You have your website and social media accounts ready. You’ve invested time and money into your content and in aligning your marketing strategy with your company goals.
Now, you want to see some results! But, how can you effectively measure the ROI of your marketing campaigns? After all, you need to have proof of the success of your campaigns. Key Performance Indicators (KPIs) are the solution!
KPIs show if you’re going in the right direction towards meeting your marketing goals. They act as guidelines for achieving your goals.
But there are various metrics in your campaign that you can track. That’s why it’s important to know which KPIs are best to assess your marketing performance.
Marketing Objectives and KPIs
Marketing objectives define what your company needs to achieve through the marketing strategy. Each of the objectives must be pertinent to your company goals.
So, what makes a good marketing goal? The S-M-A-R-T method helps us set goals:
- S – Specific: Concise and easy to understand.
- M – Measurable: With specific criteria that measure the progress of each goal.
- A – Achievable: Attainable and not impossible to achieve.
- R – Realistic: Within reach, realistic, and relevant.
- T – Timed: With a defined timeline which includes a starting date and a target date. The purpose is to create a sense of urgency.
Here’s how to align each of your marketing KPIs and S-M-A-R-T goals:
- Centre each KPI around a specific goal.
- Make sure that each KPI is measurable.
- Confirm that each of the KPIs is achievable and realistic.
- Assign a specific time frame for achieving the KPI.
The Relevance of Marketing to the Business
Marketing is important because it attracts customers! It’s a concept that is much broader than mere advertising. Marketing is the entire process of choosing, pricing and promoting your products. It results in the following benefits for businesses:
- Informs: Marketing can inform your customers about how you can solve their problems. Through your content, you can communicate your solutions, company mission, and vision.
- Engages: Marketing keeps your company in the prospects’ minds. It can turn your customers and followers into loyal fans that will support your brand. By engaging in different channels, you stay in touch with your target audience.
- Builds Credibility: Your credibility is vital to the success of your business. A strong and reputable promotion indicates that your business is credible. Whether it’s through an email campaign or social media, your brand voice helps you establish credibility with the customer.
- Sells Products: Nowadays, you can’t sell your product if no one knows about it. Through marketing, you can boost your brand reach and attract more attention to your products.
- Grows Companies: Marketing is how you attract and keep customers. A proper marketing strategy often leads to a positive ROI and business growth.
Importance of Marketing to Customers
Here’s why your marketing is so important for your current and potential customers:
- Global Connectivity: Modern technology facilitates more marketing exchanges than ever. If the customer wants to buy a product, he she can visit your website or go to your social media account and order it, it is that simple.
- Product Awareness: Getting the product recognized is the primary goal of marketing. So, when customers learn about a certain product, it often comes as a result of marketing activities.
KPIs to Assess Marketing Performance
When setting and tracking marketing key performance indicators (KPIs), many marketers and business owners give all their attention to the usual suspects:
- Sales revenue
- The number of sales-qualified leads generated
- Cost per acquisition
While many think these common KPIs are the best indicators of success, there are a number of other marketing KPIs that will help your business lead a more successful digital marketing strategy. The right marketing KPIs help you identify which campaigns and tactics have the biggest impact on whether you reach (or fail to reach) your sales and marketing goals.
No one wants to support a marketing activity that’s losing their company money. By tracking the right marketing KPIs, your company will be able to make the right adjustments to various strategies and budgets.
Without the right ones, however, your company might be reporting and making decisions based on incomplete information.
But with so many possible marketing KPIs to track, it can be pretty overwhelming to know where to start.
We’ve narrowed down our list to the 10 most important marketing KPIs that we teach our clients to track. These are the key performance indicators that provide the best benchmarks for your progress and wins. In this article, we’ll explain:
- Which marketing KPIs you should track.
- Why you should track them.
- Methods you can use to track these key performance indicators.
This way, you’ll know exactly which metrics you should pay attention to that will help you grow your business.
Now, if you don’t hit the right benchmarks for your marketing, something is either wrong with your strategy or you don’t know how to assess your campaigns. This is where marketing KPIs step in. There are several important KPIs that you should be tracking to conduct a profitable marketing campaign:
1. Website Visits
You must’ve invested lots of time and resources into your web presence. The next logical step is to make the most out of it and maximize your ROI in the process.
YOUR AUDIENCE
One of the key things to measure on your website is your audience. With Google Analytics, you can track user sessions, unique visitors, as well as new and returning visitors for your site.
By measuring users and sessions, you can determine if you’ve increased your audience, and the rate in which the audience increases.
TRAFFIC SOURCES
In addition to tracking your audience, it’s important to gauge how your visitors land on your website. Do they come from Google? From your social media channels? The email newsletter? A pay-per-click ad?
Google Analytics groups your visitors into different categories based on demographics, geography, interests, etc.
Additionally, GA segments your visitors by traffic channels source medium, and more. There are several traffic sources for generating visits to your website:
- Organic: Traffic brought by relevant industry and branded keywords.
- Referrals: Traffic that comes from websites that link to your site.
- Direct: Traffic generated by typing your URL into the browser.
- Email Marketing: Traffic generated by links in email marketing messages.
- Paid Traffic: Traffic that comes as a result of PPC search engine ads.
- Social Media: Traffic that comes to your site through posts on social media platforms.
BOUNCE RATE AND AVERAGE SESSION TIME
The longer the visitors browse your website, the higher the chances are that they’ll buy your product. If someone bounces off, he she is probably not interested, or a UX-related factor has pushed him her away.
If your website is user-friendly and relevant, people will stay longer. They may not buy immediately, but the longer they stay on your site, the bigger are the chances that they’ll buy.
2. Email Marketing Conversion
Email Marketing Conversion Rate is the percentage of users that complete the desired action when they opened your email. The simplest way to calculate it is with the following formula:
Email Marketing Conversion = Number of Conversions Number of Delivered Emails x 100
The importance of email marketing conversion as a KPI is fundamental for your marketing strategy. When you convert users via email, you build relationships with customers and interact with them at the same time.
3. Marketing Qualified Leads
With complex sales funnels and situations that you’ll encounter in your campaigns, it’s important to define which are your marketing qualified leads (MQLs).
Hubspot defines MQL as:
“a lead judged more likely to become a customer compared to other leads based on lead intelligence, often informed by closed-loop analytics.”
There are two primary ways to determine if a lead can become your customer:
- Grading: Using your ideal customer persona to create a list of targeted buyers for your business. This is especially beneficial for B2B companies where only fully-qualified buyers work.
- Marketing: Bringing traffic to your landing pages where people leave their contact information. Leaving their contact information can indicate that they want to learn more about your products, which qualifies them for further marketing interactions.
When grading MQLs, the key is to segment those who are sales-ready leads and continue to market your products to them.
4. Sales Qualified Lead from Marketing Activities
A sales-qualified lead (SQL) is defined as:
“A prospective customer that has been researched and vetted — first by an organization’s marketing department and then by its sales team – and is deemed ready for the next stage in the sales process. An SQL has displayed intent to buy a company’s products and has met an organization’s lead qualification criteria that determine whether a buyer is a right fit.”
The above explains exactly what needs to happen for a regular lead to become an SQL. Taking the time to qualify leads will simultaneously improve your lead management process and your close rate.
5. Cost of Customer Acquisition
Customer acquisition cost is the price for persuading prospects to buy your product. The formula for calculating customer acquisition cost is:
(The total of all sales and marketing expenses) (Number of customers acquired)
For example, if your total sales and marketing expenses per month are $25,000 and you’ve got 200 customers as a result of that, then the customer acquisition cost will be $125.
The values in both the numerator and denominator must use the equal time duration.
Your customer acquisition cost can also include the following:
- Salaries for your salespeople and marketing personnel.
- The equipment that your salespeople use.
- The CRM system and software that your marketing & sales team uses.
- Advertising and direct marketing activities.
- Price discounts.
There are many additional expenses that the customer acquisition cost can include that are not listed above. To calculate CAC properly, each expense must be added to the numerator of the equation.
6. Net Promoter Score
The Net Promoter Score (NPS) is an index stretching from -100 to 100 that scales the customers’ readiness to endorse your products or services. You can ask your customers to grade on an 11-point scale the chance of recommending your product or service to a friend or colleague. Based on their response, you can categorize your customers in the following three categories:
- Detractors: They’ve provided you with a score lower or equal to 6. This means that they’re not particularly excited about your product. They won’t buy again, and they can hurt your company’s reputation through negative word of mouth.
- Passives: Passives give a score of 7 or 8. They enjoy your product service to some extent. But, given the opportunity, they will opt for one of your competitors. They wouldn’t speak badly about your company, but they won’t recommend you either.
- Promoters: Promoters always answer 9 or 10. They adore your products and services. They are the ones who’ll recommend you to other potential buyers.
The NPS is determined by subtracting the percentage of customers who are detractors from the percentage who are promoters. If each of your customers gives you a score lower or equal to 6, it would result in an NPS of -100. On the other hand, if your customers rated you with a 9 or 10, then the NPS would be close to 100.
NPS helps you understand your target customers and see how they respond to your marketing campaigns. Your goal should be to gain loyal customers that will become brand promoters instead of one-time buyers.
7. Customer Retention
Customer retention rate (CRR) is the percentage of customers that you keep as regular ones over time. It answers how well your retention strategies are working. The higher your customer retention rate, the more successful you’re in keeping your customers.
CRR is calculated according to the following formula and variables:
Customer Retention Rate (CRR) = {Number of Customers (End of Period) – Number of Acquired Customers (Throughout Period)} Number of Customers (Beginning of Period)
Studies have shown that only a 5% increase in CRR can increase your profits from 25% to 95%! To increase your CRR, you need to go the extra mile and exceed the expectations of your customers.
8. Customer Lifetime Value
The customer lifetime value (CLV) is the amount that you expect your customers to spend on your products, throughout their lifetime. It is an estimation of the profit that comes from the company-customer relationship. That should help you figure out whether a customer will be profitable in the long run.
In general, CLV is an estimation of the profit that comes from the company-customer relationship. That should help you figure out whether a customer will be profitable for your business in the long run.
The easiest way to determine CLV is according to the following formula:
CLV = average value of a purchase X number of times the customer will buy each year X average length of the customer relationship (in years)
So, for example, if you have a sports equipment store, a goalkeeper that regularly buys gloves from you could be worth:
$150 per pair of gloves X 4 pairs per year X 8 years = $150x4x8=$4,800
On the other hand, an amateur Sunday league goalkeeper would be worth:
$50 per the pair of cheapest gloves X 1 pair per year X 3 years = $50x1x3 = $150
It’s clear which is the target customer that you need to focus on.
Calculating CLV can also help you determine:
- The type of products that the customers with the highest CLV want.
- The products/services that will have the best profitability.
- What are your most profitable types of clients?
Investing your time and resources in your most profitable customers is the key to business growth. The following are some proven techniques to keep your best customers and increase the CLV in the process:
- Make it easy for them to return what they’ve bought from you. If your return policy is strict, you will reduce the odds of them buying from you again.
- Set reasonable delivery dates, and over deliver on customers’ expectations.
- Encourage repeat purchases by rewarding your most loyal customers.
- Upsell to boost the value of each customer transaction.
- Interact with your customers. Make it easy for them to engage with you as well.
9. Closing Rate
The closing rate is a measurement of your marketing and sales efficiency. It’s determined by dividing the number of closed deals with the number of prospects that your team worked with. If you’ve managed to close 20 deals out of the 40 you were working with, it means that the closing rate is 50%.
By calculating your closing rate, you’ll discover where you can improve your sales. That alone is great! But, if you want to grow further, you need to compare your closing rate to industry benchmarks and targets.
For the purpose, HubSpot created the Sales Close Rate comparison tool. You can use it to measure your closing rate against 8,900 other companies from 28 different industries.
10. Marketing ROI
Calculating marketing ROI can be challenging. This is especially true for corporations that have complicated ROI formulas and algorithms. Measuring marketing ROI requires patience. You need to measure months, even a year, to see if your campaign was profitable.
The simplest way to estimate marketing ROI is:
(Sales Growth – Marketing Cost) Marketing Cost = ROI
When you’re focused on sales growth, the goal of your marketing efforts should be to increase your sales-qualified leads. You need to gauge the value of those leads by multiplying the lead growth by your historical conversion rate. If you can’t increase your ROI, you might be using the wrong marketing approach.
Wrapping Up
Now that we’ve equipped you with the top ten KPIs for assessing your overall marketing performance, it’s time to analyse your campaigns and optimize them for a higher ROI.
Measure and learn from each of the KPIs above. Use them not only for your marketing campaigns but also to assess how you do business. When the numbers don’t add up, resolve the problems before they hinder your marketing, sales, and business growth.
