How to Establish if Your Marketing Efforts Were Worth the Cost

It has become a prerequisite for success in the modern business environment that all businesses must engage in marketing in one form or another in order to achieve some level of success. However, measuring your marketing performance can be tricky, if you don’t know what to look for. We recommend that, in order to optimize how you spend your marketing budget, you keep an eye on the following metrics.

These metrics are known as KPIs, short for key performance indicators. KPIs can be drawn from almost any set of data, which can make them a double-edge sword, of sorts. On the one hand, you can generate data that tracks performance patterns of almost any facet of your business, whether it’s an individual employee’s output, the efficiency of one of your departments, or how your business is doing as a whole. On the other, with so many options of data sets to track, it becomes very easy for a business to focus on the wrong ones, or on too many.

It is therefore typically considered best practice to:

• Be Selective--just because you can track a few dozen KPIs, doesn’t mean you should. Establish a goal for yourself, figure out which KPIs will give you accurate measurements of progress toward that goal, and focus on ten, at the most, to track.
• Don’t Disregard What You’ve Done Before--while socioeconomic shifts or changes to your internal business structure or audience might make your past efforts and any metrics you collected then different from those you may see from this point on, it may not hurt to reference back to the past as a brainstorming tactic. Alternatively, by compiling a KPI timeline, of sorts, you can see where things became more or less effective, and examine them for any reasons why.
• Customize the KPI to The Goal--the reason we told you to focus on an admittedly limited number of KPIs was to avoid confusion with too many gathered metrics. However, this does not mean that you should use the same KPIs for each and every task. After all, different goals will exhibit different performance indicators, and trying to collect the wrong information may allow some data that could be of more use to you to go to waste. Therefore, invest some time into determining what indicators would serve you best for each initiative’s goal.
• Gather Your Metrics at Appropriate Times--your metrics may be subject to a limited shelf life, as the data that drives them may be highly variable. In order to keep your KPIs as accurate as is possible, it may be wise to monitor your most important and update them on a regular schedule.

Putting Your KPIs into Action

Once you have successfully compiled the KPIs that you will need, you will be able to take that information and make inferences that should lead to a more cost-efficient marketing strategy.

Determining Your Customer Acquisition Costs

For instance, if you have collected the metrics to track your customer acquisition cost (a relatively simple task, as they are just your total marketing costs for a time and the number of new customers you onboarded for the same time) and done the calculation (total marketing spend/new customers) you’ve just calculated a KPI that tells you how much you spent, on average, to onboard that new customer. You are then able to draw conclusions based on this number, as well as incorporate it into calculating other KPIs to suit your needs.

Returning to our customer acquisition cost example, you could use this to judge whether or not your available funds are being used in an ideal way to acquire new customers. If you spent your entire budget of $15,000 and acquired a total of 28 new clients, your customer acquisition cost would be about $535.71 spent on each.

Determining Your Customer Lifetime Value

Once you reached this number, you could use other KPIs to judge if that marketing investment was worth it by calculating the value of your average customer. By multiplying the total your average customer spends per sale, by the number of times your average customer purchases from you, by the time the average customer spends on your service, you can form a pretty good estimate of how much you can make from your average customer while they’re with you.

Are They Worth It?

Going back again to our example, let’s presume that your average customer spends $175 per sale, but only buys 4 times each year, and spends 12 years on your service. This customer will bring you $8400 in revenue. It is then up to you to determine if that acquisition cost is worth it by finding the difference between them. With a projected $7864.29 coming in, per customer, $535.71 in onboarding costs doesn’t sound too bad.

This is just the start of what your business can accomplish with the help of KPIs.