Key Marketing Performance Metrics for Businesses

Marketing can be considered the most important and worthwhile investment for a business. This is because through marketing, businesses can advertise their products and services to their customers, and conversely, customers learn about the business through marketing campaigns. Marketing effectiveness metrics are essential for managers to review and evaluate the feasibility of their current marketing strategies, especially in the 7-step B2B sales process which requires a higher level of complexity.

1. What are marketing effectiveness metrics? 

Marketing effectiveness metrics are indicators used to evaluate the performance of marketing activities (marketing costs / returns from the business’s marketing activities). All issues surrounding marketing, both before and after implementation, are recorded with specific data to serve as a basis for determining the business’s marketing effectiveness. How to build a marketing process needs this set of metrics to verify whether it is on the right track. 

2. Common marketing effectiveness metrics for businesses today

• ROI (Return on Investment)

Formula: ROI = Sales Revenue / Budget Spent

This is the most comprehensive marketing effectiveness metric for measuring the performance of Marketing activities. For example, if you spend 200 million on marketing activities in November and generate 400 million in revenue, the ROI is 200%.

• CPW (Cost Per Order)

 Formula: CPW = Budget Spent / Number of Orders Received

This metric shows how much you are spending per order for the money you invest. This metric is suitable for businesses that market and advertise on various channels like Google, Facebook, Instagram, or Youtube, etc., to identify their strongest markets. 

For example, within the same month, a business spends 100 million on Facebook ads and gets 500 orders, and spends 100 million on Instagram ads and gets 300 orders. In this case, the CPW (FB) is 200,000 VND/order, and the CPW (Insta) is over 333,000 VND/order. From this, the business can see that advertising on Facebook generates more orders than on Instagram. 

•  CPL (Cost Per Lead)

Formula: CPL = Budget Spent / Number of Leads Generated

This metric represents the cost spent per potential customer (a customer who finds your product through marketing activities like running ads on information pages and leaves a message, asks for the price, or discusses the product). In reality, each marketing campaign will generate a different number of leads, so this metric doesn’t measure the quality of the leads; it only shows how much money the business had to spend to acquire one potential customer. 

For example: A business spends 50 million on advertising for one week and gets 500 customer interactions (leaving messages to ask for product prices, discussing services), the cost per potential customer is 100,000 VND/customer.

>> Read more: The 4Ps of Marketing and effective marketing strategies for businesses

• Conversion Rate

Formula: CR = Number of Products Sold / Total Visits

For example, if your website receives 10,000 visits/month and you sell 2,000 orders in that month, your conversion rate is 20%. 

This metric shows you whether your marketing campaign is effective. If it’s too low, what is the cause? Is the target audience correct? A high rate proves you are on the right track when implementing marketing KPIs. If the rate is low, investigate the causes to make adjustments. How to create a Digital Marketing plan is crucial at this point as it directly affects customer traffic. 

• Incremental Sales

With this marketing KPI performance measurement index, you can easily see if revenue is gradually increasing. If it is, it proves that the marketing activities being implemented are on the right track.

For example, if both January and February spent 100 million on marketing. January’s revenue was 100 million, and February’s was 120 million, then the 20% increase in revenue came from marketing activities developing in the right direction. 

• Customer Lifetime Value

Formula: 

CLV = ((Average number of transactions per month × Average order value) × Average profit margin × Average customer lifespan

Where the average customer lifespan is calculated in months.

Customers with a high lifetime value are loyal customers who bring long-term and sustainable profits to the business. Increasing the Customer Lifetime Value index depends largely on whether the business can retain customers and turn them into loyal advocates. The Marketing team can use the CLV index to identify the customer segments that bring the most value to the business, allowing them to develop suitable strategies to build strong relationships with these key segments, this is also considered a method of customer experience management to increase revenue. 

Marketing will be a powerful assistant in introducing your business’s products or services to customers. With the detailed information about the set of marketing performance measurement indicators above, 1Office hopes that managers and corporate marketing teams can find an effective implementation plan while still optimizing costs.