Goodhart’s Law in Facebook Marketing
This is probably my all-time favourite economic law.
It pops up absolutely everywhere, but the man himself – Charles Goodhart – didn’t pen it until the 70′s. It goes something like this:
When a measure becomes a target, it ceases to be a good measure.
Hmm. That seems like a bit of a problem. Everyone needs to work to some sort of target, and any sort of company progress has to have some form of measurement in place to keep track. So far, so not-all-that-helpful.
But being aware of this truth will now make you aware of the inherent flaws that come when a company puts in systems of management to measure and motivate their teams. You will no longer scratch your head as to why the new metric of the week is through the roof while revenues tread water. Let’s see some classic examples:
1. Doctor’s Surgeries & Wait Times
It’s quite difficult to measure the level of service the public was getting at their local GP. Surveys? Good, but too time-consuming. One easy measuring-stick that was introduced was waiting times. Pretty logical – the more efficient surgeries would record the lowest waiting times, which would strongly indicate better customer service. But what actually happened? As soon as doctors knew waiting times were the goalposts, they just sped patients through as quickly as they could to game their results. Customer service FELL.
2. School & test scores
This is a massive problem in education. The system churns out thousands of straight A students who then proceed to take their first step into the world of work and fall flat on their faces – proving themselves utterly useless to their employer. Test scores have become ever more important in ranking schools, which in turn impacts their funding. Schools have an absolutely enormous incentive to stuff their pupils full of facts and exam technique to make them ace tests, at the expense of ensuring they develop useful skills that can build a successful career. Tests were meant to be the measurement of excellence. But rote-learning and spoon feeding has led to a demographic of A* knuckleheads.
3. Facebook Marketing & Likes
Onto the marketing example, the real point of this post. Lots of companies are putting some of their budget into Facebook ads. The company’s 3rd quarter ad revenue was up 66% to a whopping $1.8bn. But the question on marketing manager’s lips seems to be simply “how many Likes do we have?”. Bad, bad question to be asking. Making Facebook Likes the prime metric is a sure-fire way to lose money.
The reason is that Facebook marketing is a complex system of interactions. Likes is an attractive metric because of it’s simplicity, but fails to account for so many other factors such as : shares, photo content interaction, click throughs, video plays, reach etc. The best way to get a baseline understanding of your Facebook marketing is to keep an eye on click throughs to your site and how much revenue those visitors go on to generate for you. This segment of visitors gives you your 100% straight-from-Facebook traffic’s value. Then, ideally you can see each visitor’s journey and identify where Facebook was a touchpoint along the way, but not the final source when that person purchased. Each business is different so you can apply your own weightings to give Facebook some of the credit for that sale. Add these all together and you’ll have a value in £’s of what your Facebook marketing has contributed to your revenue.
This is the most important metric to watch for an ecommerce business. And as tempting as it is to make Likes the measure; if you do all your marketing guys will do is just deliver you a tonne of poor quality Likes that do nobody any good.
Watch out for Goodhart.