I can see for miles (part one) : measuring marketing effectiveness
Measuring marketing effectiveness isn’t always easy. It is a common question, indeed judgment, that hangs over the marketing profession – how to prove that spending money on marketing really adds value. While some of the benefits of a strong marketing strategy are seemingly intangible (brand equity…customer value…) they’re really not. A strong brand, high degrees of market awareness and customer advocacy are key ingredients for any successful business. Those organisations who find a way to successfully measure the impact of their activity undoubtedly perform better – on their marketing and wider business front.
In part one of this blog on measurement, we look at some useful metrics you may wish to consider.
All good marketing strategies, plans or campaign should always include methods to help measure effectiveness. Marketing is an investment like any other, and you wouldn’t retain any spend or asset on your balance sheet if it didn’t positively impact your bottom line.
Measuring the impact of your chosen activity (and refining your strategy based on what’s working and what’s not) is the difference between spending valuable resource wisely or seeing the pounds drain away. But, where to start?
Measure what matters
The old adage ‘measure what matters’ remains true. If you’re an online or ecommerce business, website metrics will be the key to measuring the success of your chosen strategy, as they will help you understand how well your site is performing. If you are in the retail or hospitality sector, customer footfall and online reviews will be a key indicator of the strength and success of your marketing approach.
However, regardless of the sector or industry, there are some key metrics that are common to all small and medium sized businesses that will help you monitor how well your marketing is performing. When applied, these shine a light on how well your marketing investment is performing and help you evaluate where future resource should be directed (and diverted!).
Covering different aspects of the marketing mix, these might include:
Website performance indicators:
- Website traffic and visitor volumes
- Cost-per-click – what any pay-per-click (PPC) or paid-search activity is costing
- Conversion rate – how many visitors complete a desired action on a page (i.e. downloading a resource, submitting an enquiry or requesting information)
- Bounce rate and exit pages – what pages and content on your site is turning visitors off
Social media reach:
- Follower volumes
- Audience engagement – for example, likes, shares, re-tweets and favourites
- Sentiment analysis – what people are saying about you, and in what context
Content marketing impact:
- Blog views
- Blog comments and reader engagement
- Download volumes
- YouTube views
- PR/media coverage
- Social media shares
Email marketing results:
- Deliverability and bounce rates – the quality of your database and how accurate your customer data is
- Click-through-rates (CTR) – the number of recipients who respond to the email content (and, crucially, what content)
- Conversion rate – how many recipients carry out a desired action (whether a sign-up, submitting an enquiry or making a purchase).
A truly strategic approach (and one which delivers a more accurate picture of the true cost of your marketing) is to go a step beyond the metrics outlined above. This means looking at measures that incorporate the total cost of marketing – not just the cost of certain activities (events, advertising, website projects pay-per-click campaigns) but also salaries and time of the team – and then map that cost against business performance indicators. For example:
Customer acquisition cost – do you know how much it costs you to secure a new customer? This metric takes into account everything your business spends on sales and marketing (including salaries, advertising spend, sales commissions and bonuses), divided by the number of new customers.
Customer lifetime value – if you have a recurring revenue stream from your customers, or if customers make a repeat purchase with you, do you know what it costs for you to retain them? This metric helps you understand the true value of a customer, looking at their level of spend with you in relation to what marketing investment was made to secure them.
To calculate what is known as the LTV, you need to start with the revenue the customer pays you in a period, then subtract out the gross margin, and then divide by the estimated cancellation rate (the ‘churn’ for that customer.
Customer retention rate – having strong levels of repeat business and customers acting as your biggest advocates is the key to survival for many small businesses. Evaluating your customer retention rate (CRR) is an important metric, as increasing marketing activity that nurtures existing customers and boosts loyalty can drive greater profitability.
If you would like to discuss how you can better measure the impact of your current marketing programme, or if you have a sneaking suspicion that your business is wasting marketing resource but don’t know where to start in terms of fixing it, get in touch. We can help!