Key performance indicators are an essential part of tracking your marketing progress. However, picking out the most important ones and measuring them accurately can sometimes be tricky. Which key performance indicators should you be keeping an eye on, and how do you quantify their effectiveness?
The first most important key performance indicator is customer lifetime value. Although it doesn’t seem like something you should consider when you’re focusing on conversion rates, it’s crucial to have a good understanding of it to improve the means through which you advertise and how your budget is split up. Come up with an average transaction value for a cross-section of your customers, then calculate the average purchase frequency over a period of time - usually one year. Once you’ve determined how long any given customer remains a customer, you can calculate your customer lifetime value.
If you’re looking to extend the duration of time each person buys from you, develop a loyalty system that gives them incentive to come back to you repeatedly. One way to do this is through personalized marketing emails that you can automate to send at specific times or when specific actions are completed. Products that come included with signups or purchases can also help stretch the customer lifespan of your buyers.
The next important factor is customer acquisition cost. You can calculate this by dividing your total acquisition sum by the amount of new customers you gain over any given period of time. Your customer acquisition cost should always be lower than your customer lifetime value. If it isn’t, your marketing strategy isn’t working the way it should. Aim for a 3:1 ratio for the best results. You can improve your ratio by changing your website to include obvious call to action features, social proof, and accommodations to your audience’s interests and behaviours.
Marketing return on investment is another one of the top key performance indicators. When measuring return on investment, be sure to cater to the type of market you’re in. The single attribution model measures the value of the first and last touchpoints of a sale, while the multi-touch attribtion model measures the many touchpoints in between as well. Alternatively, you can opt for test groups, which assign different criteria to similar groups and compare them; or marketing mix modelling, which takes all past and present transactions into account. Determine which method is best for your business before proceeding.
The final two factors are both conversions: traffic-to-lead and lead-to-customer. For the first, you’ll want to know your conversion number, amount of traffic, and conversion rate to make better decisions about the type of advertising you should be doing. For the second, you’ll need the open, click-through, and conversion rates. Zero in on what makes customers go from consumer to lead or lead to customer and employ those strategies more often.
Key performance indicators can be digital marketing and ecommerce lifesavers if you can measure them. Remember which ones are important, how to measure them, and what to do with the results.