What is a KPI?
A KPI or key performance indicator is a measurable value that determines how a company is successfully achieving its business goals. KPIs are used in every aspect of business, like finance, marketing, sales etc. Businesses use KPIs to track the processes in various departments and also to measure the overall performance of the business.
Let’s take a look at some important marketing KPIs that can help you improve your marketing efforts.
Lifetime Value of a Customer (LTV)
Lifetime Value of a Customer or LTV is an important KPI that determines the total amount of money a customer is estimated to spend on your products or services throughout their relationship with your brand. This KPI can help you plan your marketing budget and use resources efficiently. It can help you decide on how much money you want to spend on acquiring new customers and retaining existing ones. The higher the value the greater the profit. LTV can be useful when you plan your marketing or advertising budgets. Acquiring new customers is more expensive than retaining the existing ones. You can always expect to sell more to your existing customers.
Marketers need to be aware of how much a customer will be of value to the business, so that they can invest the money wisely. LTV can help you divide your budget between retention and acquisition. This KPI goes hand in hand with customer acquisition cost or CAC. Without CAC, customer lifetime value does not make much sense. For example, if the LTV of a customer is $500 but it costs more than that to acquire them, then you will be losing money unless you decide to cut back on the acquisition cost.
Customer Acquisition Cost (CAC)
Customer acquisition cost or CAC is the amount of money you invest in attracting a new customer through marketing, advertising or other promotional activities. This includes marketing or sales spend, salaries, and other costs associated with attracting new leads and turning them into customers. Businesses that know how to spend their money efficiently aim to reduce the acquisition cost.
CAC can help you plan your marketing budget. For example, if you are successful in generating leads organically through inbound marketing or by writing blog content then you don’t have to spend a big amount on ads. This KPI will help you assess your current marketing activities to make decisions on where and how you want to spend your money.
Return on Ad Spend (ROAS)
Return on ad spend or ROAS is a marketing KPI that measures the revenue your business earns for each dollar spent on marketing or advertising. It is more specific to the money you spend on digital advertising and how much revenue it generates. ROAS gives you insights into what’s leading to conversions and the revenue the conversions are generating.
This KPI shows you how effective your advertising efforts are. The more relevant your advertisements are to your prospects the more chances there are for conversions. You can analyze your advertising efforts using this KPI and also make further improvements to your ads.
Net Promoter Score
Net Promoter Score helps you determine how satisfied your customers are with your products or services. NPS measures how likely your customers are to recommend your brand to someone else. Your respondents can be divided into three groups which are Promoters, Passives and Detractors.
Promoters: They respond with a score of 9-10 and are readily willing to recommend your business as they are very satisfied.
Passives: Customers in this group give a score of 7 or 8 as they are happy with your brand but not enough to recommend you.
Detractors: Here, customers give a score of 6 or less. Since they are not very happy with your product or service they will not recommend you.
While calculating your NPS score you can also take additional feedback from the customers. It is important to know the customer’s experience with your business and take their feedback into consideration.
Marketing Qualified Leads
Marketing qualified lead or MQL are leads that have interacted with your brand. And are more likely to become a customer as compared to other leads. This is based on what web pages this lead has visited, which content they downloaded and other types of engagement with your company. You can gauge their interest in your brand and determine whether they are qualified leads.
Determining your MQL will ensure that your sales team receives high-quality leads that have more chances of converting.
Sales Qualified Leads
Sales qualified leads or SQL are potential customers who are willing to interact with your sales team. They have expressed enough interest in your business and are ready to enter your sales process. These prospects are already qualified as quality leads by the marketing team and are then handed to the sales team.
An MQL becomes SQL once they are ready to interact with your sales team. This KPI is useful as it can show the marketing team how many of their leads are communicating with the sales team.
Marketers always need to know if their marketing efforts are attracting people. Website traffic is a great way to see where your visitors are coming from. You can look at various channels like organic traffic, referral traffic, direct, paid, social media and more. This can show you which channels are driving more traffic to your website. For example, if your organic channel is driving more traffic means your SEO or content strategy is working. With this data you can optimize these channels to improve their performance. Looking at the demographics of these visitors can show you if they align with your target personas.
Social Media Engagement
Social media plays a key role in the marketing efforts of many businesses. Customer engagement can give you insights on how relevant and engaging your followers find your content. Instead of looking at the number of your followers, pay attention to the engagement with your posts. You can look at likes, shares and comments on your posts. You can also check if any follower has messaged you or mentioned you in any post. This can help you see the overall success of your social media marketing.
Conversion rate is the percentage of visitors who have taken a desired action. This desired action can be completing an online form, buying a product or signing up for a newsletter. These are the actions you determine. This KPI can show you how successful your marketing efforts are in quality leads. It can also give you an insight into the user experience on your website. If you are not getting enough conversions, you can look into improving your user experience. It gives you a chance to analyze your marketing strategy and optimize it to get more conversions.
Along with tracking website traffic you should also take a look at how many visitors are accessing your website through mobile devices. Majority of users prefer using their mobile devices to run a search. They also open their emails on their phones. You need to have tools to help you track mobile conversions. With this you can analyze the user experience for the visitors using mobiles. It can help you determine if your website is user friendly or not. Optimizing your website for mobile devices is important as you don't want to miss out on potential leads.
As a marketer you need to measure the right KPIs to measure the success of your marketing efforts. They can help you make important business decisions and optimize your campaigns to improve performance. The KPIs discussed above will help you analyze all the aspects of your marketing efforts. You can confidently prove the success of your marketing campaigns.
Found this helpful? Check out more interesting articles from our blog.