencing back to one of my previous posts, “Is elitism the source of poor usability,” we have to remember that our customers probably aren’t as tech savvy as we are, and they are definitely not anywhere near as familiar with our sites as we are. So, it’s important that we’re very clear in our messaging when something goes wrong.

So what does it take to write a quality error message?

1. Be specific
   It’s so important that we tell our customers exactly what went wrong. Our developers have to write code for every possible instance, but all too often we resort to generic and vague language in our error messages. Here are a couple of examples:

   

   As a customer, I’m not sure what I’m not sure what happened or what I should do about it. I might try once again, but if I got this message a second time I would be gone.

   

   This either/or scenario is really an example of a lazy error message. Which is it? Is the address improperly formatted or does it contain invalid characters? We need to tell customers specifically what is wrong and tell them how to fix it.

   Here’s a much better example:
   

2. Use clear language
   It’s very important to avoid anything that even remotely resembles tech jargon. Try instead to use short words that are part of everyday language.First, a bad example:
   

   Huh? Customers understand “password” but “authentication credentials” are certainly unclear and sound kind of scary, frankly.This one is much better:

   

   This is both specific and written in clear and simple language.

3. Strong visibility
   Error messages need to be extremely prominent. Use color and other symbols, such as exclamation points, to help the error message stand out. It’s also helpful to separate the error messages from the rest of the page with white space. Include the message prominently at the top of the page and also at the specific field, if it’s a form error.Here’s a good top of page error:
   

   I would like to see more white space around the error message, but otherwise this is really good.And I really like this way to highlight a particular field where the error has occurred. It may not be pretty, but then it probably shouldn’t be. It should stand out, and this does. Even better, we get a very specific message telling us exactly what’s wrong with the field.
   
   

4. Be polite
   Whenever an error occurs during our customer’s experience with our site, we’re in danger of losing her if we don’t handle it well. So, let’s be as courteous as possible. The cost of courtesy is zero, and it allows us to come across as friendly as possible.Here’s one that is both specific and polite:
   
   

   Here’s one that goes the extra mile to suggest calling Customer Service if there is still a problem. This is a very nice touch that will go a long way towards saving the sale.
   
   

5. Provide examples for how the information should be entered correctly
   It’s very important they we’re not only specific in defining the problem that occurred but also specific in explaining how to correct the problem. If the customer has entered his email incorrectly, we cannot assume that he knows what he did wrong or how to enter it correctly.Here’s an error message that explains the format pretty well:
   

   However, the customer may not understand what “domain” means. It may be be better to also use a real example with a well-known domain like “name@aol.com.” Even better, incorporate the information the customer entered, if possible.For example, the error might say something like:

   You entered “kevin” for your email address, which is not a complete address. Please enter an “@” symbol followed by an email provider after your email name. For example, “kevin@yahoo.com.”

Even better, be proactive. Stop the error before it occurs.

I really love how Restaurant.com handles their form fields. Upon entry to a form field, a dialogue box dynamically appears next to the field with some helpful information. The movement that occurs upon entry really draws your attention to the helpful information, which I find considerably more effective than help text persistently present under or next to a field. It’s far easier to ignore static text than something that appears when you enter the field.

Additionally, the folks at Restaurant.com have included some great help text that provides important information. In this example, they’re letting us know the address must match the billing address on our credit card. Excellent!

And here, we get some specific information about the value of our password and the basic requirements for the password. And we get some nice politeness to close it out.

Save those sales. Give error messaging your full attention.

Error messages should get just as much attention as any other site functionality in the requirements processes for our sites. We should give error messaging as much attention as we give to marketing copy. It may not be sexy, but it’s critically important if we want to avoid needlessly losing sales.

What do you think? How much time to you put into error messaging? Do you have examples of particularly good error messaging? Would you add anything to the list of quality error message attributes?