In Part One of Developing a Winning Marketing Analytics Strategy, we covered the benefits your analytics strategy should be delivering, the steps you need to take before implementing your strategy, and the different strategic approaches available to marketers. This week, we’ll dive into three different types of metrics marketers are tracking. We’ll also share our Top 10 Marketing Operations Key Performance Indicators (KPIs) that smart B2B marketers use to reach the right audiences, measure marketing’s ROI, maximize campaign performance, and make better business decisions.
Three Types of Marketing Metrics
Whether you are measuring the performance of a text campaign, the SEO of your website, or your social media pages, most marketing metrics fall into one of three basic types—volume, conversion and big picture. Each category of metrics has dozens of variables that can be tracked, and each provides varying degrees of insights and information that can be used to inform your decisions. The most simple type of metric, and the easiest to track, is volume. Conversion metrics are a bit more complex than volume, but also equip users with more actionable information. Lastly, big picture metrics are the most time-consuming to track and calculate, but they also provide the greatest opportunity to glean actionable insights. Below we’ll define each of the three types and share a few examples.
1. Volume Metrics – These are quantitative measurements of the sum total of something, such as how many times something happened (i.e. page views, clicks, unsubscribes, etc.). This type of metric is typically used to measure things like audience reach, growth and churn. Volume metrics are great for providing basic or low-level insights. Some examples of volume metrics include:
- Email/SMS Opens – Number of people on your list that opened your email/SMS, etc.
- Email/SMS Unsubscribes – Number of people requesting removal from your list
- Impressions – How many times your content was displayed to users
- Reach – The number of people who actually viewed your content
- Engagement Rates – The number of people who reacted to your content (likes/shares/etc.)
2. Conversion Metrics — This type of metric reveals how effective marketing is at turning prospects into customers. Google defines conversion metrics as those numbers associated with motivating a person to action. An example of a conversion metric is when someone visits your site and clicks a button to schedule a demo. Other common conversion metrics include:
- Lead Inquiries – Prospect requests more information, a demonstration, etc.
- Click-Through Rates – The number of times people clicked-through to engage with your content
- Marketing Qualified Lead – Person who has demonstrated an interest in your products or services
- Sales Qualified Lead – Person who has demonstrated an intent to buy your products or services
- Conversion Rate – The percent ofprospective buyers who become viable leads or make an actual purchase
3. Big Picture Metrics – These metrics are essential for demonstrating marketing’s value and typically require input from several different KPIs, which are plugged into a formula in order to calculate actual values. Big picture metrics are often what C-suite executives expect to see in marketing performance reports. Examples of these metrics include:
- Cost to Acquire a Customer (CAC) – This metric reveals the sales and marketing costs involved in obtaining a new customer.
CAC Formula: Add Marketing’s costs in acquiring a new customer to Sale’s costs in acquiring a new customer and divide it by the total number of new customers.
- Cost to Serve a Customer (CTS) – CTS measures the costs involved in serving a customer over a measure of time.
CTS Formula: According to Easy Metrics, a business labor intelligence company, “The traditional method for calculating CTS is to use an Excel model to estimate the average cost for each process, then multiply that cost by the transaction volume. The average is usually determined using an estimated labor standard.”
- Return on Ad Spend (ROAS) – This metric calculates the amount of revenue gained for every dollar spent on advertising.
ROAS Formula: To measure ROAS, you take the revenue that is attributable to an ad campaign and divide it by the cost of the ad campaign.
- Customer Lifetime Value (CLV) – The CLV measures the total revenue a company can expect from a customer and compares it to the typical span of time a customer remains with a company.
CLV Formula: To determine your CLV, subtract the cost to acquire a customer (CAC) and the Cost to Serve (CTS) customers from the revenue you earn from them.
Developing Your Marketing Analytics Strategy
Now that we’ve covered the three different types of marketing metrics, you are ready to identify the ones that will be most valuable to you. To set up your strategy for maximum effectiveness, make sure you define the goals you want your strategy to achieve. For example if your goals are to improve marketing campaign performance and increase sales, then you must carefully consider all the variables contributing to the problem you want to solve or goal you want to reach. Begin by asking questions, such as:
- What Key Performance Indicators (KPIs) are most relevant to the problem/goal?
- How can each KPI be changed, improved or manipulated?
- What outcome will mark the endeavor a success?
Choose the Right Measurements
Once you have identified the information you want to know and the KPIs that impact it most, it’s time to choose how you will measure your data. To help you select appropriate measurements, we’ve gathered marketing’s most-used KPIs and created a quick-reference table for you.
Top 10 Marketing Ops KPIs Quick Reference Table
|Insights Sought||KPI||Definition and Tips|
|Brand Awareness||Net New Users||Visits from a browser with a cookie containing a unique user ID.|
Tip: Use a cross-device User-ID on your website to reduce the number of return users counted as new.
Organize by source to see which channels produce more traffic.
|Customer Journey||Marketing Qualified Leads (MQLs)||Prospects who have requested information, i.e. eBook; demo, etc.|
Tip: Score leads based on fit and interest to determine the level of nurturing needed to move them down the pipeline.
|Sales Funnel Activity||Sales Qualified Leads (SQL)||Prospects vetted by marketing and sales with a high intent to purchase.|
Tip: These leads are the most time-sensitive. Research has shown a direct correlation between speedy follow-ups by sales and an increase in number of deals closed.
|Lead Quality||Lead to Opportunity |
(AKA MQL to SQL)
|The percentage of MQLs that get converted to SQLs.|
Tip: This metric is also useful for gauging the efficiency of sales development reps.
|Sales Forecasting||Sales Cycle Length||Time from first contact with prospect to a closed deal, averaged across all closed deals.|
Tip: Growth-driven companies focus on shortening the cycle in order to accelerate revenue growth.
|Sales Cycle||Pipeline Velocity|
V = # of Opportunities x Percent of wins x Deal Amount/Days in Sales Cycle
|Speed at which highly qualified opportunities move through the sales pipeline and close on a deal.|
Tip: Monitor velocity throughout the stages of the sales cycle to identify bottlenecks and areas for improvement.
|Channel Value||Cost Per Lead (CPL)|
CPL = Spend/# of Leads
|Dollar amount spent per channel to acquire leads.|
Tip: This metric should be used in conjunction with lead quality to determine the ROI of various marketing channels.
|Profit Margins||Customer Acquisition Cost|
CAC = Sales and marketing expenses/# of customers acquired
|The cost of extracting money from a customer.|
Tip: Long-term investments that require significant time before producing results may skew the accuracy of this calculation.
|Customer Acquisition Costs||Lifetime Value of Customers (LTV)||Amount of money that can be extracted from a customer over a period of time.|
Tip: LTVs are important for accurately assessing benchmarks for good or unacceptable customer acquisition costs.
|Marketing Value||Return on Investment (ROI)||Determines the true profit marketing campaigns generate for an organization.|
Tip: There are multiple formulas for measuring ROI including:
1. Gross Profit – Marketing Investment/ Marketing Investment
2. CLV – Marketing Investment/ Marketing Investment
3. Profit – Marketing Investment – Overhead Allocation – Incremental Expenses/ Marketing Investment