Why Are Marketing Metrics Important?
If you want eternal life for your marketing efforts, there is one key action you must take: tracking marketing metrics. For Instance, If your marketing campaigns are not carefully tracked, monitored, and analyzed, they will NOT be as effective, and certainly will be more expensive. Part of the resistance many firms encounter when it comes to tracking marketing efforts stems from the sheer number of trackable metrics out there. It can be hard to distill which metrics are most important to you and your firm’s marketing efforts.
What Marketing Metrics You Should Be Tracking
Key metrics can vary from industry to industry as well as by which media you are using in your marketing. Below, find the top five metrics you should probably be tracking.
Marketing Metrics ROI (Return on Investment)
This is a key measurement for any industry and is very important to analyze for marketers. In other words, with ROI, the idea is you are analyzing how much profit has come out of a project based on how much you invested. For example, imagine I pay for a new video to put on my site and it costs me $1,000. Then, after posting that video, I see an increase in sales of $1,500, my ROI is 50%. I made an extra $500 above what I spent on the video, which is 50% of the original investment. To calculate this metric, all you need to know is the amount invested and your net profit.
CPA (Cost per Action)
Depending on your goals, ‘actions’ can be different. For instance, in some campaigns, an action might be a new purchase, or it could be opt-in. Whatever ‘action’ actually means for your marketing, the idea of this metric is to determine how much you have to spend in order to achieve that action. For example, maybe I’m running a website and trying to get people to sign up for a phone call with me. If I spend $1,000 and end up with 10 calls scheduled, my CPA is $100. The lower your CPA, usually the better.
ROAS (Return on Advertising Spend)
Again, this metric is simple but very important. Determining your ROAS is important because advertising can be very expensive if not kept in check. For this metric, we are simply comparing how much money you spend on ads to how much extra revenue that effort ends up producing. For example, if I spend $50,000 on ads through Google, but end up with $150,000 extra revenue, my ROAS is $2. I made a $100,000 profit off spending $50,000.
CLV (Customer Lifetime Value)
This metric can be slightly more complicated if you don’t already know your annual customer value. Once you know that figure, calculating the CLV is simple- just multiply how much value each customer provides per period by the number of periods you’re measuring. For example, if I had a customer in a 5-year contract, and each year the value of that customer was $1,000, then my CLV for that customer is $5,000. This can get messy with customers paying different amounts, but you can use the average customer value multiplied by the average customer lifespan.
Here is a free template to calculate your customer lifetime value
Customer Retention Rate
The last of the five core metrics measures what percentage of your customers are staying loyal to your business. For example, if at the start of 2018 I had 100 customers, and throughout that year, I acquired 20 new customers but lost 15 old customers, I’d finish the period with 105 customers. On the surface, it looks like a good year because I gained 5 new clients. However, my retention is only 85%. Loyal customers are important because of the cost involved in acquiring new customers.
Check out our other UVU blogs to learn more about marketing.
By: Brian Miller