So, you’ve implemented a digital marketing strategy and you’re ready to take the internet by storm – nice work. Sit back, put your feet up, and wait for the sales to roll in…right? Not exactly.
Digital marketing isn’t a simple A to B journey. Instead, it’s going to require some stop-offs and re-routes along the way before reaching your destination. As such, checking in on the progress of your digital marketing strategies is key to ensuring your approach remains aligned with your end goal.
But how do you know what’s working and what’s not? Fear not – we’re here to save the day! In today’s post, we’ve compiled a handbook of key performance indicators (or KPIs) you can use to measure your performance and track progress as your business grows.
Customer acquisition cost (CAC)
CAC is exactly what it says on the tin: it measures the cost of converting a lead into a paying customer.
Why does that matter to your marketing strategy? Well, knowing how much it will cost you to acquire new customers is key to knowing how much you’ll need to spend on customer prospecting and conversions. This could be for advertising and marketing, as well as lead nurturing and sales calls.
Arming yourself with this information will give you an effective metric for informing your budgetary decisions - streamlining the efficiency and effectiveness of your strategy for the ultimate benefit of your profit margins.
Lifetime value (LTV)
Once you’ve acquired your customers, you’ll want to know what monetary value they’ll bring to your business long-term. This is where lifetime value (LTV) comes into play.
This KPI is equally useful when performing budgetary assessments of your marketing strategy, as this metric is used to predict the total revenue a business can expect from a single customer.
You can also use LTV as a handy means of comparison when assessing your CAC to calculate your return on investment with regards to your marketing and sales efforts.
For example, if your CAC value is greater than your customer LTV, this suggests you’re spending too much in the initial acquisition stage. As a result, you may need to review your CAC strategy and make adjustments to try and reduce the costs around gaining new customers.
Return on investment (ROI)
This KPI is a biggie.
Whatever sector you’re operating in, you need to know exactly what you’re getting in return for the money you’re putting into your business. This is where calculating your return on investment (ROI) comes into play.
Your ROI is found by calculating your total profit vs total marketing cost. How much profit has your digital marketing campaign generated?
Working out your ROI doesn't have to be complicated. You can calculate it easily with the following formula:
Return on ad spend (ROAS)
Digital advertisers, this one’s for you.
Paid advertising tactics like pay-per-click Google Ads campaigns and social media marketing advertising can be an effective way to drive relevant traffic and sales conversions. However, any paid-for advertising strategies should be closely monitored to ensure they deliver a valuable return.
In the digital advertising world, this is referred to as return on ad spend or ROAS. It’s an effective KPI you can use to measure the success of your PPC campaigns (across Google Search and Google’s Display Network, as well as any social media advertising activity).
The metric calculates your return by presenting the total revenue generated in the form of a ratio against every pound spent.
For example, if you generated £5 in revenue for every £1 spent on advertising, your ROAS would be 5:1.
This one’s pretty self-explanatory.
Social media can be a powerful marketing tool for building brand awareness, trust and user engagement. However, it requires a structured approach, which includes appropriate metrics to measure your progress. Cue follower growth.
Social media marketers will know how important follower growth is to the success of your social media strategies. But, in order for this KPI to be truly valuable, it’s not just about having a total follower count as your goal. Instead, we’d suggest monitoring your follower growth over a period of time - for instance, monthly or quarterly.
This will help you gain a more comprehensive picture of how well you’re performing. For example, rather than concluding that you’re simply X followers short of your goal, you can instead track your growth rate. Knowing your follower count is growing X% behind your goal is a more useful metric that allows you to gradually adjust your strategy as needed.
Conversion rate is an essential KPI to track the success of your digital marketing campaigns. Why? It tracks how many leads are actually converting into customers.
Driving traffic to your site is one thing but, if those site visits aren’t converting into leads, your conversion rate will be low and your business won’t be reaching its true growth potential.
The type of conversion this metric is based on depends entirely on your goals. For ecommerce brands, this is likely to centre around purchases - but other goals include newsletter signups, product enquiries, contact form completions, and service trials or samples.
Tracking the conversions that are most appropriate for your campaign will allow you to measure your overall success, and enable you to identify potential issues and new strategies to improve conversion rates. For instance, if a particular product page is drawing a lot of traffic in organic search but users aren’t converting into paying customers, it could suggest that the search intent and information provided on the page aren’t properly aligned.
Many digital marketing campaigns focus solely on that initial customer acquisition, but customer retention is equally important. Often overlooked, this metric can actually be a more cost-effective avenue for generating sales by nurturing existing customers rather than trying only to attract new ones.
Your customer retention KPIs are important as they can provide valuable insight into your customers – who are they and what are their shopping habits and buying preferences?
This information can be a powerful weapon in any digital marketer’s arsenal. By understanding what proportion of your customers are being lost after that first sale, and identifying drop-off points and customer objections, you can tailor future campaigns to hold onto first-time customers and encourage them to convert again by personalising their experiences.
KPIs are vital to understanding the success of any given marketing campaign. While this list is by no means exhaustive, we hope this online ‘handbook’ helps you to measure performance for your business and drive the results you want to see.
Which KPIs to choose?
When it comes to deciding which are the best KPIs for your business to track, start by working out what your business goals are. You can then work backwards to find out which KPIs are the most relevant. For instance, if you want to track the effectiveness of your paid advertising campaigns, looking at ROAS and conversion rates for sales generated could give you some valuable insights.
You can also keep the SMART rule in mind when choosing the most valuable metrics to track, making sure your KPIs are:
In short, KPIs need to deliver a specific result that can be measured and achieved within a particular timeframe, while being relevant to your overarching business goals.
Need a hand understanding what these KPIs mean for your current digital marketing strategy? We love nothing more than getting our teeth stuck into some business data, so email us now for more details or call the Land Digital team for a chat on 0191 511 1014.