Every marketing strategy should have one exact result – an increase in sales. To understand what aspects of strategies influenced sales results, you need measurable indicators. There are quite a few KPIs out there, so here are the ones you should pay the most attention to in digital marketing.
The total amount of money your company earns is essential. Above all, the increase in revenue is a crucial indicator that your marketing efforts are making things happen. The formula is straightforward – multiply price with the number of units sold, and voila! However, for a complete picture, factor in discounts, refunds, bulk pricing rates, and individual results for each price point.
Cost per lead (CPL)
Bringing in the lead is not free. But how much does it cost to bring one? It depends on the number of factors, such as industry and type of campaign. As a rule of thumb, lower costs are better as it means marketing is efficient, and it saves you money. Expensive campaigns can also bring a considerable number of leads that may convert into sales. Divide marketing spends with new leads to get CPL. The average cost varies widely by industry.
Getting a lead is one thing. Converting it to sale is a whole different beast. To see how good your marketing teams are doing, look at lead conversion. Divide the number of leads converted to sales with a total number of leads and multiply the result by 100. You will get a lead conversion percentage. The average conversion rate in the software industry is between 5 to 10%.
Cost per Acquisition (CPA)
Campaigns focused on acquisition should have resulted in an increased number of interested parties. It is essential to know which channel brings the most potential customers and whether it happens because of the campaign. That is where the cost per acquisition (CPA) steps in. The formula is simple – divide the amount you spent on the specific channel by the number of new users, and you will have an idea of how much it costs to acquire new users.
If the churn rate increases, it may be because of various reasons: competition luring customers away, significant changes in product or service, inadequate communication with the community, sales teams prioritizing first sale, and not customer retention. Divide the number of customers you lost by the number of ones you gained during a specific period, multiply the result by the total number of customers served during the said period, and then multiply by 100. An overall churn rate of 5-10% should be considered acceptable.
Keeping customers should be the focus of all departments, not just marketing. This metric measures how many clients do business with the company over a certain time, opposite to the churn rate. Taking care of a loyal customer is far less expensive than looking for a new one. The formula for calculating retention is the difference between a customer at the end and added during a specific period divided by the number of customers at the beginning of the period. Multiply this result by 100, and you will have a percentage. Most industries state that the average eight-week retention is below 20%.
Customer lifetime value (CLV)
It is essential to know how much revenue each customer brings, not just through individual purchases but also throughout their lifetime. CLV helps you by providing info about the number of customers you need to break even and make a profit. Keeping an existing customer is cheaper than acquiring a new one. Multiply customer revenue per year with relationship duration in years and subtract the total cost of developing and spending on the customer.
This KPI consists of several metrics:
- Brand impressions
- Mentions in social media and blogs
- Social media engagement
- Website traffic
Combined, they offer information on how much the broad public is aware of your brand. They also show what works in the campaign and what should be improved or changed completely. You can track them with a simple spreadsheet but also with software that provides detailed digital marketing reporting which makes the whole process much more streamlined.
Happy customers will recommend your product or services, so the marketing team should always track referrals. Today, using online software makes things much more comfortable to set up and operate by customers. Inviting a friend to join the program or use a service can give discounts or buyer points, stimulating the acquisition.
6. Bounce rate
The visitor may come to your landing page and leave it immediately, without visiting any other page on the website. It is essential to try and figure out why – after all, each of these visitors may be a potential customer. Is the problem visual outlay or navigation? Do an A/B test to check it out. A total number of visitors should be divided by those that visited only one page, then multiplied by 100. Results below 55% are considered acceptable. Anything above asks for significant improvements to the page.
As we mentioned in the introduction, this is by no means a comprehensive list of KPIs. Every marketing strategy should tailor the list to get the most useful data. Be ready to act upon new information and adapt your activities accordingly.