As marketing has become more advanced and targeted, it has also become increasingly important to understand the specific metrics with which effective marketing is measured. These metrics, more commonly known as KPIs (key performance indicators), are a powerful way to determine which marketing tactics and strategies are most effective. Used properly, they can dramatically improve your marketing tactics.
Digital marketing has quickly become the driving sector in the overall marketing industry. This is largely thanks to the fact that close to half of the world population, or about 3 billion people, now use the Internet on a regular basis. As a result, it should come as no surprise that many of the most important KPIs involve the Internet and digital marketing in one way or another.
While each business will have different KPIs, these are some of the most important marketing ones to pay attention to:
1. Cost per lead
Understanding how much it costs to acquire a lead is as important for a startup company as it is for a well-established corporation. If nothing else, understanding what makes the cost per lead increase (or preferably, decrease) can be a powerful marketing tool that improves profit margins. Beyond that, however, understanding what it costs to acquire a lead can be used as the basis for understanding whether or not a marketing campaign is a worthwhile investment or not.
2. Ratio of leads to qualified leads
One of the greatest advantages of digital marketing is the ability to highly target leads. In fact, if you are not targeting leads on a particularly granular scale, you are all but certainly wasting marketing resources in an inefficient marketing campaign. One of the best ways to determine whether your marketing campaign is appropriately targeted is by comparing the ratio of total leads to qualified leads, and ultimately the ratio of each of those metrics to an overall conversion rate. A small number of high-quality and highly-targeted leads are significantly better than a massive number of unqualified leads.
3. Return on investment
Return on investment, or ROI, is as important in marketing as it is in many other aspects of business. With marketing, ROI is used to determine which marketing tactics and strategies are most effective (as well as which ones are not), and can have a substantial impact on determining which marketing strategies will be used moving forward. In the subscription world, you’ll pay closer attention to customer acquisition cost, or CAC.
4. Lifetime value of a customer
The lifetime value of a customer is a bedrock metric for any business, and it can help determine the marketing framework as well. Ultimately, understanding that the lifetime value of a customer is particularly high (for example) can help to justify the upfront costs of qualifying leads and then acquiring them. On the flip side, a low lifetime value might mean the marketing campaign needs to be as streamlined and bare-bones as possible. In the subscription world, you should be tracking the churn rate (or retention rate if you want to keep a positive mindset) and the average monthly revenue per customer to calculate LTV.
5. Net Promoter Score (NPS)
The Net Promoter Score is based on the theory that customers who are strong proponents of your company are highly valuable. These “loyal enthusiasts” are a powerful source of referral business, and can be a major factor in the long-term viability and health of a company.
The NPS theory can basically be boiled down to this: customers who rate their overall experience with your company a “9” or “10” out of 10, are likely to be “promoters”, or customers who will dramatically improve a number of KPIs, including cost per lead (thanks to free referrals), lifetime value of a customer (thanks to loyal repeat customers), return on investment (again, thanks to the long-term value of customers), and numerous others. While it might seem difficult to attain a 9 or 10, the reality is that anything lower (7-8 is considered “passive” and 0 to 6 is considered a “detractor” rating) will not be beneficial to one’s business.
The Net Promoter Score, along with the rest of the KPIs listed above, can and should be used to measure the strength or weakness of your marketing campaign. You can rest assured that your competitors are doing the same.
Photo credit: stratman² (2 many pix!) / Furniture Fair / CC BY-NC-ND