The metrics that we, as marketers, use to measure our campaigns – open rates, CPCs, social media follows, organic traffic – can feel a little…fluffy to the rest of the world. They’re valid numbers that help us measure how well a particular campaign is doing at its particular goal, but absent that context, bringing those numbers to your CEO isn’t going to do you much good.
The little-picture metrics that you always hear about aren’t always the metrics you need to judge whether your marketing efforts are succeeding. Because, at the end of the day, how important is your organic traffic if it’s not leading to sales?
So the real question isn’t whether your emails are being read, but what the cumulative effect of all your marketing efforts really is. And with these four metrics, you can put together that picture.
Four Metrics of Cumulative Effect
How many of your new customers are the direct result of your marketing efforts? Your marketing team can come in at any time during the buying process to nurture and woo your leads down the funnel. But this metric tells you the percentage of new leads that ended up converting who were brought into the funnel by your marketing efforts, rather than cold calling or some other method. This gives you the ability to say that your marketing efforts directly grew your business by this much.
You can calculate your Marketing-Originated Customer percentage by dividing your new customers from marketing leads by your total new customers. Depending on how you measure your business, this could also be demonstrated by looking at marketing-originated revenue.
This percentage is going to vary wildly from business to business, so don’t go comparing; companies with active inside sales teams will have a lower number, and highly-automated sales operations one that is much, much higher. But in either case, you want to know how much your efforts are directly bringing in.
Your Lifetime Value (LTV) per customer is how much you can expect them to purchase from you over the course of their relationship with your company. Basically, it's what they're worth. The simplest way to calculate LTV is to multiply average order value by the number of repeat sales and the average retention time.
Now, take your LTV and compare it to your Marketing-Originated Customer number, and you can see an estimated value for your marketing efforts per relevant period; if your marketing has brought you ten new customers with an LTV of $100,000, then your marketing has brought in a million dollars of future revenue.
Marketing Percentage of Customer Acquisition Costs (M%-CAC)
So how much are you paying for these customers? Because your LTV has to eat the cost of every lead who doesn’t close, that number is higher than your cost-per-lead. To locate this important metric, known as your M%-CAC, you first need to calculate your Customer Acquisition Cost (CAC) by adding up your sales and marketing costs over a given period, and then divide that by the number of new customers you acquired in the same time.
Then, in order to find your M%-CAC, divide your marketing costs by your total sales and marketing costs. For further detail, you can divide this number by each customer’s LTV to see how much your marketing costs are being recouped.
Ultimately, your marketing potentially affects all your customers, which means that your total sales are always going to be a meaningful number, especially when bolstered by these bigger picture numbers. As sales and marketing get harder and harder to distinguish from each other, the most important metric for the overall success of this cumulative effort is simply, ultimately, how are sales doing?
This is a number that the deeper, meatier numbers bolster up and explain. If sales are up across the board, you can get a look at why. If sales are dropping off, you can do the same thing. Your overall sales are your strongest bellweather for how your business is doing as a whole, and provide direction for what you need to be looking at and looking for when you start doing your data analysis.
The beauty of these numbers is that they are firm, actionable, and ripe for analysis. They provide you with a much richer, bigger-picture look at how your marketing efforts are progressing on a day-to-day and quarter-to-quarter level, with firm indicators about how much they’re helping your business grow.
And firm, actionable, clear numbers are massively important for any business trying to grow. By moving beyond the little-picture numbers – clicks, opens, views – and moving into the real meat of how you’re spending your money and what it’s doing for you, you can start to see where you need to refocus your efforts on a macro scale.