You know that your marketing team tracks many different metrics to better understand what’s working and what’s not, to constantly improve your marketing campaigns. They look at website visits, conversion rates, blog post shares, email open rates, email click-through rates, etc. The list is seemingly endless. So, which metrics should be used to prove the ROI of their marketing efforts? After all, marketers that prove ROI are twice as likely to get a higher marketing budget the following year.
While you may be interested in some of those metrics listed above, to try and get a better picture of your marketing efforts, what it ultimately comes down to is the impact on your bottom line. Here is a list of 5 marketing metrics to analyze your marketing efforts, and make sure they are on the right track.
1) Customer Acquisition Cost (CAC)
This is the total cost for both your sales and marketing departments, divided by the number of new customers in that same time period. (Be sure to include everything in those numbers to ensure accuracy, money spent on ads, salaries, bonuses, etc.) Your CAC can be calculated for a month, a quarter, or a year, depending on the time period you are reporting.
Sales and marketing cost (in a month): $300,000
New customers (in a month): 30
CAC = $30,000 ÷ 30 = $10,000 per customer
2) Marketing % of Customer Acquisitions Cost (M%-CAC)
This is the marketing portion of your total CAC, calculated as a percentage of the overall CAC. To calculate it, take all of your marketing costs, divide by the total of sales and marketing costs you used to compute CAC.
Marketing Cost = $150,000
Sales and Marketing Cost = $300,000
M%-CAC = $150,000 ÷ $300,000 = 50%
3) Time to Payback CAC
This is the number of months it takes you to earn back the CAC you spent in acquiring a new customer. You take the CAC and divide by margin-adjusted revenue per month for the average new customer you just signed up, and the resulting number is the number of months to payback. (The Margin-adjusted revenue = how much your customers pay on average per month.)
In industries where customers pay one time upfront, this metric is less relevant because the upfront payment should be greater than the CAC, otherwise you are losing money on every customer.
Margin-adjusted Revenue = $1,000
CAC = $10,000
Time to Payback CAC = $10,000 ÷ $1,000 = 10 Months
4) Marketing Originated Customer %
The marketing Originated Customer % is a ratio that shows what new business is driven by marketing. This metric works by determining which portion of your total customer acquisitions directly originated from marketing efforts.
To calculate the Marketing Originated Customer %, take all of the new customers from a period, and draw out (this is much easier to do when you have a closed-loop marketing analytics system, but can also be done manually) what percentage of them started with a lead generated by your marketing team.
Total new customers in a month = 10,000
Total new customers that started as a marketing lead = 5,000
Marketing Originated Customer % = 5,000 ÷ 10,000 = 50%
5) Marketing Influenced Customer %
Similar to the Marketing Originated Customer %, but it adds in all the new customers where Marketing touched and nurtured the lead at any point during the sales process, not only by originating the lead. For instance, if a salesperson found a lead that wasn’t quite ready to buy, but then later closed a sale after a lead nurturing campaign, that new customer was influenced by Marketing.
Total new customers = 10,000
Total new customers that interacted with marketing = 7,000
Marketing originated customer % = 7,000 ÷ 10,000 = 70%
Knowing these 5 metrics can help you get a good understanding of the impact your marketing department has on the bottom line, and make sure that your marketing efforts are on track. If you find the metrics show poor results, and are looking to dive into a new inbound marketing strategy, check out our free ebook: 6 Core Components to Inbound Marketing, to help get you started.
*Image Courtesy of Nan Palmero via Wikimedia