How to Measure Marketing Performance with Analytics

Posted by Cydne Stewart Jan 6, 2016 4:14:03 PM

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There's more marketing data out there right now to overflow any spreadsheet and overwhelm statisticians who love number crunching even more than Nate Silver. Just the names of popular marketing metrics themselves can be too heady. Take one example—ratio of customer lifetime value to customer acquisition cost. That's a real one, by the way.

So, how do you measure marketing performance with analytics?

Starting with Customer Acquisition Cost 

Although that's definitely a mouthful, customer acquisition cost by itself will make or break your sales and marketing, even though this term is by no means as new as the concept of social media engagement, subscribers or social media reach (all important indicators of marketing done well, in their own right). For those of us struggling to keep up with all of these new terms, customer acquisition cost is pretty straightforward. 

To calculate your customer acquisition cost, simply take the amount of money that you spent on sales and marketing over—for example—a one-year timespan and divide that by the number of new customers that you gained over that period. Pretty easy. The beauty of this metric is that it can be applied to all of your inbound marketing to determine the ROI of that particular channel at that particular point in time. 

Time-to-payback CAC

Aside from its applicability across marketing channels, figuring out your customer acquisition cost (CAC) is also great because it can form the basis of other, no less important, marketing metrics and determine channel-centric ROIs. One metric that's particularly useful is the time-to-payback CAC cost, which tells you how many months it takes your business to recoup the money that you spent on customer acquisition. So, examples? 

Let's say that you sell clothing merchandise exclusively online. Naturally you also do most of your advertising online through social media, pay-per-click advertising and search engine marketing. You incur a cost for all of this marketing which, when done right, results in more customers for your business. Now, most customers just buy an article of clothing here and there, so it could take many months for your initial sales and marketing effort to recoup your cost of acquisition and start generating real ROI. 

For the vast majority of companies, time-to-payback CAC is a user-friendly way of determining the ROI of your marketing efforts. You might want to think twice about using this metric, though, when your business gets a huge lump sum type payment and you're more narrowly focused on lead nurturing a select group of people (think of selling a house). It also might be time to rethink your marketing approach, with a few caveats, if your time-to-payback CAC takes more than a year or two to recoup. 

Inbound Marketing and Lead Scoring

One of the chief benefits of inbound marketing is that it can efficiently and affordably allow you to attract more people to your business. Once you have all of these customers, what you do from there will determine the success of your sales and marketing. The thing is: without lead management and some way to differentiate leads from one another (lead scoring) to make your marketing more effective, you could be hemorrhaging money without quickly figuring it out and recalibrating. 

Lead management and Lead Scoring

If lead management is the overarching game, then lead scoring is the starting pitcher. Lead management is the comprehensive process of tracking and managing your sales leads and, therefore, lead management encompasses things like lead qualification and nurturance. Where does lead scoring come in? Lead scoring essentially gives you a way to hone your marketing efforts in on the most promising leads.

That makes perfect intuitive sense but many companies still struggle with lead scoring. Think of it this way—if you were selling cars and there were five people chatting to each other and staring out the window, on one side of the showroom, and another person asking you very detail-oriented questions about a car on your lot, would you treat all of those customers as if they had the same potential to buy? Probably not.

The difference between these leads in the above scenario is that one of them is a sales qualified lead (i.e., the guy asking questions) who rightfully should be getting all the attention. Through a similar (potentially automated) process you can determine the people most likely to buy from your company based on an individual's personal characteristics, purchase history with your company and online behavior. (HubSpot)

Big Data can provide you with a very big advantage when it comes to finding your marketing qualified leads at the right time. In particular, data collected from closed-loop marketing can determine the variables most related to selling to that lead (converting). Finding the factors most conducive to making a sale (conversion events) will transform your marketing and, in turn, your marketing ROI and sales.

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Topics: Analytics

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