Ever heard of the 80/20 rule? Named after the Italian economist Vilfredo Pareto, who observed that 80 percent of income in Italy was received by 20 percent of the population. By the numbers this means that 80 percent of your outcomes come from 20 percent of your inputs. So I ask you, what value are your marketing efforts bringing to the bottom line?
Key performance indicators (KPIs) are a great way to make your goals more tangible and quantify the time and effort invested in your digital marketing strategy. For instance, it could be that your boss is wondering if you’re doing a good job with your efforts. What numbers would you provide? What value are you bringing to the company? In this blog I will discuss 5 marketing KPIs your boss wants to know to help answer that question.
A widely used metric by most marketers is a baseline number for monthly growth. This KPI will indicate the number of leads acquired overtime. A lead can be determined by various call-to-actions such as someone filling out a form on your site or downloading freebie content from a Facebook advertisement. Month-over-month monitoring will indicate if your efforts are providing value. Above is a graph provided by Marketo that shows the average conversion rates for various marketing channels.
Qualified Leads per Month
Which of your leads appear to be interested enough that you will pass them along to your sales team? What percentage of your leads were accepted by sales? Measuring your qualified leads per month is a great indicator of whether or not your marketing and sales efforts are on the same page.
Which prospects have potential to become customers? Use a CRM tool to create a sales funnel by scoring your leads into these three different tiers:
- Marketing Qualified Leads (MQL) - the marketing team has approved these leads and forwarded onto sales team
- Sales Accepted Leads (SAL) - leads that are evaluated and accepted by the sales team as potential prospects. A follow up with the lead is necessary.
- Sales Qualified Leads (SQL) - the salespeople consider the lead to be a prospect and focus attention on moving them down the buying cycle.
Now each month you should measure the percentage of MQLs that were accepted by the sales team and converted into SQLs.
Cost Associated Per Lead Acquisitions
How much does it cost you to acquire a lead? How many leads became actual customers? The cost per lead KPI shows the cost of acquiring a new prospect. You should evaluate whether your different strategies are paying off the time and effort spent to attract new leads.
How to measure: quantify the time and money spent on lead generation marketing activities and resources. Compare these results to the total number of monthly leads.
How to optimize: which of your campaigns are converting the most? Reallocate your budget and increase the time spent on those efforts.
Cost Per Conversion
A KPI that shows the cost of acquiring that lead that turned into a paying customer driving revenue for the business. Your marketing efforts can drive hundreds of leads, but how many are actually converting into paying customers? Which become long term clients?
Relative to your lead conversion time, you should measure the cost of time and resources spent on lead generation. Some examples of resources you should track include Facebook advertising, blogging, Adwords, or other social media efforts. Then use your CRM tool to see how many of that month’s leads actually converted into a paying customers. You can break this down and monitor each marketing channel separately as well. This will help you focus your efforts and budget on the higher converting channels hopefully improving your overall lead quality each month.
Finally, divide the total monthly cost of a lead with the number of conversions to see how much acquiring a new customer costs you.
The final and last KPI you need to report to your boss is ensuring your sales revenue exceeds the expenses of your marketing campaigns. Your reports should all lead to increased profits. This number is typically all your boss really cares about. How much profit are you bringing in?
To determine this monitor the monthly profit over multiple time periods to gain a clear insight of historic growth trends and normalize your values. This can act as a baseline goal and help you account for monthly and quarterly spikes in revenue. This number can also be sliced to show how each market is performing and/or how each sales team or individual reps are contributing to overall growth. A success indicator would be a positive growth over a specified period of time.
There are many other KPIs that will help you look like a marketing all-star. Let me know in the comments which ones you regularly report on.