#marketingeffectiveness

People say high bounce rates are bad. At first glance, this makes sense. After all, who’d want customers to visit a (web or app) page and leave without seeing any more pages? We might decide, therefore, that digital advertising may be made more efficient by eliminating channels with high bounce rates.

This is a mistake. Let me explain why.

Consider the following:

1. Salesperson A stands just outside a retail store handing out pamphlets. 90% of the people who get pamphlets visit the store. Of the people who visit the store, all of them end up shopping at the store. 10% Bounce rate, 100% Conversion rate (=customers/visitors).

2. Salesperson B expends shoe-leather, visits customers’s homes and hands out pamphlets, even speaks to a few customers. 10% of the people who’ve seen the pamphlets end up visiting the store; of these, 50% end up shopping. 90% of people “bounce” i.e. they see the pamphlet but don’t visit the store. 90% Bounce rate, 50% Conversion rate.

3. Salesperson A and B have the same fixed salary.

Would you, on the basis of the above data, conclude that Salesperson A is the better salesperson? Or, that Salesperson A is attracting “higher-quality traffic” than Salesperson B?

Consider the following question instead:

Suppose Salespersons A and B hadn’t handed out pamphlets. What percentage of people would have become customers anyway?

The conclusion is the very opposite of what we’d get if we went by bounce rates or conversion rates. 

Granted, it’s a lot easier to measure things based on last-click based attribution, and a lot harder to measure Incrementality. This would be alright if a sole emphasis on last-click attribution and bounce rates resulted merely in a suboptimal solution. The trouble is, it can lead you in exactly the wrong direction.

Notes

1. The title of this essay is inspired by the computer scientist Edsger Dijkstra’s essay “Go to statement considered Harmful”, see http://www.u.arizona.edu/~rubinson/copyright_violations/Go_To_Considered_Harmful.html

2. I’ve taken some liberties in extending the concept of bounce rates to the offline world. Specifically, bounce rate is defined as the % of total sessions that begin and end at the landing page. In the Salesperson analogy, I’m considering a “view” of the pamphlet to be a visit to the landing page, and a visit to the retail store as the negation of bounce. Imperfect though the analogy is, I think it captures the essence of the problem well enough.

3. For an example of how an emphasis on different metrics, each seemingly sensible, leads to entirely opposite conclusions, see Jeff Bezos’s 2004 letter to shareholders, where he compares the effect of optimizing for free cash flows versus net profits. https://www.sec.gov/Archives/edgar/data/1018724/000119312505070440/dex991.htm. 

In this letter, Bezos says: “Though some may find it counterintuitive, a company can actually impair shareholder value in certain circumstances by growing earnings.” 

Analogously, marketing teams can actually impair their effectiveness in certain circumstances by trying to reduce bounce rates. 

There’s another great quote from the same letter: “Cash flow statements often don’t receive as much attention as they deserve. Discerning investors don’t stop with the income statement.” 

Of marketing, I’d say the following: Incrementality doesn’t receive as much attention as it deserves. Discerning marketers don’t stop at bounce rates and conversion rates, they also consider incrementality.