Master the Metrics
How do you gauge marketing success? If you’re only using sales to define success this post is for you.
While marketing provides the tools to close a sale it is important to note that there are many ways to track success.
It’s time to Master your Metrics
Each industry has specifics that gauge market success. The 4 that are mentioned below are helpful indicators in every industry.
4 Metrics to Track
- Cost per Acquisition
- Customer Retention
- Customer Lifetime Value
- Return on Advertising Spend
Cost per Acquisition
Cost per Acquisition is a good indicator of marketing success. Your goal in start-up phase is to fine tune your messaging and lower your acquisition cost. You can find benchmarks for your industry just google cost of acquisition by industry.
It’s important to retain customers. It’s less expensive and what company doesn’t adore raving fans. Although 100% retention would be amazing it’s unlikely. In fact, most industries are between 25%-45%.
Customer Retention Rates = (Customer’s End Period – New Customers for this Period) / Customers at Start of the Period x 100. Subtract the new customers from the number of customers at the period’s end, and divide that by the customers at the start of the period, and then multiply by 100 to get the percentage of Customer Retention.
Customer Lifetime Value
Knowing your customer’s lifetime value is important to the overall success of your marketing efforts. If the cost of acquisition is higher than your customer lifetime value your business will fail.
The Customer Lifetime Value (CLV) formula:
AOV = (Number of Orders X Revenue)
PF = (Average Order Value / Number of Unique Customers)
CV = (Average Order Value X PF)
CLV = Customer Value X Customer’s Duration with the Company
Return on Advertising Spending
Advertising is helpful in generating leads, creating awareness and driving the bottom line. But not all advertising is equal and therefore it is important to have a measure of effectiveness.
ROAS = (Ad revenue/ Cost of ad source)