If you are implementing a digital marketing strategy for the first time, you may be asking yourself, “What is the best way to measure the success of my campaigns?” There are specific metrics and key performance indicators (KPI) to look at if you want to get a clear picture of your return on investment and the value of your campaigns. Understanding these metrics and KPIs can help you tailor your digital strategy so that you can get to the point of consistency and predictability in your revenue.
THE METRICS THAT MATTER: CONVERSIONS AND CLICK-THROUGH RATE
People who are marketing in the digital space brag about the number of impressions they served or how many clicks their campaigns generated. While impressions and clicks are important, they are just the tip of the iceberg. Here are the metrics you should focus on when measuring the success of your digital marketing campaigns.
What is a conversion exactly?
First, I want to explain a bit about conversions. Conversions refer to the people who visited your website or interacted with an advertisement and became a customer. For the most part, conversion types are qualified by inbound leads, such as form fills and phone calls, in addition to the number of pages viewed and website transactions. Conversions show how users engage and take action when they visit your website and that they didn’t just click off of your page after a glance.
Let’s take a look at the different metrics we use when we talk about conversions and the value of our digital campaigns.
Cost per conversion
Cost per conversion measures how much it costs you to acquire a customer. This metric looks at how many people viewed your advertisement and how many took action to become customers. In order to determine your cost per conversion, divide the total cost for generating traffic by the number of conversions.
Conversion rates refer to the percentage of website visitors who came to your website or landing page and converted. This number tells you how relevant your website traffic is and how successful your website or landing page is at getting visitors to take desired actions. If your conversion rates are below industry averages, it might be time to rethink your digital strategy because you may be generating irrelevant traffic to your website.
Click-through rate (CTR) allows you to see how well you are targeting your desired customer with your ad messaging. Low CTRs indicate that you need to try out new ad copy and/or change your target audience.
KEY PERFORMANCE INDICATORS: CUSTOMER LIFETIME VALUE AND ACQUISITION COSTS
Another reason you can’t just rely on impressions and clicks to measure the success of a digital campaign is that with all of the advancements in how we search online (smartphones, voice search, tablets), there is a multitude of touchpoints for each online search inquiry. The quantity and variety of touchpoints create a very complex path to purchase for your customers. So when measuring the success of a digital campaign, marketers should look at more customer-centric metrics, like customer lifetime value and customer acquisition costs.
Customer Acquisition Cost
To determine your customer acquisition costs, you need to start by establishing the baselines from which you will collect data. Begin by choosing the time periods in which you are going to look. Next, put together data on how much you’ve invested in your sales and marketing expenses over that period of time. Finally, put together a report on how many customers you secured during that same time period.
Tip: Start by looking at a year, and then, as you refine your process, narrow it down to quarters. Eventually, you can get to a point where you’re looking at it monthly so you can see some trending averages.
Customer Lifetime Value
Customer lifetime value (LTV) refers to how much money a customer will spend over a period of time. This is where you want to start when quantifying your return on ad spend. You may feel like you want to see a return on your investment right away, but don’t forget to take into consideration the value of a single customer over several months or several years.
Goals for success
Conduct industry research to help set reasonable expectations for what digital marketing success means for your business. The ultimate goal is to get to a point where you can predict your business revenue for the year. By utilizing the metrics and KPIs mentioned in this post and adjusting your digital strategy accordingly, you can get to a place where you are consistently achieving desired outcomes and conversions. You can create a strategy for predictability.