In this Article How Key Performance Indicator is a vital tool in Business. Is your marketing plan working for your business? Sure, you are making sales, but what specific aspect of your program is bringing in those sales? Do you know how much your business is paying per lead? How about the exact ratio of people that hit your website’s landing page that converts into sales?
These questions and more like them often leave business owners with blank looks and silent mouths as they stare across at a consultant who is looking for business metric information. Too often, business owners throw money at marketing in the hopes that at least some of it will produce enough revenue to not only justify the cost but to ensure the profitability of the company as well.
Because of this, when a downturn happens in the company or the revenue of the business dips for any reason, marketing is often the first line item that takes a hit in the budget. But unless a business knows their marketing key performance indicator (KPIs) numbers, this action is often a mistake and leads to a further loss in revenue.
Knowing your marketing KPIs can be one of the most valuable sets of numbers for your business as it will tell you exactly how much you spend, where you spend it, and how much you make per dollar spent.
Below are 6 of the most essential marketing Key Performance Indicator (KPIs) that matter to your business:
The first and most apparent Key Performance Indicator is your overall sales revenue. If your total revenue is completely marketing-driven (i.e., all your sales come directly from marketing), then it is easy to see if your marketing program is working. But, if you have sales that come from referral, existing clients, etc., you will want to subtract that revenue from overall revenue to see what the marketing revenue is.
Cost Per Lead
Figuring out your cost per lead is reasonably straightforward; you can simply use the CPL Formula, which is your total ad or marketing spend divided by the total number of leads you receive. This can be broken down by segment, of course.
For instance, your total number of leads from magazine ads, online ads, organic social media, etc. The vital factor here is the proper tracking of leads, which many businesses fail to do. Every incoming communication should be tracked back to its source. You can do this either by simply asking, which is not always 100% effective or by establishing some marketing funnels that will ensure you know where each lead comes from. These could be in the form of dedicated phone numbers that include call tracking, separate email addresses, etc.
Lifetime Value of Customer
The lifetime value of a customer is another Key Performance Indicator that many businesses often overlook. One obvious point is that your cost of a lead should be a lot less than the lifetime value of a customer. This can be an issue if your revenue is based on one time sales of a product or service, but if your business model includes recurring income, the lifetime value can be significant.
In either case, focusing on retention is vital to increasing this metric. For one-time sales, your hope is to have them purchase again at a later date. For recurring income clients, your goal is to keep them as a customer year after year via retention campaigns that involve general customer service.
Reach out to them to see if their needs are being met as well as any other forms of communication that will help them feel good about their decision in doing business with your company.
While determining this metric is a little tricky, Hubspot’s blog has a great entry that includes a downloadable tool to help your business discover your lifetime value of a customer.
Website/Landing Page Conversion
When thinking about their websites, businesses often think in terms of traffic. They want a lot of people to visit the site and see what they have created. But high traffic is an ego boost, not necessarily an income generator. It doesn’t matter how many people come to your site if they don’t buy.
To convert that traffic into paying customers, work must be done on the site, so that it is designed to encourage that activity. Increasing the conversion rate of a website or landing page is an entire subject unto itself, but rest assured, it is absolutely a Key Performance Indicator you want to pay attention to as part of the marketing campaign for your business.
Organic traffic refers to the number of people who find you themselves, mainly through search engine results. This means that your Search Engine Optimization (SEO) has got to be reliable.
When people are searching for what you do on Google, are you being found? This is another extremely involved topic, and the process of creating a highly effective SEO campaign can be expensive and lengthy, but it can also be extremely financially rewarding.
For the uninitiated in this area, begin your journey with a quality keyword search. Your goal is to find which keywords people are using in search engines to find what you do. Then, you want to optimize your site using those keywords. Easier said than done and hiring a quality SEO company that can guarantee results is recommended here.
Social Media Traffic & Conversion
Concerning social media activity, you don’t need to have that traffic and activity result directly in sales for the campaign to be effective. Your social media pages can be used to support some of the Key Performance Indicator KPI’s above, including lifetime value of a customer and website traffic/conversion.
If your social media activity gives value to a customer or prospect, that alone may make them feel better about your business, visit your site, and choose to buy. Existing customers may be retained in this same way as well. But, if sales and conversion is your number one goal, the campaign gets quite a bit more involved and will include paid advertising and posts geared around converting visitors into sales.
No matter your purpose, your overall social media campaign is another Key Performance Indicator to consider in your overall marketing campaign.
Digging into each of the areas above can take some time, but once you begin to understand each of the KPIs listed, you will gain valuable insight into your business and your current marketing campaign. Once you know the numbers, what’s working and what’s not, you can then tweak as necessary to begin your future marketing campaign.
Good luck, and here’s to your marketing success!