Every business owner wants to know what marketing works, but most barely have time to create marketing campaigns, let alone sift through marketing data to find answers.
If you can measure marketing effectiveness, however, you can answer every question you might have about your marketing including:
- Where did new customers come from?
- Which keywords are working?
- Am I paying too much for new customers?
- How many leads am I getting in return for my marketing?
- How many calls are spam? Which leads are worthwhile?
- Can I increase my marketing spending?
- Will increasing my marketing spend be worth it?
It’s okay if you don’t have time to sift through marketing data. In fact, most marketing analytics tools are more work than they’re worth. Relying on standard analytics tools like Google Analytics can actually give you misleading information, which can steer you in the wrong direction on your marketing decisions.
It’s 2020, and it should be simple and seamless to get answers about your marketing effectiveness. Still, more than 80 percent of marketers say they can’t measure how their marketing impacts their business.
In this post, we’ll explain how to solve this problem by measuring the right metrics.
What does marketing effectiveness mean?
First, let’s define what it means for your marketing to be effective.
Here’s one definition: effective marketing campaigns drive qualified leads that turn into sales revenue.
Junk leads don’t lead to sales, and low-value leads aren’t as important as high-value leads. Easy enough.
What metrics matter when measuring marketing effectiveness?
We know that leads are fuel for sales, so it makes sense to measure marketing effectiveness based on leads. If you can track every lead, you can then sort, filter and qualify those leads to see if your marketing is generating good leads.
Lead reporting is important too; it’s easier to measure marketing effectiveness if you can create lead-based reports that show which marketing channels are delivering quality leads. The more information you capture about each lead, the more informative your reports will be.
Here’s all the information you should be capture about every lead:
Next, let’s talk about a few metrics that don’t help you measure marketing effectiveness.
Don’t rely on conversion rate
Conversion rate may seem like a logical metric to track when measuring marketing effectiveness, but when you look at your site’s conversion rate on Google Analytics, you’re only seeing the result of a simple equation:
(The number of visitors to your site)
(the number of people who completed one of your conversion actions)
That’s it. That’s all the information you get. This number doesn’t tell you how many of those conversions are likely to result in a sale, or whether or not the leads are qualified, or how much each of those leads might be worth to your business in terms of revenue.
Those lead details matter. Without them, you’re relying on lead data that lacks context, and making marketing decisions based on incomplete data.
Don’t rely on vanity metrics
Here are some examples of vanity metrics:
- Page Views
- Social Media Likes & Followers
- Email Open Rate
- Content Downloads
These metrics don’t affect your business’ bottom line. You can have millions of page views, thousands of downloads and a 75 percent email open rate, but if you aren’t driving quality leads that result in sales, none of it matters.
Keep this in mind when you’re creating marketing reports. A lot of marketers make the mistake of reporting on things like impressions, CTR and bounce-rate. Why not just report on leads? It’s hard to make the connection between bounce-rate and your bottom line, but it’s easy to understand that leads fuel sales.
Now that we’ve established that you should be measuring your marketing based on leads, let’s examine two lead-related metrics you should be tracking.
Lead Value: A concrete way to measure your marketing
On one end of the spectrum, you have vanity metrics; they provide little insight and are often misleading. On the other end of the spectrum, you have lead value. It’s a metric that matters; a hard number that ties the marketing to potential sales and can prove marketing ROI.
Different businesses will use different methods to assign value to leads.
- A subscription-based SaaS company might value leads using CLV.
- A dentist, spa, or other appointment-based service might value leads based on the cost of the appointment.
- A landscaping company might have to use customized numbers based on the quotes requested by each lead.
Does your marketing drive leads that are interested in your cheapest products, or are only interested in short-term subscriptions, or have a low likelihood of becoming a long-term or repeat customer? That’s not ideal.
Focus on the marketing channels that drive high-value leads; the long-term customers, or customers who want your more expensive products and services, or customers that have a large budget to work with. If you can attach monetary value to the leads that your marketing drives, you’ll be way ahead of the curve; only 21 percent of marketers say they can measure marketing ROI for all their marketing engagement.
That’s one way to figure out what marketing works. Here’s another.
Customer Lifetime Value: An overlooked marketing metric
Customers with a high CLV offer repeated, reliable revenue. Salespeople pay close attention to Customer Lifetime Value (CLV) because salespeople want to reap the commission rewards of customers that bring recurring revenue.
Marketers should care too though. As a marketer, it’s in your best interests to figure out which types of marketing bring you customers with a high CLV, because that’s the kind of marketing want to double down so that you can deliver that repeated, reliable revenue.
There are a lot of marketing metrics out there, but the most straightforward way to measure marketing effectiveness is to measure how well your marketing drives quality leads that turn into sales. Your goal shouldn’t be to drive a large quantity of leads, but to drive quality, high-value leads that result in revenue. Once you’re focused on leads, it’s easy to block out the marketing noise and measure marketing effectiveness.