Marketing’s Makeover: From Fluff to Facts
By Desiree Grace
She’s got a bad reputation. Marketing—she’s a party girl. Golf outings, customer appreciation events, expensive meals at trade shows—when the economy gets rough, she’s the first thing to go. But much like the cheerleader with a perfect GPA, there IS more to Marketing than meets the eye. Done right, it’s not just entertainment and good times. Effective marketing involves discipline and hard work that is measurable.
Let’s discuss Marketing Key Performance Indicators (KPIs).
These are metrics that demonstrate results and return on investment. There is some
rigor underneath all that fluff and fast talk. To understand the impact of your
work, you must assess the outcomes of your strategy and optimize your programs
and campaigns accordingly. This can include channel-specific marketing
activities if you’re a manufacturer selling through distribution.
Some good basics you can and should measure include the
following:
1.
Return on Marketing Investment (ROMI)
a.
You calculate ROI by subtracting marketing costs
from their generated revenue, then dividing that number by the cost of your
marketing efforts.
b.
Caution: This is in an ideal world and is easier
said than done. It’s often hard to isolate marketing from other elements of
your growth strategy, such as pricing discounts or sales initiatives. There ARE
things you can do to connect results to a specific initiative. Try using an
event QR code, using Google Analytics or other software to measure the success
of a particular online campaign, or other measures that track where your leads
and sales originate.
c.
You should track ROMI, as it can make or break
your budget requests for the next year. If your campaign paid off, and the
resources allocated show quantifiable results, you can make the case to run a
similar campaign again. Better yet, compiling ROI by campaign, by target
market, or by geography, for example, will demonstrate that marketing
investments should continue.
d.
ROMI can also help you identify your most
profitable tactics and allocate resources wisely. Maybe that golf outing wasn’t
such a poor investment, if your target customer placed a large order the next
day. Say you spent $1,000 on golf, dinner, and cart rental at a premier course,
and the customer placed a $3,000 order. Your ROI is 200%.
2.
Customer Acquisition Cost
a.
Customer acquisition cost (CAC) is a
marketing KPI that calculates the total expense incurred to acquire a new
customer. You calculate it by dividing the sum of all marketing and sales
expenses over a specific period by the number of new customers acquired during that
period.
b.
Conventional wisdom and marketing textbooks
state that it costs 3-5 times more money to gain a new customer than it does to
keep an existing customer. Validate that by measuring your results.
3.
Customer Lifetime Value (CLV)
a.
This KPI is key to long-term profitability,
customer retention, and customer segmentation.
b.
You can measure this easily by multiplying
customer annual revenue X customer lifespan. Then, subtract any acquisition
costs for year one and retention or servicing costs, like rebates, from the
annual number, and presto! You have customer lifetime value.
c.
Let’s walk through an example: Acme Electric
buys $10,000 per month per year from Alpha Manufacturing, with a year-end buy
of $5,000 to make their rebate goal. The rebate costs 5%, $6,250. Assuming
there were no acquisition costs and minimal servicing costs, Acme’s annual
value to Alpha is $118,750. Assume Acme is a steady customer of over 20 years,
and, so far, their CLV is $2.375 million. Not great, but if they are low
maintenance and pay their bills on time, not bad. A different topic for another
day is how Alpha can grow Acme in the upcoming sales cycle.
4.
Lead Conversion Rate (LCR)
a.
LCR measures the percentage of visitors to your
website, your app, or your counter day who take some sort of desired action,
such as making a purchase, signing up for your newsletter, or filling out a
contact form.
b.
You calculate LCR by dividing the number of
conversions by the total number of “visitors” and then multiplying that by 100.
If your website receives 1,000 visitors and 50 of them complete a purchase,
your conversion rate is 5%.
c.
Understanding conversion rate is essential to
measuring your marketing campaigns, as it focuses on customer actions. A high
conversion rate indicates success with your campaign and your target audience.
On the other hand, a low conversion rate means you need to make some changes.
5.
Cost Per Click, or Cost Per Contact (CPC)
a.
It’s common and predictable to measure the total
cost of a campaign or an event, but a more meaningful measure is CPC.
b.
Let’s say you offer a customer training event.
You pay for a subject matter expert, maybe even offer Continuing Education
Credits, and provide breakfast. All in all, a $10,000 investment. It seems
steep, but NOT if you have 120 attendees. Your cost per contact is less than
$84. You cannot even make a sales call for that amount of money.
c.
In a digital setting, CPC considers the amount
you pay each time a user clicks on your paid advert. CPC is calculated by the
total cost of your ad divided by the number of completed clicks. If you spend
$1,000 on your ad and it receives 500 clicks, your CPC is $2. In this instance,
you can assess online advertising’s financial efficiency. Google Ads or other
tools can help you track and measure this metric.
This next batch of metrics applies mainly to the digital
world. We are living in a digital world,
so measure these, too.
6.
Impressions
a.
This is a great way to measure brand awareness
and interest. Impressions are the number of times your ad or organic content is
displayed or viewed, regardless of whether it earns clicks. Impressions track
the number of times users are exposed to your content. Caution: this includes
multiple views by the same user.
b.
If your goal is to boost awareness or increase
exposure of your brand, impressions matter. Again, Google Ads or social media
platforms analytics help you measure your impact and let you know if you need
to make changes.
7.
Search Engine Rankings (SEA)
a.
Reality check—most customer research online,
whether they ultimately buy online or in-store. (Researching online and then
buying via brick and mortar is known as omnichannel.) To reach this large
audience or researchers, your website needs to appear at the top of search
engine results pages (SERPs). Rankings
impact your brand’s visibility to potential customers. Ideally, you want to be in the top 5 for your
category.
b.
Whether you use Google Analytics or other search
engine optimization (SEO) tools, you will gain valuable data to measure search
engine rankings, which will help you understand your marketing performance so
you can make any needed adjustments, such as creating more interesting content
for your target audience.
8.
Click Through Rate (CTR)
a.
CTR is important for assessing online
advertising campaigns and search engine results. Calculate it by dividing the
number of clicks your ad or link receives by its impressions and then multiplying
that number by 100 to get your percentage.
b.
Digital marketing tools like Google Analytics
help you assess the performance of your ads, keywords, and content. You will
learn how well you communicate with your customers. The higher your CTR, the
better.
c.
Benchmark your CTR against your own past
performance, your industry, and, of course, your marketing objectives.
We all know it’s hard to fix a bad reputation or correct a
bad impression. Sometimes, more information is needed; sometimes you need to
look more closely at the person or situation. Our party girl has a reason and a
rationale for everything she does. This applies to Marketing. With some solid
KPIs, some discipline, and tracking, you can learn what she’s really
got—beauty, brains, and the ability to get results.
If you ever want to analyze marketing mistakes and
miscalculations and fix them, give River Heights Consulting a call. We can set
you up for success and help you justify your marketing budget. As a former boss
once told me, find the facts and figures that support your business case. We
can help you do just that.
Desiree Grace is an advisor, consultant, and mentor with 30+ years as a senior leader in the electrical
distribution and manufacturing sectors. Desiree leads and supports special projects for River Heights
Consulting. She builds brands, grows revenue and motivates teams, facilitates strategy and execution, and offers special expertise in helping international companies enter the North American market. Experience with Fortune 100 companies, private start-ups, and mid-market businesses enables Desiree to help a variety of B2B organizations improve market share, revenue, and profits. She is a sought-after speaker for topics such as professional development, sales leadership, industry trends, and team leadership and motivation. You can connect with her at www.linkedin.com/in/desireecgrace.
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