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Adverity’s Joseph Danter takes us through his Top 5 marketing KPIs businesses need to start tracking in H2 to help them optimize marketing efforts and improve outcomes.
The modern era of marketing is data-driven. Hopefully, a surprise to the few and not many. And as we enter the second half of 2021, marketers face more and more pressure to provide evidence that marketing activities are contributing to business goals. As the year has progressed, there seems to be more and more marketing KPIs you ‘should’ be tracking, as businesses strive to improve how they measure and optimize marketing efforts.
With exponentially increasing digital advertising budgets to add fuel to the fire, digital marketing now being one of the fastest-growing advertising channels and surpassing the $330 billion mark globally in 2019, measuring the impact of marketing investments and driving effectiveness becomes essential for success in 2021 and beyond. Many businesses have begun the shift to data-driven marketing, but understanding which KPIs are important to your marketing health and which aren’t is another hot topic worth a whole article in itself.
Below we run through the top five KPIs you should start tracking in H2 to help you to get ahead of the competition and provide the best possible product or service to your customer in H2 and beyond.
Customer Lifetime Value (CLV) represents the total revenue a customer is expected to contribute to your business during the time they spent as your customer. By measuring customer lifetime value with the more commonly measured cost of customer acquisition, companies can evaluate how long it takes to recoup the investment required to attain a new customer.
To calculate customer lifetime value you need to calculate the average purchase value and multiply that number by the average purchase frequency. Then, once you calculate the average customer lifespan, you can multiply that by customer value to determine customer lifetime value.
For example, if you sell books on an online store, if you spend $5 on advertising to attract a customer and each customer on average purchases five books every year for 10 years, your profit margin on each book is $7. Based on this data, your profit is $35 per year from a customer, which works out to be $350 over the course of the decade. You can then subtract the initial investment required to attain a customer, which results in a net customer lifetime value of $345.
But why is Customer Lifetime Value important? Imagine if we sold those 5 books each year to 5 different customers? It would cost $5 to acquire each customer, which would reduce our profits considerably. CLV is therefore important because, the higher the number, the greater the profits. Every business at some point will have to spend to acquire new customers and to retain existing ones, but the former costs five times as much.
When you know your Customer Lifetime Value, you can work to improve it by retaining your existing customers through email marketing, SMS marketing, social media marketing, and more.
Your Traffic-to-Customer ratio is the percentage of visitors that visit your site and convert into actual customers in any given period. This KPI is useful because it tells you a lot about the quality of your website traffic. It is especially important for businesses in which your website serves as a major business tool, such as eCommerce sites.
Although your website traffic may be growing, it may not be leading to an increase in the number of customers you acquire. Even if you have invested in a user-friendly website, if you can’t manage to optimize your traffic-to-customer ratio, then the investment is not worth the return. Measuring the traffic-to-customer ratio allows you to identify the existence of any conversion problems you may have.
By tracking your traffic-to-customer ratio over a given timeframe, you can determine whether the changes you have implemented to your website have improved conversion rates, or the other way around. Constant innovation is crucial when running a business and if you don’t implement the right changes, you might lose potential customers.
For example, your website has 1,000 website visits and 100 new customers in a month. That would entail that your website traffic-to-customer ratio is 10:1. Or, in plain English, your conversion rate is 10 percent. Your goal should be to maximize your traffic-to-customer ratio over time.
It would be realistic to argue that your traffic to lead ratio will depend on your industry, and speaking with an external consultant may help you better understand what the industry norm for your businesses is. Ultimately, your website is there to attract and convert potential customers.
Average Time of Conversion is the timeframe between your first tracked contact with a prospective customer and the moment of the completion of a purchase, averaged across all customer purchases. Average time of conversion is the product of conversion rate multiplied by conversion volume, or sum of total transaction time divided by the total number of successful conversions during a specified period.
For example, if we were analyzing the turnaround rate for an email-based subscription renewal campaign, we would want to calculate the conversion time as the total transaction time divided by the number of successful conversions. Let’s say you had 50 customers with expiring contracts that you reached out to, and 37 of them agreed to renew their contracts. On analysis, you find it took a total of 700 hours for 37 of the renewals to complete, and of the 13 that rejected your offer they took 242 hours overall to respond. Average time of conversion helps introduce predictability into your forecasting.
Using this metric, if you get a certain number of prospective customers entering the marketing funnel, you can start to predict what your sales figures may look like a few days, weeks, or months down the line. In addition, you may want to segment the average sales cycle length by lead source, prospect size, and the product you’re selling, to ensure you have an accurate picture of what to expect and enable you to find opportunities to reduce the sales cycle length.
A great Call-to-Action makes it clear to potential customers which action they should take next, and helps remove friction in moving the user down the sales funnel. The overall success of a call-to-action can be measured via a conversion rate formula that calculates the number of clicks divided by the number of impressions.
Call-to-action content’s goal is usually to encourage your prospective customer to share more information about their persona with you. On an eCommerce site, the CTAs may be more commercially focused such as Add to cart, Checkout, Buy now, and Add to wishlist. In each case, the CTAs on the page tells the user what action to take on the site and move them further down the conversion funnel.
To test the effectiveness of various calls to action on your website or landing page, you can use an A/B testing platform that will eliminate any guesswork and give you data-backed information that helps you optimize for the highest-converting call-to-action content.
Last but not least, Brand Mentions are a marketing KPI that you should be tracking, and as you monitor brand mentions it’s also worth checking what your target audience is saying about your brand. It will help eradicate any rumors, misconceptions, or PR issues about your brand and address them immediately.
If you don’t have a generic name, it might be easier to track your brand name. But even so, brand mentions have a lot of filters and accuracy algorithms that manage to show only relevant mentions. Social listening tools will come to the rescue in this situation and allow you to refine your search.
Brand mentions can be broken down into two categories: web and social, to help you pull out results more easily. You can keep track of your media mentions, social mentions, or mentions generated from relationships built with influencers, other companies, and so on.