Tracking the effectiveness of your marketing is important, but many small and mid-sized businesses don’t know where to begin. Which marketing campaign effectiveness metrics are a true indicator of your marketing performance?
To begin improving your business marketing, you need to identify and track the right marketing metrics and KPIs. These will vary depending upon your business type, your marketing goals, and the strategy and marketing activities you put in place.
What Are Key Performance Indicators in Marketing?
Marketing Key Performance Indicators (KPIs) are quantifiable metrics used to measure marketing effectiveness across all channels. Marketing metrics are numbers that help you track performance and progress of certain marketing and business initiatives. Not all marketing metrics are key performance indicators for your business.
Marketing KPIs Vs. Marketing Metrics
It can be a bit confusing to differentiate the two, but KPIs are distinct in that you select certain measures that indicate the success or shortcomings of your marketing efforts. Each KPI should measure a specific objective over a predetermined period. Marketing metrics do not possess any specific characteristics and are not specific to a given amount of time.
You could say every KPI is a metric, but not every marketing metric is a KPI.
How to Choose the Right Metrics
Naturally, most marketing teams would like to measure as many key marketing metrics as they possibly can, but sometimes tracking too many can be a bad thing.
A dilemma that many marketing teams face isn’t so much which marketing performance indicators they need to track, but more so what they need to eliminate from the equation altogether. Tracking everything can waste time and cloud the real goals and objectives of your marketing campaigns.
Selecting the most vital marketing campaign metrics for your business can be a real challenge. Ultimately, the right marketing metrics are those that bridge the gap between marketing and the goals of the company.
You need to keep these three core considerations in mind as you’re selecting the right metrics to track for your business:
- What is the purpose of the metrics you’ve selected?
- Who will see and use that information?
- What decisions will be made based on the information you’re tracking?
There are also considerations you need to consider at the executive level:
- Does the information presented provide an insight into what works and what doesn’t work?
- Do the metrics display how marketing is impacting business outcomes?
- Do the metrics display the financial value and effectiveness of marketing?
Before deciding on the marketing campaign measurement metrics that you need to track, you must first understand your company’s most critical business outcomes. If you’re focusing on rapid growth, you’ll need metrics that accurately display customer acquisition and growth. If one of your critical outcomes is increasing revenue, then your marketing department needs to focus on metrics that measure qualified leads.
In addition to focusing on the true needs of your business, each of your metrics should be significant and meaningful. As you’re choosing the metrics to measure marketing performance at your business, you may be tempted to focus on what’s most comfortable to measure. However, it isn’t about what’s easy — it’s about what’s best for your business.
Choosing Marketing KPIs and Metrics that Affect Decision Making
Key performance indicators for marketing departments should always be selected based on the impact they will have on your business objectives and should never be dismissed due to emotional decisions.
Let’s say you’re tracking return on marketing investment (ROMI) and you realize the company can save money by reducing the size of a bloated marketing department or advertising budget. That may be the best decision for the business, but the actual act of discontinuing certain employee or vendor relationships can be very hard. Some people may decide to omit or devalue marketing efficiency metrics like this to avoid making difficult decisions.
However, all metrics should be used as a tool for decision making. You should look at your metrics objectively. Select marketing performance metrics that will drive action and ultimately help your company succeed.
6 Marketing Metrics Examples Your Business Should Be Using
Every business is different, but you’ll find there are certain KPIs for sales and marketing that are universal. Let’s look at the following marketing KPIs list for a better idea of what you should be tracking at your organization.
1. Customer Lifetime Value (LTV)
Customer lifetime value should be one of the core metrics for any marketing plan. Understanding the total value a new customer is expected to bring to the company throughout their relationship with you is crucial information and helps guide appropriate sales and marketing investments decisions.
LTV measures the amount of gross profit generated by a customer over the entire time that they do business with you. You can calculate this using one of the following equations:
- Revenue per transaction x Gross Margin % x expected number of transactions over the course of their relationship
- Revenue per subscription period x Gross Margin % x average length of retention (subscription periods) for a typical customer
Reaching out to your current customers is one of the best ways to enhance customer value, and it has a variety of beneficial effects for your business:
- It will keep your customers happy
- It can help to reduce churn
- It can increase the lifetime value of your customers
2. Customer Acquisition Cost (CAC)
This metric gives you insight into how much it costs your company to acquire a new customer. You can easily calculate this using the following formula:
- Total marketing dollars spent on customer acquisition / Total new customers acquired, calculated over a given period (e.g., monthly, quarterly).
Depending on how deep you want to go in assessing your client acquisition costs, you can include all sales and marketing costs, both fixed and variable inclusive of payroll, or subsegments of these such as limited to all marketing expenditures (see # 5 below). Either way, set yourself a target such as having a CAC of $450.
Understanding the relationship between LTV and CAC (e.g., LTV divided by CAC) is one of the most important metrics for your business, providing not only insight into how effective your spending is, but giving you information to determine how much you can afford to spend on customer acquisition.
3. Web Traffic
If you’re utilizing an inbound marketing strategy, you need to measure the number of users that have visited your site. There are several KPIs you can decide to use, from Total Visits by unique users to your website or specific page, to the specific traffic sources that are driving them there: Direct (typed your URL into their browser), Organic, Referral traffic, and Campaign, such as pay-per-click advertising or email links.
There’s a good chance you’ll be focusing heavily on acquiring organic traffic, which is the free traffic that you acquire through good SEO (search engine optimization) practices. There’s no specific equation to measure organic traffic, though you can look at absolute numbers, the percentage of total visitors, and page views or rankings.
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Whether you use a KPI or metric for your marketing team, make sure to keep track of the effectiveness of your SEO strategy, as well as the keywords you’re using to draw in customers.
For help from an expert SEO agency, contact MARION today.
4. Lead Conversion Rates
It’s one thing to attract prospects via your marketing team — it’s another to close them with your sales team. Ultimately, you will want to measure the number of leads that are converted into sales; as a KPI, the Lead Conversion Rate can be calculated as:
- (# Leads converted to Sales/Total # of Leads) * 100
In doing so, you’ll want to look at marketing qualified leads (MQL), and Sales Qualified Leads (SQL) and the conversion rates between the categories
A marketing qualified lead (MQL) are individuals who have been deemed ready for the next step of the sales process or more likely to convert to a customer compared to other leads. This is based on what pages they have visited and what actions they have taken. For example, someone filling out a form download an e-book, signed up for your newsletter or engaged with your business content in another way might qualify as an MQL.
Sales Qualified Leads (SQL) are leads that someone has vetted, perhaps members of your marketing and sales teams, and deemed ready for the next stage. These could also be someone who requests a meeting while providing certain qualifying criteria or that your sales team has already contacted or has scheduled for an appointment.
5. Inbound Marketing ROI
As far as management is concerned, this is likely one of the most important metrics for your business. Inbound marketing ROI is significant because it helps you to ascertain whether your current inbound marketing methodology is making or losing money.
No one wants to continue feeding money to a marketing campaign or activity that’s losing your business money. Therefore, return on investment is a fundamental metric to measure, because it can determine whether you move forward with a particular marketing activity or completely shut it down.
Calculate your inbound marketing ROI with the following equation:
(Incremental Sales Growth – Marketing Investment) / Marketing Investment = ROI
6. Social Media Traffic
While most every business needs a social media presence and should have some metrics in place, there is an increasing number of industries where a comprehensive social media marketing strategy is essential for success and may warrant a Top 6 KPI.
There are a variety of metrics you can measure when it comes to determining the effectiveness of your social media marketing strategy. For most companies, it’s best to avoid becoming fixated on vanity metrics such as new followers, and instead track Key Social Metrics that measure the impact of your social media efforts on other marketing channels. This can include referrals to your website, the number of referred visitors who convert after they get to your site, or events users take to interact and engage with your company.
Breaking down the specific role the various social media channels can play for your business will help you focus your efforts while helping to determine metrics or KPIs that can help drive improvements when needed.
What Marketing KPIs will you track for your business?
This list is by no means all-inclusive, but it should give you a general idea of some of the most important marketing metrics and KPIs you should be tracking for your business.
If you’re not sure how to monitor marketing performance by keeping track of top marketing metrics, we’re here to help. MARION is an integrated marketing agency dedicated to helping small to medium businesses grow their influence online. Our team of internet marketing strategists and graphic design experts is ready to help you every step of the way and ensure you’re tracking of the right metrics to improve your marketing campaigns.
Contact us today for more information about our marketing services.