Typically when speaking with business owners I get a similar response when I ask them how their marketing is doing - “leads are okay/good”.
However, does knowing how many leads you have really tell you if your marketing is helping you to achieve your business goals? In truth, many business owners are unsure of how to measure the impact of their marketing, so they simply look at new leads/customers that are generated and bury their head in the sand.
Why should I monitor my marketing performance?
Monitoring your marketing metrics can provide you with a clear picture of what’s happening in your business and will help you to identify what you should do more of or what you should stop doing.
By reviewing marketing metrics, you can translate numbers into insight to create a story about WHAT is really happening within your marketing. Once you paint this story, you will have a better understanding of your activity and can identify areas in need of change.
Which Marketing metrics are the most important to track?
When starting to think about which marketing metrics to track it’s very easy to over-report and drown in the data. With 100s of marketing metrics available, it can be difficult to know which marketing metrics are the most important. Hey, even I fell into this trap with this blog nearly being the top 10 metrics you need to measure!
However, understanding your marketing performance does not need to be complex. Here are the top 5 key marketing metrics you should measure if you want to know if your marketing is working:
Revenue
Leads
Acquisitions
Cost Per Aquisition (CPA)
Return on Marketing Investment (ROMI) or Return on investment (ROI)
We detail each of these metrics in more detail below, so keep reading to find out how easy it is to track your marketing performance.
Revenue
The ultimate goal of marketing is to drive revenue and help you to grow your business. Looking at how much revenue your business is generating helps you know if you are achieving your business goals or not.
In order to help tell the story of how your business is performing, monitor your revenue against your revenue target. If you don’t have one, try setting one now - how about 5% year-on-year growth?
If you provide service-based or subscription-based business, you may find measuring New Business Revenue more helpful to see the impact of your marketing activities. However, it is still perfectly acceptable to measure total revenue, just make sure you’ve accounted for your existing business in your target. This is a personal choice, so if you’re not sure, stick with total revenue for ease!
Leads
A key part of the marketing funnel are your leads, and while tracking leads on their own only shows a small part of your marketing performance, they are still important nonetheless.
When looking at your leads, try not to just look at the total number, rather use leads as an opportunity to identify changes in performance trends or seasonality effects. For example, if you looked at your lead volume over the past two years, does your business have a natural decline in leads over Christmas, or is that your peak season? Once you know the seasonality trends of your customers, you can plan for this and adjust your marketing accordingly.
A second way to consider your leads is to look at your total leads by marketing channel. Which marketing channel is driving your leads? Don’t forget to count offline or non-trackable conversions, such as telephone or emails as this could change the picture slightly.
However, don’t make decisions or opinions on your marketing activity without considering how many of your leads convert into acquisitions or the cost of those. What might seem to be your largest lead driver, may not always be the driver of your customers.
Acquisitions
Once you know your leads, the next important step is to understand how many of those leads convert into a purchase.
Much like the insight we can learn from looking at leads data, you may find a seasonality or trend patterns in your acquisition data. For example, you might see less leads over the Christmas period, but your acquisition volume remains flat - this would suggest that leads that come in during this time have a higher intent to convert than normal.
While looking a lead to acquisition conversion, it’s often easier to look at the % of leads that convert rather than looking at total leads vs. total acquisitions. To calculate your lead conversion rate:
Lead conversion % = total acquisitions ÷ total leads
For example, if you received 100 leads, but only 40 converted to new customers, your lead conversion rate would be 40%.
Once you understand your lead conversion rate, it is possible to identify which of your lead generating channels are performing well and which might need some attention.
For sales-based business, it’s important to remember that marketing isn’t solely responsible for driving acquisition, however that doesn’t mean you shouldn’t monitor acquisitions. Simply use this as a way to identify areas for improvement, either in marketing activity or sales performance. Ultimately sales and marketing teams share a single goal and are one and the same.
Cost Per Acquisition
Next, it’s important to understand how much it’s costing you to acquire your customers.
The cost per acquisition is simply the cost of your marketing activity divided by the number of acquisitions:
£CPA = marketing cost ÷ acquisitions
When reviewing your CPA, it's useful to review at a channel level if you are able to segregate your data to this level. By doing this, you’ll be able to see which channels are acquiring customers at a more profitable rate.
As with all metrics that we measure, it’s important to set a target. To calculate a CPA target, you will need to understand how much you’re average client is worth - this is referred to as Customer Lifetime Value (LTV).
To calculate your LTV:
£LTV = Average monthly revenue per customer x no. of months they remain a customer.
Return On Marketing Investment (ROMI) or Return on Investment (ROI)
Return On Marketing Investment (ROMI), also referred to simply as Return on Investment (ROI), is the percentage of profited gained from investing in your marketing activity. By using ROMI, you can see how your marketing is impacting on achieving your business growth objectives.
To calculate your ROMI:
Return on Marketing investment % = [Gross profit - marketing investment] / Marketing investment
As a growing business, your marketing aim is simple, to ensure your marketing activity has a positive return-on-investment. Once you are confident in this, it's time to scale!
Do you need help in to present your data in a useful way that makes it easy to understand? Download our free Annual Marketing Dashboard Template to get quick and easy insight into how your marketing is performing.
If you are struggling to identify how your marketing is performing or need support in how to effectively reach your target audience, CULT Marketing could help. Feel free to contact us for a free initial no-obligation chat.
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