Business metrics are crucial for understanding what makes a particular business really tick. To effectively and systematically grow your business, you need to know detailed statistics – such as how much it costs to acquire new customers, and what their lifetime value is.
Metrics like these become even more important in the current era of social media marketing. According to The CMO Survey, only 15% of marketers actually study the impact of social media on their business, despite the steady increase in ad spending.
The most common reason for this neglect is that it’s easy for us to get hooked up in day-to-day operations. However, it’s important to understand how much value can be extracted from the right business metrics. These will help you optimize your systems and processes and focus on the things that matter.
Metrics Vs. KPIs
KPIs, or Key Performance Indicators, are a special kind of metric selected because of their huge impact on the business. Companies typically choose only 3 or 4 KPIs to determine whether they are moving in the right direction and meeting their goals. Metrics, on the other hand, tend to be much more actionable and are used to track initiatives that help the company meet its KPIs.
How to Measure the Success of Marketing Efforts
In practise, all marketing efforts can be split into two categories: continuous and targeted.
Continuous marketing is the beating heart that keeps the blood flowing. It’s tracked over time using various metrics and KPIs. These include total revenue, number of unique visitors, page views, and conversions. All of these can be tracked in real-time via RTB-Media’s Free Reporting Tool. The important thing is to gather a large enough data sample so you can perform deep data analysis and cross-reference everything with your marketing efforts.
Targeted marketing has a clear goal with a beginning and end. If you have multiple goals, sort them according to their priority and select the best KPIs you can. For example, if the ultimate goal of your marketing effort is to increase the total number of your Twitter followers and establish a larger social presence, the number of followers is the most important KPI to keep an eye on. You can also measure associated metrics, such as retweets and comments for engagement, clicks for website traffic, and conversions for revenue.
Five Important Metrics to Keep an Eye on
1. Customer Satisfaction
Research by NewVoiceMedia has revealed that 44% of US consumers will leave a business for a competitor as a result of poor customer service. Customer satisfaction is like a medical examination with a power to shine light on potential problems before they become larger issues. It can be tracked at all stages of the customer experience using simple questions and surveys.
To increase your chances of starting off on the right foot with new clients, make sure your advertising campaigns and other marketing efforts do not over promise on what you offer. Most people don’t click on a “Lose 1lb/day!” ads because they know it’s not real. And those that do click end up disappointed.
It’s also a good idea to measure secondary metrics which directly influence it — such as average reply time, average handle time, and replies per ticket. The simplest way to measure the overall satisfaction of customers is to ask an open-ended question, such as “how satisfied are you with our business?”
If you would prefer a more quantitative approach, just let customers respond using a 1-10 rating scale. Also remember to ask those that grade you with less than 10 with a “What could we do better/differently in order to get a higher grade?” input box.
2. Cost to Acquire Customers (CAC)
A high cost of customer acquisition is a frequent pitfall many business owners and entrepreneurs fall into. Knowing the total cost of a new customer will help you analyze the ROI from marketing campaigns and sales efforts.
There’s no magic number, as CAC heavily depends on a particular business model and industry. For example, a real estate firm might need to spend $1,000 per acquisition and then make a profit of $20,000.
Your business model or industry might be very different. Regardless, measuring your CAC is easy: divide your total costs spent on acquiring customers by the number of new acquisitions within the same time period. If you spent $1000 on advertising and got 10 new clients, then your CAC is $100.
An effective use of A/B testing is a great way to improve your CAC. Even seemingly small tweaks to your ad, landing page or shopping cart can have drastic effects down the line.
3. Lifetime Value of a Customer (LTV)
While LTV may be difficult to calculate if you are just starting, it’s absolutely necessary for determining the overall profitability of your venture. Simply put, when your CAC is higher than your LTV, you are on the road to bankruptcy. To lower your CAC, it’s best to measure all your marketing/sales efforts, and then optimize wherever possible. To increase LTV, make sure you never lose sight of customer satisfaction.
For this purpose, established companies use customer relationship management (CRM) software. These help them to analyze customer interactions and take better decisions in the right moments. The data CRMs provide also helps you better understand your clients, so you can further optimize your marketing and ad campaigns.
4. Sales Revenue
Though businesses watch this metric a lot, they rarely take the time to analyze it thoroughly. If your goal is to periodically increase sales, it is essential to correlate your sales data with specific initiatives and patterns. You can analyze your revenue by time period, individual products, or consider the impact of certain actions. It won’t take long before you find out exactly what drives your revenue and what doesn’t (i.e. what you should do more and less of).
5. Revenue split
Many businesses have (or should have) more than one source of revenue. An online blogger may be receiving money from advertising, affiliate sales, paid guest posts, or through various sponsorships. Bundling everything together could easily obscure emerging trends and patterns in customer behavior. Be sure to clearly separate all your income sources to have an even clearer image of what you should be focusing on.
The Bottom Line
Metrics don’t have to be scary and complicated. All it takes is to identify a handful of key areas that make the biggest difference. We strongly advise you to avoid going down the analytics rabbit hole by tracking hundreds of different metrics of little to no significance. Such an approach can quickly lead to burnout due to the sheer amount of data you accumulate.
Banner image source: http://www.linuxeden.com/upimg/allimg/131013/254-131013091123.jpg