By Kat Solukova
Digital marketing KPI’s are super important for measuring and tracking your businesses online performance.
The question is…Which marketing KPI’s should you be paying attention too…(and monitoring all the time)?
Free tools like Google Analytics let you monitor site traffic, demographic data, and locations of prospective site visitors are great. But…this data is pretty worthless if you don’t know how it relates to your business goals.
If you are a digital marketer or business owner, you need to have ways to measure whether your company’s marketing efforts are succeeding. Here are five highly effective digital marketing KPIs you should be tracking.
What Are Key Performance Indicators?
Key performance indicators (KPIs) are measurements that help you understand where your company’s marketing efforts are succeeding and where they are lacking. KPIs are a kind of quantitative benchmark that lets you track your company’s progress towards its goals.
In other words, KPIs are metrics businesses use to help them keep their projects and departments on track.
Why Digital Marketing KPIs Are Important
KPIs help businesses track their market performance and make more educated marketing decisions. For example, if you want to increase sales efficiency, you need to track the ratio of total sales to total leads. Based on your company’s individual goals, you can set a specific ratio you want to work towards.
Moreover, KPIs also give businesses a quantitative way to understand how their marketing decisions affect their market performance. If your target is to increase sales efficiency, a KPI based on the ratio of total sales to total leads lets you see how marketing decisions affect your progress towards that value.
To put the point simply, businesses use KPIs to create a kind of “road map” to their company goals. By monitoring key KPIs, businesses can determine whether they are on course or have fallen off course.
5 Key Digital Marketing KPIs
There are a ton of KPIs out there that can help your business achieve its goals, but these five KPIs are essential and every business should measure them.
1. Website Traffic
Website traffic is a KPI that keeps track of how many people visit your site in a given time frame. Website traffic has many sub-dimensions such as number of page views, average session duration, average page views per session, the number of individual users, etc.
Monitoring your website traffic helps you figure out whether your ads have good placement, whether your website captures visitor attention, and how long each user spends on your site on average.
2. Website Traffic to Website Lead Ratio
Your website traffic to website lead ratio is the percentage of visitors to your site that turn into actual leads. When customers reach your site, it is important that they convert and turn from visitors into leads. All other things being equal, a higher ratio means your website is more successful at converting visitors to leads.
Website traffic to website lead ratio can give insight into how your site is failing to generate leads. For example, if you are getting a lot of visitors but fewer leads, then there might be a problem with your site layout or user experience that discourages visitors from converting.
It might also be that your ads and external links just aren’t reaching the right audience.
3. Cost Per Click (CPC)
CPC is short for cost per click and refers to the price you pay for each click your website receives in a pay-per-click marketing campaign. The cost per click is determined by many factors, but most importantly by how much you and your competitors bid for ad placements online.
CPC marketplaces behave in a similar way to a house auction where bidders try to out bid each other for advertising space on popular platforms like Google and Facebook.
It’s also important to note that CPC metrics can vary greatly depending on which advertising platform you’re using.
For example: Google Adwords management can become expensive quickly if not properly managed while social media platforms like Instagram or Facebook can offer a similar service with much cheaper CPC’s. It all comes down to how highly your competitors are bidding on similar keywords and audiences, your CPC can be higher or lower.
Ideally, you want a low CPC and high click through rate. That means that you are paying less to publishers for each click on your ad, yet there is a higher proportion of customers actually clicking on the ad. You need to know your CPC because that helps you figure out if you are meeting your desired return on advertising investment. If your CPC is too high, you won’t be making a good return on your advertising costs.
4. Cost of Customer Acquisition (COCA)
COCA is basically a measure that tells you how much your business spends on convincing a customer to buy your company’s product or services. In other words, the COCA is the cost of all resources and efforts that go into turning a potential customer into an actual customer. For a simple example, say you spend $10,000 on sales and marketing and acquired 50 new customers in one month. Your COCA for that month would be $200.
COCA is an important metric because it allows you to measure the impact each customer has on your profits. To be clear, this measurement is somewhat useless if you don’t take into account how much each customer spends on average. A COCA of $2,000 might seem high, but if each customer spends an average of $10,000, then it’s actually pretty good.
In general, you want your COCA to decrease over time which means each customer has a lower impact on your profits. One good method to lower your COCA is to give customers an incentive to refer friends and family, like a freebie or discount.
5. Customer Lifetime Value
The customer lifetime value (CLV) is a measure that indicates the total worth to a business of a customer over their entire engagement with the company. A CLV measure helps you figure out whether keeping old customers is more lucrative than acquiring new ones. For example, if the average CLV is $1,000 and your COCA is $1,500, then your company would be losing money as it costs more to acquire customers than they end up spending. Knowing the CLV helps businesses make strategies to retain existing customers and get new ones while maintaining profits.
To calculate CLV is simple, multiply average purchase value by purchase frequency. For example, to calculate CLV for a service based business, first they need to calculate how long their customers stay with a company on average, let’s say it’s 18 months. Then they need to calculate how much customers pay per month on average, let’s say $200 per month. So the Customer Lifetime Value is $3 600 = 18 months x $200.
KPIs are a fantastic way to track your business growth and to make sure you are on track towards meeting your companies marketing goals. There are a lot of KPIs out there and it can get confusing but if you take a step back and think about what truly important for your business you can quickly identify the most critical KPI’s that align with your growth goals.Featured photo credit: Depositphotos