July 22, 2016
Marketing Metrics which matter most (Part 2)
Titus Maccius Plautus, a roman playwright who lived from 254 BC to 184 BC once said that “You must spend money to make money.” Not everyone agrees with this saying. However, if you are a business owner and you are spending money, you would want to know if the investment that you’ve made was worth it. Marketing is often an expense that a business cannot do without as it is the means by which a company can get the word out on its product/s or services. It can get very expensive especially in the first year of the business. For this reason, it is vital that all marketing efforts are monitored to see what kind of results are achieved for the dollars spent on the activities or campaigns. With the various tools available for measuring the output of marketing, especially those conducted online, you can easily track the performance of your marketing activities. However, if you are not selective with the data that you monitor, you’ll end up with mountains and mountains of information, some of which you don’t really need. What then are the marketing metrics that matter? Below is a list of the marketing metrics that you should be measuring according to your preferred channel for promotion.
Traditional advertising generally refers to promotion done through mediums such as TV, print, billboard, radio, phone, and direct mail. In measuring the effectiveness of the campaign advertised through these mediums, it would be essential to set key performance indicators or goals prior to launching the campaigns. The effectiveness of the campaign can then be determined based on whether or not these KPIs were met. For each of these traditional channels, good indicators for the level of awareness that can be achieved are the number of listeners (for radio), number of viewers (for TV), number of subscribers (for direct mail), number of cars that pass (for the billboard). On the other hand, if the goal is to increase sales, then the number of sales (relative to the goal set for this) after the campaign was launched is a good indicator of how successful it is.
The internet has broadened the playing field for reaching people. The online marketing channels and methods that are commonly used as well as the metrics by which to measure the effectiveness of a marketing activity or campaign are discussed below.
Nowadays, having a website is crucial to the success of any business. It is a means by which customers find your business and an avenue for conducting marketing and sales activities. The most important metrics to measure on your website include:
- Total Sessions – This refers to traffic that your website is getting. Total sessions measure the number of times your website was visited over a period of time. An increase in sessions is an indicator that your website is performing better and that your business is achieving broader brand awareness.
- New and Returning Visitors – New visitors pertain to the first time users of your website during a given time frame while returning visitors refer to those who have already been to the site previously. Having a large portion of returning visitors is an indicator that your customers find reasons to go back to your website whether to get more information, engage or purchase (if an e-commerce site).
- Traffic Source – Users arrive at websites from many different sources. Measuring the traffic source will tell you if your users were led to the website via an organic search, through a referral, from social site, through a paid campaign (such as AdWords) or if a user came direct.
- Bounce Rate – This refers to the percentage of users that leave your website without generating a second interaction (generally a page view). A high bounce rate may indicate that the entry page is not as effective as it should be in capturing the interest of the user to explore your site further.
- Conversion Rate – This measures the rate at which users covert on the site. Conversions are set up to be the desired action that you would like a user to take that generally represent an action of value to the business. Examples of conversions include; filling out an enquiry form, subscribing to a mailing list, purchasing a product/s, making a donation among others.
- Time on site – The length of time a user stays on a website is a good indicator of the user’s interest in what the website has to offer or. Users tend to stay on a website longer when they find its contents engaging or are on the website to perform or complete a transaction. This depends on the purpose of the website however as support sites aim to solve problems and answer questions quickly so a lower time on site would actually be a positive metric.
- Page Views per Session – The number of page views a user makes on a website is said to point to the engagement level of the user on that website. The more pages a user views, indicates his or her interest in the contents of the site. However sometimes having a lower number of pages per session actually means that users are finding the information they are looking for more effectively.
Marketing through emails is an easy and effective way to reach customers. The metrics that you would want to monitor are:
- Click Through Rate – This lets you gauge the performance of each email that has been sent out to your customer by looking at the number of people engaging with your content and how. What they click on in an email will determine what content they are interested in.
- Conversion Rate – As stated earlier, is the rate at which a customer performs an action that you want them to take. These actions may include filling out a form, downloading content or visiting your website.
- Growth of Email List and Unsubscribe Rate – A growing email list gives you a chance to reach more people and deliver targeted messages. A declining list points to problems with the content that you are disseminating.
- Hard and Soft Bounces – An email that “bounces” is an email that has not been delivered due to varied reason. Hard bounces are caused by a permanent issue such as invalid email addresses while soft bounces are due to a temporary issue such as when a recipient’s mailbox is full.
Social Media Campaigns
- Engagement – This refers to actions done within a social media account such as likes, shares, and comments.
- Inbound links – This will allow you to determine the effectiveness of your social activities and campaigns in bringing people to your website.
- Sentiment – The feelings, attitudes, and opinions of your brand can be measured through the conversations that take place within the social media accounts. This will give you a chance to understand your customers better and see how your brand is perceived.
Paid Search and Display Metrics
- Click through Rate – This will indicate if your ads are relevant to those searching and whether or not your key word or creative representations are effective. Moreover, the click through rate will have a major impact on your Quality Score (Google’s measure of your keyword’s relevance).
- Conversion Rate – The number of people who clicked your ad and went on to perform an action determines the conversation rate a customer.
Overarching Marketing Metrics
Outlined below are the marketing metrics that you should be monitoring regardless of whether or not the promotional activities are done online or offline.
- Return on Marketing Investment (ROMI) – As marketing is a big expense, it should be treated similar to an investment wherein, the returns will only materialise after a certain period of time and the cost is somewhat amortised over a period of time. Return on Marketing Investment measures the effectiveness of your marketing campaigns. The computation to get the ROMI is gross profit minus marketing expense divided by marketing investment.
- Cost per Acquisition (CPA) – Simply put, this is the cost that you incur to acquire a customer. This metric is important as it can indicate the scalability and profitability of your company. To get your CPA, divide the marketing spend on a particular activity or campaign by the number of customers acquired. Essentially, you would want to retain the activities that cost less to retain a customer in order to have a higher profit margin.
- Customer Attrition Rate – Customer attrition rate or customer churn rate is the number of customers that drop from your client base. By knowing your customer attrition rate, you will know your customer retention rate. Being aware of your attrition rate will enable you to determine what you need to do to compensate for this loss (i.e. how many new customers need to be acquired to make up for the loss). It is ideal to keep your attrition rate down as this will mean a higher number of customers in your pipeline, higher sales and therefore, higher revenue.
- Lifetime Value of a Customer (LVC) – This is the average lifespan of your customer or how long a customer remains loyal to your company. There are multiple ways of computing the lifetime value of a customer. One way is to multiply the average amount that a customer spends per transaction by the number of repeat sales and by the average retention time.
The above are the core metrics that should be measured based on our experience and is not a comprehensive list of metrics that can be measured for all marketing activities. An important point to remember that when choosing the metrics to measure, these metrics should be aligned with the goals that you have set for your marketing activity or campaign from the get-go.
Tags: Digital Marketing, Marketing Goals, Marketing Strategy