How to measure marketing performance
Updated: Jul 29, 2020
Is your marketing performing well?
Are you measuring the impact your marketing is having on your business? Are you delving into any of the data at your disposal to assess whether it is going well or where it can improve?
This is a common problem I've seen across all different businesses. It can be a minefield knowing where to start which means marketing measurement can be neglected. Sometimes marketing is perceived to be 'designing a nice brochure' or 'attending an exhibition'. But marketing has many different functions and is much about the upfront planning and the marketing strategy as it is about the output. To be truly effective you need to build a long relationship with a prospect and guide them through the decision-making process to get to this point.
So why should we measure marketing?
I'm a huge advocate of marketing measurement and as a marketing consultant, this is one of one of my most important roles and it is very often where clients need expert help. There are many reasons why you need to measure your marketing which include:
To set benchmarks – to define what 'excellent' looks like for your business and give you a target to aim towards
Assess your performance – it will allow you to assess how well you’re doing against your goals at a moment in time
To monitor improvements – to see how you're improving over time, and make adjustments to accommodate changes in the marketplace
To plan budgets - setting and deciding how to spend your marketing budget isn't an easy task, and the starting point should be to review your business and marketing performance to decide where you need to invest budget
Here are my golden rules for measuring marketing in your business:
1. Have a go at putting a few numbers down
The hardest part can be putting some initial numbers down and feeling scared to commit to these. Remember these are merely a starting point. You need to aim somewhere.
I normally start with the overall financial performance of a business, known as the ‘macro metrics’ including turnover and number of sales. I would then start to narrow this down and look at what marketing can contribute towards. These are referred to as ‘key performance indicators’ and may include:
Revenue - the income made from sales
Cost per lead - the cost associated with generating a lead
Customer acquisition cost (CAC) - this measures the cost of converting a potential lead into a customer. Businesses can then determine their profitability because it compares the amount of money you spend on attracting customers against the number of customers gained.
You can find this value by looking at the total cost of the campaign and dividing it by the total number of sales. For example, a campaign that cost £100 and generated 5 sales has a cost per sale of £20. As a general rule, it should take one year to recoup the cost of customer acquisition but obviously, this will vary from industry to industry and will be much longer in business to business.
Customer lifetime value (LTV) - this determines how valuable a customer is to you and therefore helps to identify how much money can you afford to spend on acquiring a customer. This is absolutely critical for planning a marketing budget and deciding what to invest.
The LTV = ‘average sale value per customer’ x ‘the average number of times a customer buys per year’ x ‘average number of years you typically keep a customer.
Your LTV: As a general rule CAC should be 3:1 — in other words, the value of your customers should be three times the cost of acquiring them.
Return on investment - this is the amount you get back compared with the amount you’ve spent on a campaign. For example, if Richard spent £100 on a campaign and made £500 worth of sales his ROI would be £400 or 400%. This is calculated by the sales value divided by the cost of investment.
2. Ensure you have tracking measures in place
I've worked with so many clients that haven't tracked their marketing, making it very difficult to assess what marketing has worked and what hasn't. On the most basic level, track your website and social media activity to determine how many visitors you're getting a month, how they are finding you and how engaged they are.
Google Analytics contains a wealth of data on your website, so create your own free account to get started. You can find out the traffic to your site on any given period, the number of repeat visits, the channels that people have come from to find you, how long people are spending on your site and the most common pages they visit.
If you're undertaking any social media advertising on Facebook, ensure you've installed the Facebook Pixel. This will allow you to accurately target and retarget prospects on a more granular level and measure activity.
Customer satisfaction is another important metric in marketing. Remember marketing isn't just about acquisition and generating leads. In large businesses customer satisfaction is measured more formally with quarterly 'Net Promoter Score' surveys. However, there are still ways you can measure this in a small business. To start you’ll need a reading of how satisfied your customers are at the moment compared with at the end of the year/or the period you want to measure. You can do this through a customer satisfaction survey using Survey Monkey or sign up to a rating site such as TrustPilot.
Vanity URLs are incredibly useful for measuring marketing campaigns. This enables you to drive customers to specific landing pages so you can track the number of visits. I use bitly so I can track all my activity. This practice is also known as a branded link or a custom short URL and creates a memorable URL that redirects visitors from one location to another. Specific URLs can be created for different activities, like a social media advert or within an email.
Databases are also key sources of information for a marketer. These are always my starting point when I undertake a marketing review for a client. Ensure you’re tracking where leads have come from and collate customer information into a central database. You don't have to invest in a complex CRM system if you're just starting out or a small business.
3. Break down your marketing objectives
Despite many preconceptions, marketing isn't about generating quick sales. Marketing is the start of the process which defines the brand, the message and who to target. The end result is to target the right prospects and make sales easier by marketing to the right audience.
This means marketing has many different functions which are related to generating brand awareness, generating interest and helping to retain customers. So this means that we need to look at different metrics for each stage of the customer journey.
Awareness - can be measured through several ways including website traffic and social media reach. Here you can create a dashboard to track a vast range of metrics some of which I've already mentioned. Your social media insights can also give you a wealth of data to understand but ensure you’ve set up a Business Account rather than a personal account to gain access to these features.
Consideration - this is a measure of the journey your customer goes on before actually buying your product or service. Start by going back and looking at the number of visitors you generate to your website. Then follow their journey to the point at which they buy. You might have several points at which a lead will convert to a sale. There may be stages at which you lose prospects. Check you're converting as much as you possibly can. Offering an incentive at this point of the journey can help from a promotion, free trial or free download.
Retention - the percentage of customers you retain over time. Churn is the percentage rate at which a customer stops subscribing, using or paying for a product or service. You make a lot of effort in acquiring new customers, so you must monitor the rate at which you lose them. Find out the reasons why and address them. Existing customers tend to be more valuable than new ones so finding ways to keep them is important.
4. It isn’t just about reach
Reach is the measure of how far your marketing travels, or how many people see it. But don’t be fooled by thinking you are doing brilliantly by generating thousands of likes and followers and distributing thousands of leaflets as part of a door drop campaign. What is vital is understanding how this engagement converts into sales – your conversion rates.
When I meet many clients, not many of them know their conversion rates. It may sound like an obvious thing, but someone needs to be held accountable for owning, recording and analysing this data.
A simple excel spreadsheet capturing this information will do the trick if you don’t have a prospect database or CRM system, which so many small businesses don’t. You’ll need to set up processes to ensure you are capturing this data every month. I'd recommend you share this data monthly with staff and core partners so everyone is aware of what they are working towards and can be held more accountable.
5. Turn your data into insights and take action
This may be the last step but this is the whole point of measuring your marketing. By incorporating a simple ‘key learnings’ and ‘action’ column in your metrics it's a good way to ensure you do this.
This complete process is a cyclical one. I run regular marketing review meetings for clients. In these sessions, we review key performance indicators and agree on what is working, what hasn't and the action plan as a result. Someone needs to own this and be accountable for these sessions and follow up, otherwise, the day to day running of the business will take over.
Test, Learn and Refine
Marketing measurement needs to be embedded into your business and be part of ongoing business planning.
You should approach marketing as a constant test. Learn, refine and adapt your activity as you go along. By having your finger on the pulse of your business you'll be able to identify and take advantage of upward trends and stop any unnecessary activity that isn’t serving you well. With careful monitoring, you'll have the confidence to test new things and run with what works for you and your business.
Discover more about marketing in my sales and marketing glossary, and how to create a marketing budget. Would you like to have a chat about marketing your business. I offer a free 30 minute consultation. Get in touch if you would like to take your marketing to the next level.