Key Performance Indicators are about Revenue
When you want to know where your money is best spent and which marketing activities are having the most impact on your bottom line, you cannot waste time on inessential data. Metrics like “Number of Clicks” and “Number of Followers” have their place – but not when you are calculating key performance indicators.
By tracking the right KPIs, you will know whether your marketing dollars are being invested wisely. You will know which specific programs and program channels are most cost effective for your business. Most of all, you will know which programs and channels are no longer worth the investment.
This is the information you need to definitively show the value of your marketing strategy – not to mention justify marketing spend to your boss and the Board.
What data should you collect?
To determine the value of your marketing programs, you need to start with the right data. This is not hard to collect but you need to be able to do so accurately and consistently. You also need to be able to break the data down by program and program channel.
Programs refer to the specific activity you are tracking. For instance, downloading a report off your company website is a specific program. You likely have a landing page and a form and button with a call to action, all of which pertain only to that specific report. The program channel for this might be “Website Downloads” and you may have other report programs within that channel.
These are the essential data to collect, by program and by program channel, as well as for the time period you wish to track:
- # of Leads
- # of Marketing Qualified Leads (MQLs)
- # of Sales Qualified Leads (SQLs)
- # of Customers
- Total Sales Revenue
You may also want to collect information on:
- Team Hours
- Technology Costs
- Advertising Costs
- Distribution Costs
- Printer Costs
- Overhead
These types of data can be useful when calculating your total investment per customer. “Team Hours” refers to how much time your team puts in on each program or channel. This could be creative, sales or technical work.
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Technology, advertising, distribution and printer costs really depend on the program in question. For instance, a direct mail postcard may have distribution and printing costs but not technology or advertising costs.
Overhead is also something worth calculating, as the cost of doing business always represents part of your marketing costs.
Tools That Can Help
The math for calculating key performance indicators is pretty simple; the difficulty is in the data collection. You need to decide what time frame you are interested in tracking and which programs and channels you wish to track.
Luckily, there are a lot of tools available to help you.
Google Analytics is an obvious choice. It is free and can easily be integrated on your website, and it lets you track conversions as well as traffic. Google Adwords, if you use it, can also be a tremendous source of data.
There are also numerous other analytics tools you can try. If you use a marketing automation software, you likely have access to much of these data already. Your Customer Relationship Management (CRM) software may also provide you with ways to tabulate much of this information.
Social media accounts can provide a lot of these data points, as well, particularly if you wish to track the impact of social media ads.
Which KPIs do you need?
Once you have collected your data, you will be able to calculate key performance indicators. I like to break KPIs into two categories: Customer Cost & Value and Program Cost-Effectiveness.
These categories reflect the different kinds of information you may want to measure: the value of your customers and the value of your programs. These KPIs give you the data you need to set achievable goals and they let you know which programs are likely to help you get there.
Be Sure to Remember …
Whichever KPIs you choose, you need to select comparison data. Without something to compare to, your KPIs will be meaningless. Your comparison may be as simple as your KPI for last year or last quarter. You may be comparing one channel to another or you may be comparing your KPI to an industry standard. The comparison gives you validity. After all, you don’t want to go to the Board ecstatic that your ROI is 150% only to hear the Chair point out that last year it was 200%.
Make calculating KPI an ongoing activity. If you calculate more frequently (for instance, monthly as opposed to annually), you are better able to respond to trends. The best way to make cost-effective choices for your company is to continually measure and monitor your marketing programs.
Lastly, don’t let yourself get overwhelmed. If tracking KPIs is new to you, start with only one or two measures; you can always track more later. Determine which you feel will be the most informative for your business and start there. Or get outside help to get you started.
Michelle Marketing Strategies provides expert consulting services in digital marketing, marketing automation and content development. Email or phone for more information.