It’s the start of a new year, which means many marketers are busy kicking-off the marketing plan they spent weeks, maybe even months, plotting out in 2018. With a full slate of projects and campaigns planned-out – all laddering-up to a set of agreed-upon goals and objectives – chances are, your marketing team might already be in full execution mode. So, how will you measure success?
Most marketers will focus on campaign-specific metrics to understand how a particular strategy or tactics performed (or is performing), which is definitely important. However, marketers also need to be able to translate results from marketing initiatives in a way that’s easy for the C-suite to understand. Most of these people care less about pageviews and click-through-rates, and more about revenue generated by marketing investments.
Here are three metrics you can track to better your marketing plan in 2019.
Customer Lifetime Value (CLV)
How much are your customers worth? Not all customers are created equal, but gaining a better understanding of how different customer segments behave helps companies optimize their marketing investments.
Customer lifetime value (CLV) is a metric that measures the value of a customer relative to their relationship with a brand or company. There are many nuances to consider when calculating CLV, but here’s a simple revenue-based formula:
Average Transaction Value (ATV) x Average Purchase Frequency (APF) x Average Customer Lifespan (ACL) = Customer Lifetime Value (CLV)
In order to increase CLV, marketers should focus on retaining and upselling existing customers. Developing and/or enhancing a loyalty program is a common way to keep customers longer, which often drives increased purchase frequency and customer lifespan with a brand. Upselling is also a good method of increasing average transaction values.
Customer Acquisition Cost
Once you know CLV, then you can identify which customer segments are most profitable. This allows you to calculate how much to spend to acquire new customers.
Customer Acquisition Cost (CAC) is essentially the cost of convincing someone to buy a product or service. Knowing your CAC will tell you, among other things, how much new customers cost and which channels are working the hardest for you.
Total costs associated with acquiring customers (expenses) for the duration of a campaign / number of customers acquired during campaign or time period.
Reducing customer acquisition costs is an ongoing endeavor for many organizations. There are a number of different strategies that can contribute to reducing CAC, one of which is employing loyal customers to be evangelists for your brand/company vis-à-vis a referral program.
Calculating Marketing return on investment (ROI) can be as simple or complex as your marketing mix; the more channels and touchpoints that need to be considered and tracked, the more effort it’ll take to measure. Using insights derived from analytics allows marketing teams to focus on the efforts that yield the greatest returns.
Here are some general guidelines for tracking marketing ROI:
- Make sure your analytics are in-order. Having a well-organized method of tracking marketing activities will only make it that much easier to consume and understand the data.
- Focus on the right data, not vanity metrics that distract from key goals and objectives. Zero-in on the actionable stuff that actually correlates to revenue and ignore the rest.
- Analyze data before, during, and after specific marketing activities, to gain a more complete view of the results.
Understanding your marketing KPIs will help you better evaluate your campaigns, and in the process allows you to maximize your marketing budget.