Marketing strikes a fine balance between art and science – creativity and data. While historically, art dominated marketing, digital channels, platforms and significant advances in technology ushered in the era of data-driven marketing or the science of marketing. Today, marketing leaders look at metrics to measure the success of creative processes and ideas.
According to Google, 89% of leading marketers use metrics like customer lifetime value (CLV), gross revenue, or market share to measure the effectiveness of their campaigns. The right marketing metrics could mean the difference between business success and failure.
Since the beginning of the pandemic earlier this year, marketing budgets have come under increasing scrutiny. IAB, the advertising industry body predicts(1) that the total marketing spend on traditional media is expected to shrink by 30% percent in 2020. Given this reality, marketers must focus on optimizing costs and improving ROI in marketing, here’s where metrics can be their biggest ally.
What are Marketing Metrics?
Marketing metrics are measurable values that help marketers access the impact of campaigns and content across all marketing channels. These metrics operate across both traditional and digital channels. So, it is crucial track the right ones, relevant to the specific business context. For instance, an offline retailer would want to measure metrics like average footfall, average purchase value, and brand awareness to measure marketing effectiveness. Similarly, metrics for a business primarily reliant on digital marketing would look very different. However, in the real world, business often deploy a mix of traditional and digital messaging to drive revenue and sales.
In this article, we’ll explore the ten most important marketing metrics businesses must track now to emerge successful in 2021.
10 Marketing Metrics to Drive Business Success in 2021
So, now that we’ve established what marketing metrics are and why they’re critical for success, let’s take a look at some of the most vital marketing metrics for business this year and beyond:
Leads or lead generation is the most important indicator of marketing success. It determines the business’ ability to generate future revenue. According to HubSpot, lead generation is the top priority for 63% marketers(2). It signifies the transition in a customer’s journey when they cease to be a prospect and make a purchase. Their purchase generates revenue and hence is the most crucial metric.
As leads move through the marketing funnel, they can be qualified based on next expected behavioral outcomes. They can broadly be categorized as sales or marketing qualified leads.
Here’s a quick look at what each of those terms mean:
- Marketing Qualified Lead (MQL): It refers to leads who are most likely to become customers based on lead intelligence. Such leads exhibit specific behavior or engagement which correspond to key marketing metrics such as content downloads, website visits, or inbound enquiries.
- Sales Qualified Lead (SQL): This term is typically used by sales teams to designate a potential customer. Sales qualified leads are closer to purchase compared to marketing qualified leads. Sales and marketing teams can further score these leads by assigning values to certain content collaterals or behaviors.
2. Return on Marketing Investment (RoMI)
Return on marketing investment measures the revenue a marketing campaign generates compared to the cost of running the campaign. This metrics helps marketers understand how their campaign is performing and contributing to company growth. While RoMI might seem pretty straightforward, calculating it can prove to be challenging. The sheer number of marketing campaigns and collaterals make it difficult for markets to stay on top of every individual campaign. Moreover, connecting marketing messages to channels and campaigns could also prove to be difficult in some cases. Which is why we recommend using marketing platforms or end-to-end suites to manage campaigns and automate RoMI calculation.
3. Referral Traffic
Referral traffic indicates the number of visitors who landed on your domain from another site without going through a search engine. Referrals typically come from social links and backlinks. Businesses with the right backlinks in place benefit from increased website traffic composed of referrals.
Marketers most commonly use UTM tracking codes to measure referral tracing and can gain comprehensive insights from Google Analytics or other custom analytical solutions.
4. Total Website Traffic
Overall website traffic measures the total number of visitors who have visited a website over a certain period of time. Total website traffic is a strong indicator of content performance – and helps marketers measure how content campaigns or the website content is resonating with consumers. Google analytics is again the preferred tool for marketers to measure website traffic. Marketers can customize their dashboard to breakdown total traffic into traffic coming to focus pages and accordingly prioritize optimization or enhancements.
5. Testimonials and Reviews
Customer testimonials and reviews are crucial for marketers today. Particularly in the current context as consumers increasingly choose online and digital channels to make purchases. Testimonials and reviews provide credibility to your product or service, improve customer trust, and even instill new purchase desires. Let’s quickly understand how testimonials and reviews can be measured respectively:
- Testimonials: Measuring testimonials can be a little tricky as you have to be mindful of the fact that most marketing suites don’t provide dedicated testimonial measurement capabilities. Instead, you can combine metrics such as views, profile clicks or leads generated to calculate the effectiveness of Testimonials. You can also conduct A/B testing to gauge how and which testimonials resonate with visitors and the types of behaviors they promote.
- Reviews: In this context, reviews are very similar to the ones you post on Amazon – they tell other visitors how your experience with the product or service was. In an era where consumers rely on community recommendations to inform their purchase decisions, reviews are one of the most important influencers of purchase. Ideally, customers will rate your product/service on a 5 point scale or a 10-point scale which may be followed by a descriptive review. Measuring reviews is pretty straightforward – if you aggregate review rating improves, it means customers are happy and satisfied. On the other hand, a drop in the aggregate reviews suggest that you must work on refining your product/service.
6. Customer Acquisition Cost (CAC)
Customer acquisition cost (cost) is defined as the cost a business incurs to acquire a new customer. This cost is comprised of multiple factors including the sales and marketing costs incurred by the business. CAC is a crucial metric for marketers because it allows them to calculate which customer segments are the most profitable and efficient. It also determines the financial stability or future of the organization.
CAC has become particularly popular in VC circles where investors examine a potential business’ CAC to determine investment worthiness. When tied together with the lifetime value of a customer (LTV), CAC provides marketers an accurate understanding of the total return on investment (ROI).
Most organizations use the following formula to calculate CAC: Sales + Marketing Costs / No. of New Customers.
7. Customer Lifetime Value
Customer lifetime value helps marketers calculate the total revenue their organization can expect from a single customer account. The metric measures a customer’s value against their lifespan in context of the business. For instance, if the customer buys a $40 data plan every month, their lifetime value to the company will be calculated over the tenure of their entire relationship.
Customer Lifetime Value can be calculated using the following formula:
Average Revenue Per Customer Account * (1/Churn Rate) * (Gross Margin %).
8. Cost Per Lead
Cost per lead measures the cost-effectiveness of a marketing campaign, i.e., how much it costs to generate a new qualified lead. The cost per lead metric is a vital metric for marketers looking to rationalize their marketing spend and monitor individual campaigns.
9. Subscriber Growth Rate
This metric enables marketers to measure the percentage growth of their account base over a specific period of time. Subscriber growth rate has emerged over the past few years as marketers increased their investment in content creation across blogs, websites, and YouTube. Subscriber growth rate is again a reliable content performance indicator.
10. Customer Retention Rate
Customer retention rate measures the number of customers a company has retained over time. It is the opposing metric for churn rate that calculates how many customers chose a competitor over the business. Retention rate is again a critical metric for marketers in the software and services industry as it directly impacts revenue and profitability.
Marketing metrics are similar to the pole star for sailors – they tell marketers where they are and where are they headed in the future. As consumer behavior shifts in wake of the COVID-19 pandemic, marketing metrics have become even more important for businesses to validate their ideas, strategies and processes.