Hybrid metrics can seem complicated at first glance, but once you have a basic understanding, they can be leveraged to assist specific types of SEM programs in experiencing more controlled success. In this article, we break down what hybrid metrics are, when to test them and how to align them with your business goals. For specific cases, understanding and correctly implementing hybrid metrics can be the key to driving improved SEM outcomes.
It’s important to keep in mind that a hybrid metric is not a fit for every program. It’s essential to only employ them when needed or you risk overcomplicating your metrics and results.
What is a Hybrid Metric?
A hybrid metric is based on two or more conversion or revenue metrics that you wish to optimize towards. It’s often a combination of a higher-funnel metric that has an abundant amount of data and a lower-funnel metric that generates less data. In most cases, the higher in the funnel the metric is, the more volume and less accuracy it will have. Conversely, the lower in the funnel the metric is, the less data is available, but it is highly accurate.
This enables you to prioritize a lower-funnel metric that has scarce data by bidding towards it and the higher funnel metric. The hybrid metric gives you more control over your results by letting you pull certain levers to focus on specific parts of your conversion funnel.
When to Consider Testing a Hybrid Metric
“Hybrid metrics are most useful when your business goal is too low in volume to optimize towards.” Scott Brunstein, Sr. Data Analyst at QuanticMind.
In most cases, when you have enough data it makes sense to optimize towards just one metric. However, in some situations – for example, when you have complex business goals or low conversion volume – it can be valuable to approach optimization using a hybrid metric.
If you’re curious, and you’re confident you have adequate data, you can employ our general rule of thumb: if the minimum volume is double-digit conversions in a day, then you have enough data. Depending on the program and goals, the threshold can be even lower. But generally, if the data is lower than double digits, then we recommend looking into leveraging a hybrid approach.
If you think your SEM program could benefit from a hybrid metric, the first step is aligning your business goals with the proposed metric. Once you do that, it’s recommended that you select a subset of your program to test it on.
If you know your business goals, you can move on to the next section as you will use your goals to determine which type of hybrid metric to test. If not, take some time to think about what you’d like your SEM program to achieve this quarter and whereabouts in the funnel you might need some additional focus.
Choosing Your Hybrid Metric
There are two main types of hybrid metrics:
1. Various Conversion Paths: When a program has a bunch of different conversion metrics that don’t have a true revenue value or are valued differently. You can combine and weight different styles of leads such as email, phone call, items in a cart and checkouts into one hybrid metric.
Example: Email Signups + 2*Phone Calls
2. High and Low Funnel Optimization: Allows you to leverage multiple sections of the conversion funnel and optimize towards that. A good case to use this is in SEM programs with expensive products of low volume that are optimizing to conversion metrics. If you know something higher in the funnel leads to the lower funnel conversion, you can combine those two things together.
For instance, look at email leads as part of a shopping funnel. One could optimize towards leads and conversion amounts. This lets you give the algorithm more data by optimizing to something that is close to what you want. You can boost the lower funnel one by multiplying it by a constant.
Example: Hybrid Metric = Leads + (10 * Conversions).
For more on funnel optimization, check out our past blog post, Hybrid Conversions, Part 1: Why You Should Look at the Whole Conversion Funnel.
Confirm Business Goals Alignment
As mentioned earlier, if you’re going down a hybrid route it’s important to align important business goals with the metric. Creating a priority list of what you value is a good place to start. If you need help assigning values to target towards, you can derive it from historical performance.
It can take a bit of trial and error to confirm the hybrid metric that is right for your SEM program. You can focus on a higher funnel metric such as a click on a ‘learn more’ button instead of the actual conversion.
Testing a Hybrid Metric in 4 Steps
It’s important to go through all four steps before you start testing. This allows it to be well thought out and provides a better foundation for testing, ensuring you have accurate results.
1. What Section to Test: Determine the subset of your program that you’re willing to test on.
2. Bucket Split: Perform a bucket split of that section so you have both a control and variable bucket. The buckets should be split evenly and without bias or judgment.
3. Determine the Time Period: Set a proper pre and post period to assess whether or not the metric of interest (sales volume or cost per sale) has improved. Ensure you control for seasonality, latency, and other external factors.
4. Defining Success: Determine how you’re going to define success before you begin. In most cases, you’d look at conversion volume and cost per acquisition. Have an idea of what you’d consider successful even if it’s a range and then you’re ready to start the test.
After your test, you have one last thing to do – fine-tune your hybrid metric. Based on the results you can change the metric as needed. Perhaps you’d like to adjust how it’s weighted or test additional parts of the funnel. Once you’ve selected the final version of your metric it’s important to keep it up to date.
Hybrid Metric Example
Now that you understand the fundamentals of a hybrid metric, let’s explore a fictional example together. Let’s say you’re a bookstore selling a series of books online through your website and your goal is to hit a specific number of conversions efficiently every month. You’d like to spend a certain number of dollars for someone to purchase a book from your online store.
In this example, the book store’s online book retail program is comprised of the following:
- Over 250,000 keywords that are bid on
- Selling an average of 200 books per month
- Conversion path includes two different options:
- A button for direct purchase (lower funnel metric and sale)
- A button to learn more about the books (higher funnel metric and lead)
Looking at the historical data for ad clicks over the last six months or longer would help you determine a ratio of leads to sales that you can expect. You can use this to determine a hybrid metric that you can apply to all the other keywords in your account.
This example is a good candidate for a hybrid metric as there is a large number of keywords being bid on with low sales conversions. It also has two different conversion path options.
When a hybrid metric is set up correctly, it will help you bid high enough on keywords that have strong sales volume, helping shift sales to be a larger portion of your optimization strategy than leads. It will also work to reduce bidding on the keywords that drive zero to low sales. It can also help you bid on cheaper keywords that drive more sales volume.
While a hybrid metric is a good fit in this example, keep in mind they are not suitable for every program. When they are a good fit, they can be a helpful tool to optimize toward different parts of your funnel.
If you’ve made it this far you should have a basic understanding of hybrid metrics including, the two main types, when to use them and how to test them.
For even more information on hybrid metrics check out this blog post “Why is My PPC Performance Bad? Part III: How to Ensure You’re Optimizing Towards the Correct Metric.”