5 Marketing KPI’s Your Boss Wants To Know About
Do you groan inwardly when it’s time for performance evaluation?
Few of us are excited by the prospect of sinking our teeth into marketing metrics, typing up reports and having our role scrutinised.
We get it. Maths, stats and tracking isn’t our idea of a Foxy time either.
Furthermore, it’s hard to find the time to regularly track your marketing campaigns and know what metrics are the best to use. It’s easy to get so caught up in the doing of marketing campaigns, that we skip through the measuring and evaluating steps.
However, in order to look credible and demonstrate the bottom line value of our role, we need to know how to effectively measure the returns on our marketing work.
The marketing gurus at Hubspot have pinpointed the top marketing metrics that your CEO or boss really cares about. They’re so good, we’re giving them to you here!
1. Customer Acquisition Cost (CAC)
This metric is essentially the total cost that is involved in onboarding a new customer. It should account for expenditure such as:
- All external advertising
- Costs associated with internal and external marketing campaigns (eg printing, design, etc)
- Manpower (staff wages, salaries, bonuses and commissions
Simply choose a time period (eg month, quarter, year) and add together the above costs. Next, divide this total cost by the number of new customers that your company acquired during this same period.
This leaves you with an average figure to represent how much each new customer cost the company.
2. Marketing % of CAC
As the name suggests, this metric is worked out by simply calculating the percentage of marketing costs that contribute to the total CAC.
It can be really useful to track changes in this metric, as increases may indicate that your marketing budget has blown out.
3. Ratio of Customer Lifetime Value to CAC
Many companies will conduct repeat businesswith their customers. Therefore, it’s essential to find out how much revenue you gain from the entire lifecycle of a client relationship, against how much it cost to onboard them in the first place. As opposed to the CAC, this gives a much better representation of how much value your marketing efforts to acquire each new customer actually provides.
Here’s how this calculation works:
- Choose a time period
- Add the revenue that each customer pays during this period
- Subtract the gross margin
- Divide by the estimated churn % (cancellation rate) for that customer, this is your Customer Lifetime Value (CLV)
- Take the CLV and the CAC then calculate the ratio of these two figures
This ratio indicates your marketing ROI over the average purchasing lifetime of a customer in your company.
4. Time to payback CAC
In marketing, we constantly justify where our advertising dollars go! Marketing is a type of investment and it’s helpful to provide a specific timeframe to your boss on how long their investment is expected to be repaid.
To calculate this metric:
- Start with your CAC
- Divide by the margin-adjusted revenue per month (as relevant to the ‘average new customer’ who has just onboarded)
- Voila! Your answer is the number of months to pay back their CAC
Please note: If your company provides a one-time product or service, the customer’s initial payment should be more than the CAC. If it’s not, your marketing expenditure is costing rather than making the business money.
5. Marketing Originated Customer %
We think you’ll like this one!
This metric demonstrates what percentage of new business is due to Marketing (i.e. YOU).
To get this figure:
- Choose a time period
- Add all new customers who purchased, opted in or signed up for this period
- Calculate what percentage of these customers came from a marketing lead
Handy Tip: You can also work this percentage out based on revenue, not customers.
Once you’ve calculated these marketing metrics and it’s time to report them to senior management, it’s helpful to remember this: Your CEO has a million things on their mind and ultimately cares about cost and net profit – not all the steps in between.
Stick to the main points, highlight key figures, and hey – you might even start to like your performance evaluations a little!