If you are a fan of the ABC “Shark Tank” program, you may have heard famous entrepreneur “shark,” Mark Cuban says, “You must keep up with your metrics.” If you don’t keep up with your metrics, he’ll simply say, “For that reason, I’m out!”
If you are not measuring your marketing metrics tracking data and using analytical tools like Google Analytics then you are literally flying blind.
The beautiful thing about digital marketing services is that you should be able to put in a dollar and get five dollars back, but the only way to do it is if you can measure everything.
A Greek philosopher perhaps said it first when he said, “The unexamined life is not worth living.” (Plato) Today, he might say, “The unmeasured website is not worth promoting.”
Taking that idea into our current world is not difficult to do with all of the analytical tools that are available today for business owners and the growing need to keep up with your traffic and customer behaviors.
In this post, we will examine why marketing metrics are so important for business owners and marketers.
- So, Why are Metrics So Important?
- Metrics vs KPIs: What’s the Difference?
- Metrics and KPI’s: Profit and Cost
- What is Profit?
- Return on Investment
- Formula for ROI
- Cost per Acquisition
- Revenue Growth
- Metrics and KPI’s: Qualitative Data
- Content Counts
- What is your customer churn rate?
- Lifetime Value Per Customer
- Cost Per Lead
- Lead-to-Customer Ratio
- Not Just Traffic: Quality Traffic
- Conversion Rate
- Metrics and KPI’s: Increasing Customer Engagement
- Click Through Rate
- Bounce Rate
- Pages Per Visit
- Less is More?
- Finding the right KPI’s and metrics
- Metrics by Platform
- Using Google Analytics for Data Keeping
So, Why are Metrics So Important?
No matter how good your business is doing or what your new business idea is, the market is unpredictable. You don’t know what is going to happen with customer demand, product availability, or even customer needs until it happens. Metrics is one way that you minimize this unpredictability.
Marketing metrics, in short, is just another word for “indicators.” These are little things that tell us how your website and business are doing using specific factors. Metrics bridge the gap between risk-taking and the effective use of a company budget.
If you want to get the best of your advertising and marketing budget and increase your ROI (return on investment), you need to educate yourself in measuring your metrics. Knowing how to measure metrics effectively helps you to see where you need to improve, as well as to show your success to interested parties.
Metrics vs KPIs: What’s the Difference?
Metrics are indicators of performance on your sites and blogs. They are helpful because they show you what is going on with your website. But sometimes they are not specific enough. If you want to make a difference in your website performance, you need to use measurable values that illustrate how effective you are on your sites.
Advantages of KPI’s
A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use key performance indicators at multiple levels to evaluate their success at reaching target goals. This is an excellent approach to making sure you are on track with your business. Below are some of the key characteristics of KPI’s.
- Lets you apply various metrics in different ways
- Totally aligned with your marketing goals
- Helps you zero in on ROI
- Help keep you on track with your marketing goals
By using KPI’s, you know that you are always following the path to your marketing goals. It is advisable that you keep a list of your marketing goals with you while planning your KPI’s so that you have everything coordinated.
Metrics and KPI’s: Profit and Cost
Keeping your KPI’s in line with your marketing goals will help you measure your profit and keep up with your profit/loss. For example, if one of your key performance indicators is to save money on inventory for the month, you should see your spending metric going down in the “loss” column.
You can work on multiple KPI’s at the same time, but to gain the most improvement, you may want to focus on one at a time in a given month. One way to do this is to create a line graph or a bar graph (histogram). This shows the gains you’ve made in specific categories. Graphs are a great way to show your progress to a board of executives or investors or even your staff. This would do wonders to informing others about your progress while also getting everyone on the same page about what is essential for company growth.
What is Profit?
Simply put, profit is the amount of revenue you are generating after all of your expenses, inventory, and other expenses are subtracted. Profit is not measured in percentages like other metrics, so you have to do simple math to see what your profit is. In essence, profit is what is what is referred to as “the bottom line.”
Your goal regarding profit should be to always increase your profit margin as you build your business. Some ways you can achieve this are listed below.
- Decreasing inventory spending until you see growth
- Finding suppliers who offer lower wholesales costs
- Cutting down on unneeded contract workers
- Deleting or replacing products that do not sell
- Increasing sales and focusing on new leads
All of these ideas will work if you focus on them enough. Decide which ones will work best for you. Notice that one of our tips is to find suppliers with a lower wholesale cost. That is great if you want to increase your inventory because buying in bulk often means you will save more money. But if you need to cut down on your inventory, you may find it a bit harder to find a lower priced supplier. Still, it can be done by shopping around.
Return on Investment
Roi stands for your return on investment. It is considered the most important metric that you need to consider when doing business. Whether your business is online or in the real world, your ROI is all that matters regarding predicting whether you will be in business five years from now.
More businesses fail because they are not making enough profit to justify stayed in business than from any other reason. That is why it is so important to understand how to manipulate your return on investment to increase your profit and decrease your loss.
Unlike some other metrics, ROI is measured with a percentage, and it can be more than 100%. Depending on the profit that you experience at any time, you may find that you can increase your profit as much as 300% or more simply by doing something a little different in your advertising or branding.
Formula for ROI
Some business owners realize the importance of ROI, but there is a formula for figuring actual return on investment that should be utilized regularly. You simply take your revenue and subtract the cost it takes to run your business. Then you divide this figure by your revenue to get the percentage of profit. A simple example of this is shown below.
Step 1: Subtract 1000 (Revenue)-500(cost)= 50O (Profit)
Step 2: Divide $500 (Profit) / $1000 (Revenue) = 50% profit
The above illustration shows someone who had $1,000 in revenue for a given week, and you subtract the cost which is $500 for inventory materials or staff. This yields $500 in profit which is 50% profit by percentage.
Using this simple ROI formula is a simple way to figure out your overall profit percentages as you go. This is very important on a continual basis so you can see how your profit margin is growing as you find better suppliers and increase your profitability. As they say, do the math!
Cost per Acquisition
Almost as important of a metric is the cost of acquisition. This is the cost it takes to acquire one customer that you keep over a certain period that you are measuring. In most cases, investors and others interested in your company will want to see how well you are maintaining customers for a certain cost. They usually want this regarding about 12 months. But of course, you can check this and compare with other periods as you keep your metrics for any period of time.
This data is not interested in the number of clicks to your website or impressions. You’re not interested in anything other than the amount of money that it takes for you to actually convert a customer to a sale. Your total marketing expenditures divided by the number of customers or campaign converts will give you this figure.
Keep in mind, you were only looking at conversion rates when planning your Analytics and using the tools that you use to gauge your progress on conversions. You can create digital pixel images through Facebook and Google AdWords, as well as other platforms that allow you to tweak and measure your performance with your actual profit based on conversion rates.
As mentioned before, your profit margin is one of the most important things you should look at when trying to make changes to your ad campaigns. This is a figure that shows how your traffic has improved since the last time you measured your revenue.
A company that is solvent and continues to grow is one that continues to enjoy a high revenue growth throughout one year or more. You can measure this metric using the tools available with Google Analytics as well as your business software and other tools like expense management software.
Measuring this metric is very important because it shows how much your marketing strategies have paid off. It is considered one of the most important key performance indicators.
Metrics and KPI’s: Qualitative Data
Now, we come to the metric that is also related to your KPI, as well as to your profit margin. That is your customer retention rate. It is also related to your customer acquisition rate, but here we are concerned about which customers you are keeping and which you are not. You should be looking at the factors that are most likely to result in increasing your retention rate, and this is directly related to your ROI as well.
One of the most influential factors in whether you can keep customers is your ability to sell a product that truly solves their problem or that they like more than your competition. Additionally, there are some psychological factors involved in a sales funnel and how you appeal to their limbic brain or emotional system regarding online sales.
Writing engaging content is even important as well as other digital assets because this keeps them coming back to your page which will encourage more sales.
SEO (search engine optimization) goes hand in hand with creating valuable content.
Considering hiring a professional?
What is your customer churn rate?
Your customer churn rate is the number of customers that you are losing over time. Like the other metrics, this is usually measured on a yearly basis as well as a monthly or weekly basis. You can segment your audience and retarget your campaigns with email marketing and social media.
Lifetime Value Per Customer
Increasing your lifetime value for your customers is important also. This applies to the number of repeat customers that you can gain over the lifetime of your business — there many big brands that have successfully done this such as Coca-Cola and others where customers return again and again because of the perceived value of the company or brand.
Measuring your lifetime value is a long-range metric that should be watched and observed so that you can determine which factors most influence loyal customers. But statistically, loyalty is built mostly from consistent good products and marketing over a long period. The businesses that have done the best with customer loyalty also traditionally provide the best customer service so the customers feel they can trust you.
Cost Per Lead
Is your website a leads magnet? If not, how can you make it one? Do you write engaging copy that will draw people to your site and make them want to come back to see what you will do next? Hosting giveaways or customer rewards sometimes works, as well as creating valuable content on your blog.
Whatever you do to decrease your cost per lead will help you. Your cost per lead is associated with a PPC campaign, but there are also strategies like SEO and content marketing that will help you make gains in this area.
Simply writing an informative blog post (like how much does Google Advertising cost) or creating a live video event may do wonders in this area. It is generally considered that you should calculate your cost per lead before calculating your ROI since it is directly related to your overall return on investment.
Another metric you should study and watch is your lead-to-customer ratio. This is the number of leads you need to generate a sale. You can measure the quality of your leads and delete the low-yielding ones that are not resulting in sales. If you have a low lead to customer ratio, this suggests you need to focus on improving your lead quality or perhaps putting your ad on a different platform to bring in more targeted leads.
Not Just Traffic: Quality Traffic
It is important to note that increasing traffic will not help you make more sales unless it is quality traffic. Knowing your audience and what your ideal customer looks like is important if you are going to corner the market in your niche area and improve your results. You can use surveys, customer service videos, emails, and other tools to understand your targeted audience better.
Google Analytics and other tools such as Kissmetrics and Salesforce may also help you to take a deep dive into the psychological and demographical information about your potential customers.
If you study no other metric, make sure you understand your conversion rate. All else being equal, this is the bottom line and the goal of online advertising in marketing. If you are not converting customers from your advertising, it is not working, and you’re losing money. This is directly related to your ROI, and you should study different factors that may increase your conversion rate over time. It is generally the customer’s perception of your site and brand that influences this the most so work on increasing trust and creating value for your customers.
Metrics and KPI’s: Increasing Customer Engagement
Engagement is the level of activity that customers do to interact with your brand. You need to study the abandonment rate which is behavior that indicates people are leaving your site before making a purchase. Some may even put items in their shopping cart then leave the site before making a purchase.
Why are they leaving?
You need to use your metrics to determine which factors may apply to your customer abandonment. You can sometimes take your conversion rate and make it better by improving the offer. You can improve on this with automation software or other techniques. But the best idea is just to have a better message and a better product so that people will feel compelled to buy it and follow through with their purchase.
There are several types of Abandonment that you should be concerned about and analyze.
- Forms- Is your form too long? Make it shorter. Just ask for a name and email.
- Chatbot sessions- Did they get the help they needed or not?
- Videos- Are they clicking on your CTA? If not, revisit this and make it more compelling.
- Podcasts- Ask people to make comments after your podcasts to see if they are listening. Ask them in a follow-up email or survey what to do to improve it.
- Webinars- People should react to webinars while they are visiting your site’s live feed. Ask for their email for later marketing opportunities if you did not sell to them in the live broadcast.
- Shopping cart- Is your offer priced too high? Should you add something else?
Click Through Rate
Your click-through rate (CTR) is related to paid advertising that you can purchase through Google, Facebook or other platforms. Whenever a customer clicks on your links, from one location, it records these clicks as your click-through rate. Even if no purchase is made, it’s still recording the data, and this is important data to know when studying your marketing metrics.
You should always think of your website as a study in progress and to measure how effective your current content is by encouraging users to click on your links. Also, You can generate organic traffic through SEO, pay-per-click traffic via digital advertising, or social media links that lead to your page. All these are examples of leads generation based on your click-through rate. Generally, the CTR is going to be around 2% if you have marketed your brand well to draw in your target audience.
Further, if you can make a sale for every 100 clicks, you have about a 10% conversion rate from your CTR.
Do you know what your bounce rate is? If you don’t, you need to study this, and it can be studied in Google Analytics. This is one of the metrics that are available with that tool. There are other tools you can use as well, but you need to know the number of users who visit only one page of your site and then bounce off. A good bounce rate is less than 50%, but most people’s bounce rate is probably around 50% or more.
Bounce rates are caused by many factors, one of which is poor marketing where people are jumping onto your site accidentally because they think you have what they want. Then they discover it is not what they’re looking for. You can improve your bounce rate and lower it by using better keywords. These keywords adequately describe what you offer so that you are more often making matches between the customers needs or wants and your site content.
Pages Per Visit
It is important to remember that a session is just a recording of anytime a person visits your site. Visiting specific pages or the number of pages visited is more detailed and in-depth information than just a session. Don’t spend time on general data. Move on to specifics by measuring the length of visits to specific pages and the behaviors that you see on the pages.
Less is More?
If you notice that a person visited only a few pages, it’s possible your content is not eliciting the right response from your target audience. Or if you see that they are going to too many pages, your site may be a bit too difficult to navigate or perhaps people are getting lost on your site due to clutter or lack of focus.
Keep in mind that a “session” is the entire duration of time spent on your site, even if the visit was not productive regarding a lead or sale.
Finding the right KPI’s and metrics
It’s important to remember not to get lost in the data and to focus on what is most important to you. Go back to your goals sheet and determine which KPI you want to focus on the most to reach your most important goals. You should consider your KPI goals as you build your marketing plan and refer to it often so you will always keep on track.
Metrics by Platform
Here are some of the metrics you should look at to dig deeper into why you are getting (or not getting) the results you need.
- Phone Calls
- CTR (click-through-rates)
- Email Marketing
- Open Rates
- Unsubscribe rates
- Hard Bounces
- Soft Bounces
- Delivery rate
- Earning per email/click
Using Google Analytics for Data Keeping
Google Analytics is one of the best places to keep up with your metrics. But you should focus on the metrics that give you the most insight. If you are creating posts that you want to measure for results, you can use factors such as your reach, level of engagement. Levels of engagement include actions taken like “likes” and shares, and other factors to measure their effectiveness.
Only choose metrics that are most likely related to your business goals. Using data and analytics to reach your goals is the most effective use of your resources and money.
Spend your advertising and marketing dollars wisely by measuring what’s happening.
Just remember the old saying, “What you observe, you also change!”
To get a quote, or to see how we can help you become a better marketer, give us a call!