Have you set up marketing success metrics associated with your business goals?
Can you track and measure the results from each marketing campaign?
The mere mention of numbers and/or analytics instills some marketers with fear.
BUT you must speak your CFO’s language to prove you created profitable sales.
Show results by marketing campaigns with associated qualified leads and/or revenues. Otherwise you risk losing your budget or worse your job.
For, as you move from one marketing campaign to the next, you need a basis for assessing each campaign’s effectiveness in achieving their intended business goals in order to ensure continued success.
To understand how marketing success metrics work, follow this easy-to-use approach to make your CFO happy. The definitions and formulas apply to both B2B and B2C businesses.
Marketing Success Metrics Definition
Marketing success metrics are defined as the scorecard of your marketing programs. In total, they provide a concise numeric snapshot of your performance towards defined business goals. Also, they track the effectiveness relative to budget and past results. (Often, they’re checked by month versus the prior month and versus same month the previous year. )
Often referred to as Marketing KPIs (or key performance indicators), these measurable values show how well your plans and/or specific campaigns helped to achieve defined organization’s goals. They can be tracked by content or communications format, marketing channel, device and/or customer segment.
Among the top marketing success metrics are:
- Brand awareness
- Marketing Qualified Leads (MQL) and/or Sales Qualified Leads (SQL)
- Conversion Rates ( such as Traffic-to-Lead Ration, Landing Page Conversion Rates, and/or Lead-to-Customer Ratio. Also tracked by stage of customer journey)
- Customer acquisition cost (CAC)
- ROMI (aka: Return on Marketing Investment)
- Customer Retention Rate (includes Attrition and Churn Rates)
- Customer Lifetime Value (CLTV)
So why are marketing success metrics important?
Because 2/3 CMOs can NOT show financial results (2019 CMO Survey.)
But marketing provides the value CEOs seek in terms of:
- Organic growth,
- Launching new products and/or services, and
- Entering new markets.
And according to Joe Pulizzi:
“Most [marketing] programs do not get cut for lack of results, but because the executives with the purse strings don’t understand it!”
3 Types of Marketing Success Metrics
1. Marketing Metrics
These marketing success metrics generally answer “How many?”
Housefile consists of people who interacted with your marketing. The accuracy and/or granularity of these metrics depends on calls-to-action and related campaign tracking (referred to as UTMs.)
- Traffic (or visitors or impressions). This tracks how many people visit your website, social media and/or other marketing channel.
- Leads (or New Email Addresses). These prospects responded to your marketing. It shows the effectiveness of your content marketing, communications and/or advertising. They’re labeled marketing-sourced leads (or MSLs) or sales-qualified leads (or SQLs). The difference depends the alignment of Marketing and Sales.
- Customers. Actual buyers of your product.
- Fans and/or Influencers. They’re customers, fans and/or influencers who promote your products, services and/or content. Your ability to track these activities varies.
- Sales dollars generated from a campaign. Acquisition campaigns may lose money, since sales over time will exceed the initial cost.
- Items or shipments tracks the units of product purchased. Depending on the business, they may be broken out by product type, category and/or season.
Costs represent the money that a business lays to purchase and/or made the product and to market it:
- Variable costs include the cost of goods (or COGS), fulfillment costs (from taking the order to getting the product out the door), and bad debt (including credit card processing fees and returned product).
- Fixed costs. Marketing expense (salary, media, premiums (or incentives), creative (includes in-house, agencies and/or freelancers) and overhead.
2. Marketing Rates
Rates are marketing success metrics that put different results in relationship to each other to assess marketing effectiveness.
Customer Acquisition Rates
Lead acquisition rates:
Response rate determines the number of people who acted on a specific marketing campaign. Response Rate = Total Prospects/Total Traffic
Conversion Rates (such as Traffic-to-Lead Ratio, Landing Page Conversion Rates, and/or Lead-to-Customer Ratio.) Assess the quality of the number of people who took an action leading to purchase.
Conversion Rate = Total People Who Completed Goal Action/Total Number of Prospects
Marketing expense rates:
Customer Acquisition Cost (CAC) or Cost Per Acquisition (CPA) determines the average marketing cost per new customer.
CAC = (Total Marketing Expense + Marketing Staff Expense + Sales Staff Expense) / Total New Customers
Further, CAC calculations vary based on your creative, format, channel and/or campaign. (Brian Balfour provides a detailed explanation and worksheets.)
Costs/media viewer reached (CPM). Assesses third party media expense. It’s often stated in terms of cost per 1,000 views and only measures media cost. It can be broken out by media entity.
CPM = Total Media Cost / [Traffic/1,000]
In the long run, marketing must yield profitable revenue. Or you go out-of-business.
- Gross sales (or top-line sales) is the money brought in by a campaign or time period.
- Returns are items customers send back.
- Taxes is the money based on gross sales paid to governments.
- Net sales This is the amount of revenue the company retains to apply to various costs. Net Sales = Gross Sales – Returns – Taxes
Sales Per Customer is the average revenue generated per buyer.
Sales Per Customer = Total Customers Sales/Total Number of Customers
Average Sale is the average revenue per item purchased. It can be measured in total or by product line.
Average Sale = Total Product Sales/Total Number of Items.
Average Order Value (AOV) is the amount of money customers typically spend each time they buy.
AOV = Total Customers Sales/ Total Number of Orders
Return on Marketing Investment (or ROMI or ROPI) is a more precise form of ROI measurement since it focuses on marketing.
ROMI = (Gross Margin – Total Marketing Expense) /Total Marketing Expense
Gross Marin = Total Net Sales – Variable Costs
Total Marketing Expense = Marketing Costs + Marketing Staff Costs
Product or Order Rates:
Order rate is the average number of orders per buyer.
Order Rate = Total Number of Orders/ Total Number of Customers
Unit Order Size is the average number of items sold per buyer. It can be tracked by campaign or for a specific period of time.
Unit Order Size = Total Number of Items Purchased / Total Number of Customers
Customer Retention Rates
Customer Retention is the process on-boarding new customers and getting existing customers to buy more and/or different products or services from your business.
Retention Rate = [(Total Number of Existing Customers at the end of the period) – (Total Number of New Customers during the period)] / (Total Number of Existing Customers at the start of the period))/100
Customer Attrition Rate is the number of customer that your business lost during a given period of time.
Customer Attrition Rate = (Total Number of Customers at Beginning of Period) / (Total Number of Customers at End of Period)
Churn Rate only focuses on customers who no longer buy from your company.
Why is customer retention so important?
Because, in his October 2014 Harvard Business Review article, “The Value Of Keeping the Right Customers”, Frederick Reichheld of Bain & Company showed that:
- By increasing customer retention rates by 5%, businesses could increases profits by 25% to 95%.
- Further, it’s 5 to 25 times more expensive to acquire a new customer than it is to retain an existing customer.
To increase customer retention and create a “Loyalty Loop” (McKinsey) for your business, use one or more of these tactics:
- Reduce product returns and non-use with improved customer on-boarding and post-purchase support.
- Maintain and expand customer buying by offering the same, related and/or different products and services. Use on-going consistent content and personalized communications to support these purchases.
- Improve customer relationships and community to develop loyalty and yield referrals.
3. Long-term Marketing Results
Measure marketing results over time to see business-specific trends.
Tracking must be of sufficient length to get reliable results.
Compare current marketing results to past performance to determine effectiveness against prior periods and budgets. Also use third-party data to assess performance compared to competitors.
Customer Lifetime Value (CLTV) assesses the value of all revenues generated from a segment of customers over time against the initial marketing investment. Further CLTV considers the time value of capital.
Simplified LTV = (Average Sale per Customer) x (Average Number of Customer Purchases per Year) x (Average Time Customer Continues To Buy)
Average Time Customer Continues To Buy is average length in years of customer retention.
With improved optimization, customer-onboarding and retention, marketing builds customer loyalty and increases customer lifetime value. Since customer acquisition cost (CAC) is a one-time expense, you can create incremental marketing revenue with lower marketing investment.
Branding is a key element of marketing but it’s difficult to measure directly. This is attributable to the emotional nature of branding. Despite this, branding has a real and measurable value to a business and it’s tracked in a business’s balance sheet as Goodwill.
What You Can Do To Improve Measurable Marketing Results
How can you show the measurable business value of marketing?
- Improve existing content, information and data. Eliminate redundancies, improve existing content and fill gaps while helping to create better data across the business.
- Build and support cross-functional customer-focused teams. Work with Sales and Customer Success teams to support customers through the entire process.
- Re-distribute marketing budget across entire customer lifecycle. Provide content prospects and customers want while increasing customer engagement & building community.
- Increase sales by offering core products to new and existing customers, upsell and cross-sell related and/or enhanced products to existing customers, Add new product offerings (including content), and/or expand into new customer and/or geographic markets.
Marketing Success Metrics Conclusion
These marketing success metrics will help you to prove that your marketing strategy and plans yielded profitable results.
To ensure marketing success:
Align your marketing with your business’s goals with trackable call-to-action and targets.
And don’t forget to take the time to help your management team understand what you’re doing and how you’ll show results.
Editor’s Note: This post was originally published on April 10, 2014 and has been extensively revised and updated based on Heidi Cohen’s presentation at 2019 MarketingProfs B2B.
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