The best thing about digital marketing is that everything is trackable and measurable. Gone are the "pay & pray" days of throwing money at your problems and hoping for the best.
Making the most out of your marketing data to measure performance is key to understanding which marketing methods work well, and more importantly, which ones don’t work. Repeating the same mistakes is a sure way to waste your money.
Here are a few tangible ways to adequately track your marketing campaigns to make sure you’re focusing on tactics that lead to more customer conversions and more revenue.
How many new leads were generated?
The flow of new leads is the lifeblood of almost any business. But not all leads are created equal. Make sure you have a clear picture of the kinds of leads that are most lucrative for your business. Then, review your marketing initiatives and parse out what kinds of leads they are generating. This is probably one of the best ways to estimate the ROI of your marketing efforts. You may be surprised to learn that some of your costliest efforts are generating low-yield leads, and vice versa. Rank your campaigns in terms of lead quality and marketing investment, and focus on those that are best for your business.
How much do your leads cost?
Once you have ranked your lead generation channels and eliminated the ones that do not produce quality leads, the next step in the process is calculating your Cost Per Lead (CPL). This is a simple calculation of dividing your spend over the number of leads and will help you keep your marketing balanced and focused. You'll be able to tell which marketing initiatives are the most cost-effective, and which ones may potentially be redundant or too pricey. Here is a handy post on calculating cost per lead.
What is you customer lifetime value?
Customer Lifetime Value, or CLV, is really where the rubber hits the road in terms of understanding your marketing and planning your business in general. CLV is a measure of how valuable a customer is to your company over time. This metric is especially important for businesses with recurring revenue, such as companies that charge monthly subscription fees. There are a few ways to calculate CLV, and this blog post by Qualitrics can help you decide which one is the most appropriate for your type of business.
You can also look at your CLV trends over time. Are you getting more or less repeat business from the same customers? How does that relate to your lead flow? Reviewing all of these metrics will help you see trends and patterns over time and adjust your marketing initiatives, as well as other aspects of how you run your business.
What is your return on investment?
We've arrived at the most salient point in marketing, and business in general. Measuring ROI is the most fundamental marketing metric. Your ROI will show how your marketing initiatives are affecting your revenue and your bottom line. When it comes to ROI for marketing, it can be difficult to calculate because there are typically multiple tactics a business will use for the different stages of the marketing journey.
Perhaps it is difficult to calculate ROI from your blog, especially if you write it yourself, since it's a matter of time and effort. And, let's face it, some blog posts will be better than others. But subjective efforts like blogging or branding campaigns can help establish your business as a destination, aspiration, or an authority in your niche.
But in most other digital marketing efforts, especially direct response campaigns like pay-per-click advertising, ROI should be fairly straightforward to calculate after you understand your cost, the quality of your leads, and your customer lifetime value.
How do you allocate your budget?
With all of the above in mind, every business owner needs to decide how to allocate their marketing budget. There are two broad categories: direct response and branding. For an in-depth dive on that distinction, check out this article from James McAllister. If you are a fashion brand, a high-end restaurant or a motivational speaker, you may need to allocate a significant portion of your budget towards building your brand. On the other hand, if your business is anchored in commodities or reselling, perhaps it's all about generating traffic through pay-per-click campaigns. Most businesses fall somewhere in between, so it's really up to the business leaders to decide how much to invest in branding.
Are you a local business? Read our blog post on the 12 most avoidable local SEO mistakes.
For more insights on small business marketing, check out the Deep Drawer Blog.