The 3 Core Metrics Every Business Should Be Measuring
Successful businesses are driven by analytics. Any company looking to optimize its strategy should be a glutton for data, and data should inform every action that a business takes, but with all the data that companies collect it can often be overwhelming for a business to know exactly which metrics are most important.
A lot of data is unnecessary or worse, misleading. Should you be watching your viral coefficient? What about your product metabolism? And if so how should they influence your decisions?
By following the wrong metrics marketers can find themselves hindering their sales processes more than they are helping them.
More than just tracking data, you need to understand it and know how to use it to direct strategy.
Red herrings abound in the world of data, but if a marketer knows which metrics to be watching they can better understand and fix the breaks in their sales cycle.
This article will not only tell you what metrics are important but also show how they integrate with each other to create useful knowledge for the businesses that track them.
The right data + a knowledgeable marketer = a winning solution
These are the three core metrics that every business should be measuring because they each tell a unique and crucial story about a business’ marketing. When it comes to your marketing mix and where you need to optimize it’s important to stay laser-focused on these three key metrics.
#1 Top of Funnel Conversion Rate
Top of funnel conversion rate should be considered one of the most important metrics that a marketer can observe because it builds the base for the rest of the sales cycle.
Your business could have the greatest sales team in the world and a product that everyone needs, but if you aren’t bringing people into the sales funnel then you will never be able to last. Top of funnel conversion means leads generated and consumers engaged.
The more users who opt into a sales funnel the greater your potential for sales.
The math is simple: if you are able to convert 50% of users to opt-in to the sales funnel and 1% of them close at the bottom it would be the same as if 5% of users opt-in and 10% close at the bottom. With the same close rate even slight increases in opt-in rates can mean dramatic improvements in gross number of deals closed.
Getting users to opt in can be difficult, but there are some highly effective inbound and outbound marketing media that will help to up your top of funnel conversion rate:
Outbound points of opt-in conversion can be expensive, but they are a necessary means of expanding your user base. Examples of outbound points of conversion are newsletters, discount codes, and lead magnets. These different media will generate different types of leads and will probably produce different close rates. The nuanced marketer should be keeping track of each of their points of conversion to best understand their sales cycle.
Inbound points of conversion are forms of earned media that can vastly improve the equity of a brand among users. Forms of inbound points of opt-in conversion are webinars, whitepapers, and quizzes. If a company produces high quality inbound marketing media then users will be much more likely to trust the product and enter the top of the sales funnel.
Rate of top of funnel conversion can vary greatly by industry and product type. The most important thing is that you always strive to see new ways to bring users into the top of the funnel. If a marketer becomes stagnant in their attempts to bring users into the top of the funnel then sales will stagnate as well. Be creative and never stop watching the top of funnel conversion rates.
#2 Bottom of Funnel Conversion Rate
Bottom of Funnel conversion rates are a cardinally important part of any business because they give you specific knowledge about the most important part of the business: are people buying your product? Every successful company watches this metric, and with good reason. No matter how many users you are engaging, you need deals to be closing in order to gain any revenue.
But just because companies are paying attention to bottom of funnel conversion rates doesn’t mean that they are watching them the right way.
To most this metric seems simple, of the users engaging with your product how many close? Once you start paying attention to the important parts of the metric t’s not as simple as it seemed at first blush. Companies need to be paying attention not only to the number of leads that close, but the average deal value, and the channel through which the leads were generated.
If the channels for lead generation are producing vastly different close rates then there is likely a difference in the quality of your channels.
A good marketer must understand what is working well in one channel or failing in another and try to raise the bar.
It could be that certain lead generators are not producing the right leads. That is, they might not be targeting users who are ready and willing to close. By understanding this you can adjust your target consumer and the ways that they are treated in the sales funnel.
Deal value can vary greatly for companies with the same close rates, and must also be closely monitored. A marketer would always rather have large deals than small ones, all else equal. If you have deals closing then the hard part is already over. Increasing the value of those deals can be a simple and effective way to up revenue.
Attempting to raise deal value should be done carefully, however. A marketer needs to understand which types of users are willing to increase the value of the deal and which will be scared away by pressure to do so. This requires careful observation of the data around bottom of funnel close rates.
#3 Traffic Costs
At the end of the day it’s important to understand what you are spending to get these conversions. You could have great top of funnel and bottom of funnel conversion rates but if the costs of procurement are too high then they aren’t worth a thing.
Understanding your traffic costs is an important way to audit the entire sales funnel.
With a firm grasp of the costs associated with your traffic you can calculate the ROI for different sources of lead generation and sales channels.
Traffic costs should include every aspect of the sales process from advertising to user acquisition to the close of a deal. By breaking the traffic costs up into particular sources you can understand exactly which methods and leads are generating the highest return relative to cost, and by tracking traffic costs each step of the way from the top of the funnel to the bottom you can see what step in the process is most costly.
Certain sources of traffic may cost more but convert at a much higher rate. So just understanding conversion rate or traffic cost separately will not tell the whole story. Once you have tracked and understood the rates at which you are converting you need to track the traffic cost of each lead to know whether the conversion was worth the cost.
ROI is not the whole story, however. For some businesses it is worth it to have lower margins or even negative ROI if it means generating more deals. A fewer number of sales with little marketing investment could have a better ROI than a lot of sales with a higher traffic cost, but for many companies growth is more important than profit.
If a lead generator is highly successful but highly costly it might still be worth investing in. You should try to eradicate traffic costs where they aren’t improving conversions, but otherwise you shouldn’t fear them too much.
In a competitive business landscape, conversions cost money. Don’t cut user procurement methods that are working just because they have high traffic costs.
The most important metrics that your business can watch are the rates that users are the top of funnel conversion rates, bottom of funnel conversion rates, and the costs associated with generating that traffic.
Opt-in rates are the base of a successful business. Your points of conversion should be creative and should target the people who are likely to close on deals.
Examples of marketing media are:
- Discount Code
- Lead Magnet
Bottom of funnel conversion rates can tell you which channels and top of funnel conversion points are producing the most closed deals. You can use this data to influence the entire funnel and create larger and more numerous deals.
Traffic costs should be mitigated wherever they are not improving your sales process. However, remember that costs are a necessary part of the sales funnel, and you shouldn’t ditch a successful strategy just because it is expensive.