How can we optimise our marketing performance? How can we make sure that your every penny on marketing brings out favourable results?We need some sure-fire methods to track and test our results beyond gut instinct. And it just so happens that this is where performance metrics come in.
Performance metrics are a way to measure certain aspects of your marketing efforts and to identify their impact on various business objectives, such as acquisition, retention, or conversions into paid customers. This post will explain what performance metrics are and give a couple of real-life examples to show you how they can be used. But before we start, let’s go over some of the basics: first, what is a metric?
What is a Marketing Metric?
A metric is a way to measure something. In marketing, metrics are used to measure the success of an action or strategy. It means that for each metric we use in our measurement, there is a specific goal or objective it should help us to achieve.
According to another definition, metrics are the “standard by which we analyse, analyse and make decisions”. They are also used to track and analyse the performance and results of specific actions; this helps us validate if our campaigns are working as they should be.
What Does a Performance Metric Measure?
A performance metric measures the business results of your marketing activities or an aspect of it. These metrics can help you analyse and improve your marketing to increase business results. Performance metrics can be based on quantitative results, qualitative data, or both. Aspects of performance metrics can include acquisition, retention, conversion and revenue.
There are some of the basic metrics based on which you can measure the performance of your marketing performance.
The acquisition is how new customers are brought into your business. You can calculate addition by looking at how many new customers were acquired during a specific period, compared to the total number of customers you had before this period started. There are two types of acquisition: internal and external investment.
Internal acquisition is a type of acquisition that occurs when a new customer is brought into your business through an existing customer. For example, if Alice acquires Bob from her current client Brian, this would be an internal acquisition.
The external acquisition is a type of acquisition that happens when a new customer comes to you without coming through any existing contact. For example, if Charlie comes to your business directly from his search engine and you aren’t Brian, and he hasn’t seen Bob’s site previously, this would be an external acquisition.
Retention is a measure of your customer’s loyalty. It shows how many customers have remained loyal to your brand instead of being tempted away by competitors. For example, if you had 100 clients and only 60 remained loyal after six months, the retention rate would be 60%.
Conversion measures how effective you are at persuading potential customers to take action and purchase your product or service. For example, if you are running a campaign designed to get the target audience to sign up for a free trial for your product, the conversion rate would be how many people signed up for that free trial from that campaign.
Revenue is a measure of your profitability, calculated by taking your income and subtracting any expenses incurred. This metric shows how much money you’ve earned compared to the amount spent on your marketing activities. For example, if you brought in $1,000 during a period and spent $500 on marketing activities to bring in that income, your revenue would be twice your expenses (which means your profit would be $500).
Revenue is typically calculated on a period-by-period basis, for example, monthly. However, it can also be calculated on a lifetime value basis – this helps companies determine the long-term value of their customer base.
Another way to measure revenue is by using customer lifetime value. Customer lifetime value is the total amount of money you expect from a customer, considering the profit you will make from the product or service they purchase and any additional purchases or repeat business they will make.
When to Use Performance Metrics?
Performance metrics are best used to quantify the success of a marketing campaign and track how this affects business objectives. The most common metric used in marketing is revenue generated. However, there are many other metrics that you can use to quantify the success of your campaigns, including acquisition, retention, conversion, etc.
It would help if you used performance metrics when:
- You want to compare the ROI (return on investment) of two different marketing campaigns simultaneously. It would allow you to compare two different campaign strategies and decide which one is most effective.
- You want to identify how effective a specific marketing activity is. It can give you an idea of what kind of results you should expect from this activity. You can then use these results as a baseline for future marketing activities to make your targets realistic.
- You want to track the progress of your marketing strategies over time. For example, you can compare your company’s performance today with the same period last year to find out whether there are any changes to the success of your campaigns.
Pros & Cons of Performance Metrics
Performance metrics have both their good and bad points.
Performance metrics can show the performance of your work. By using metrics and tracking results, you better understand how your campaigns are working. However, there is also a downside: if you are overly focused on numbers and what they mean, then it can cause some problems in terms of driving poor judgment.
Companies should not get too hung up on the results of their marketing activities after they start tracking performance metrics. If you do this, your marketing campaign may become too focused on the output (the numbers) and not on the process. It can mean losing sight of what’s important – your customers.
These metrics can show how well a project is going, but at the same time, they can also show where things are going wrong. By using metrics, you also need to make sure that you are using the best information available.
Practices to Optimise Your Marketing Performance with Performance Metrics
Following is a step-by-step guide to using metrics effectively in your marketing campaign:
Know your Objectives
Before you start using metrics like acquisition, retention, conversion and revenue as performance measures, you need to know what you want to achieve from your campaign. In other words, what’s the goal of this? Set a measurable goal and make sure that you measure where you are compared to that goal.
Create Some Appropriate Metrics
After you have defined your goals, you need to create some appropriate metrics. The primary metric to measure at this stage should be ‘customer lifetime value’. It shows how much profit you will make from a customer over the lifetime of the relationship.
Conversion is another critical metric for online marketing. It is essential to measure it across all channels and not one track in particular (for example, not using Google Analytics for Facebook campaigns). Conversion on Facebook would be different from the conversion on Twitter.
Choose the Right Metrics
Metrics are not just about the process of measurement. It is also about the context in which these numbers are being expressed and how a valuable set of metrics can help you make effective marketing decisions.
For example, if you had 50 people signed up for your newsletter, but only 25 of those people purchased something, it would show an abysmal conversion rate. However, if your newsletter was a lead-generation tool and had the purpose of getting people onto your sales funnel, then this may not be such a bad performance.
Analyse the Data
Once you have collected some data, you need to make sure that you are analysing it effectively. Use charts and analysis to show what works better than what else. This will help you get actionable insight into improving your marketing campaigns and performance.
Plan Your Next Steps
Once you have analysed your data, you need to make sure that you are using it to make smarter decisions in the future before moving on to the next stage of your campaign. This will help you stay abreast of the expectations of your audience and improve the engagement and conversion rate of your prospects.
We hope that we have given you a better understanding of how metrics work and how they can be used effectively and efficiently. To make the most of your marketing efforts, measure your performance effectively by using performance metrics. Get in touch with our tech consultants today to help you get delivered on your digital marketing needs and improve your business performance.