Why Many CMOs Fall Behind When It Comes to Understanding Marketing Metrics
Marketing professionals are living in an exciting age. In our digital world, there are seemingly infinite ways to market, promote, and advertise business—from interactive Snapchat campaigns to auto-responder lead-generating content efforts.
Not only are we privy to an array of digital marketing options, but these possibilities come with a veritable gold mine of data. We can closely measure the effectiveness of our campaigns and easily track things like traffic, clicks, and followers. These metrics work to improve our efforts and give us invaluable insight into our audience and prospects.
However, many marketers and even CMOs fall short when it comes to understating marketing metrics. This can be detrimental to business. Lacking an understanding of which metrics matter the most can lead to a huge loss in time, money, and opportunity.
So, do you have a firm grasp on which marketing metrics you should be paying attention to and why? If not, we’ve got you covered. The following list contains the marketing metrics that every CMO should keep a close eye on.
Customer Acquisition Cost
How much is it costing your organization to acquire a customer? Knowing this number is critical to your marketing campaigns. Of course, you need to know how much you’re spending on marketing and sales, but you’ll also want to define an acceptable customer acquisition cost for your business.
There are a few ways you can choose to measure customer acquisition cost. One would be to combine the total of your efforts across all channels and divide that into the number of new customers you’ve acquired. That would give you your most basic customer acquisition cost.
Alternatively, you can use that same formula but separate it by marketing channel. For example, divide the total number of dollars spent on Facebook by the number of customers that found you on Facebook. This will inform you about which marketing channels are the most effective for your business.
Customer Lifetime Value
Now that you know how much it costs to acquire a customer, let’s determine the loyalty of those customers. When comparing your customer acquisition cost and the customer lifetime value, you’ll need to determine how long it takes for a customer to become profitable. This is one of the most important metrics to factor in because it’s a compilation of all your efforts across the board.
To measure a customer’s lifetime value, you need to define a few things:
- Your customer’s average total of orders
- Order frequency
- The amount of time you have that customer’s attention
There are a few different formulas that you can follow, but the important thing is that you are taking these numbers into account.
According to a statistic by Bain & Co, increasing your customer retention by 5% can increase sales by up to 75%. This shows just how important it is to focus on keeping the customers you have and understanding their lifetime value. Marketing efforts should not only move towards getting new customers, but they should also keep existing customers interested. Measuring the lifetime value of your customers is one of the best ways to find out how effective your marketing plans are. It’s worth the time and money to keep your customers engaged.
Volume Vs. Profitability Threshold
There are a variety of methods that you can use to increase profitability and sales volume. On one hand, it’s a sales tactic as old as time—a high price means that you don’t need to attract hoards of new customers to meet profit goals. However, focusing on volume of sales can increase your market share, which often leads to a bigger ROI in the long run.
Balance, here, is key. Avoid focusing too much on either side of the coin. It makes sense to analyze the efficiency of your efforts, but you need to also look at volume of sales as well.
Also, keep in mind that your organization is a team. Everyone should understand these metrics and how to meet the desired targets to be effective. This information cannot be solely relegated to your sales or analyst team—everyone needs to be on board. If everyone isn’t aware of what the goal is, it will be impossible to strike the right balance of volume and profit.
Now that you know how to measure some of the more common metrics, it’s time to go even further. Next, let’s dive into some more granular concepts that CMOs often don’t pay enough attention to.
Traffic Cost And Quality
Good traffic is expensive. It’s a common misconception to think that it doesn’t take a lot of time or money to drive traffic for your business. For example, traffic from search engines is likely to be up to over half of your total website traffic. So, how do you get traffic from search engines? Great SEO—and it isn’t cheap.
If you want to drive a lot of traffic to your website, you need your website to land on the first page of Google. While targeting the right keywords will help you get there, it is still a big investment.
Beyond that, there’s more to factor in than the total number of visitors that are clicking through to your site. Another metric that really matters is who is behind the traffic. Are you reaching the audience that will find your product or service valuable? Are the visitors to your website looking at the content or are they clicking away? The quality of the traffic can make or break your entire campaign, and you need to know where it is coming from.
Measuring Web Page Visitors Across Various Stages And Funnels
Getting clicks to your website or landing page is only the first step of many. You also need to measure the number of visitors you get across all the stages of your sales process. You could be getting 10,000 hits a day to your website, and it seems like your digital marketing investment is paying off. However, what matters is how many of those visitors are getting beyond your homepage and moving through the sales funnel
To understand if you are getting the desired behavior from your visitors, you have to break down the sales funnel. How effective is your call of action? After finding your landing page, how many people are signing up for your newsletter—and opening it once it hits their inbox? How many sales are you able to make via the funnel you’ve invested in? Your marketing automation software will have all this information for you, but be sure to go beyond your total number of hits or subscribers. This will provide you with more insight into how many qualified leads you’re earning.
How many leads are you converting during your campaigns? That metric alone can be the difference between profitable campaigns and ones that tank. The goal of your marketing efforts should always be to convert your audience into customers. While knowing the number of qualified leads is an important piece of the puzzle, they won’t all turn into customers or engage with your brand. This is why monitoring and analyzing the conversion rate in digital marketing campaigns is crucial to your success.
Furthermore, the number of conversions tells you more about the people you are reaching than anything else. Are you getting thousands of visitors to your landing page and only a handful of those people are becoming your customers? If so, you need to adjust your campaign.
It is, however, a bit tricky to define what a good conversion rate is for your business. Many CMOs get stuck here, but the truth is, there really isn’t a simple answer. The thing to keep in mind is that your number of conversions must increase in order to justify the money spent on the campaign. If your conversion rate is increasing month over month, you’re on the right track.
While many CMOs fall short understanding marketing metrics that really matter, this doesn’t have to be the case. While marketing has continued to evolve in the digital age, the core concepts are still important. However, the way in which we prioritize and measure the success of campaigns is changing. You can’t rely on any one study to tell you which numbers are good for your business. You can only rely on knowing your business, your target audience, the goals of your campaigns, and digging into the metrics that will get you the answers you’re looking for.
To truly understand the right marketing metrics, you need to make use of the available data and determine what it means in context. This means going beyond the basic numbers like traffic, clicks, and followers in order to get a grasp on what’s really going on behind the scenes. This will empower your company to see the trends and adjust accordingly so you can make your marketing campaigns more effective and profitable.