<img src="http://www.hrb1tng0.com/39877.png" style="display:none;">

Measurable results: 10 essential marketing performance metrics

by Simon Spyer on May 1, 2014 7:29:00 AM

10 essential marketing performance metricsAll performance measurement should be to deliver the right data at the right time to the right people so that they can optimise a process.

For marketers, this means delivering the right metrics to optimise your marketing performance: knowing how activities are performing across the business, which levers to pull and when.

This can be easier said than done - Google Analytics alone has 60 standard metrics - so here are 10 metrics that we think are essential, should feature prominently in your marketing dashboards and all performance measurement should be anchoured around.

By applying these to your measurement and reporting, you will can set yourself apart from the many vanity metrics that exist and be presenting a cogent, holistic and commercial view of your marketing performance.


Customer Lifetime Value

CLTV is a critical marketing performance metric. 

It calculates the predicted value of a customer over the lifetime of their relationship with you and combines both sales and costs so that you can work out the net profit of a customer across their lifetime.

If calculated properly and embedded in your business then the potential for the use of this metric should be clear: Are your marketing efforts increasing CLTV? Which activities have the greatest impact and where can you remove costs without affecting CLTV?

Calculating CLTV is relatively straightforward. You will need the following data points:

  • Customer volumes
  • Retention rate
  • Average Transaction Value
  • Frequency of purchase 
  • Costs split into marketing costs, cost of sales etc

There are many resources that will walk you through a CLTV calculation. We recommend starting here.

Depending on your marketing objectives and type of business, you may want to complete this by customer segment and even create a model so that you can predict the CLTV of new customers based on the CLTV of lookalike existing customers.

A couple of watch-outs:

  • Take into account the whole customer journey [link to old blog] so that you account for all customer touchpoints, not just the ones that are in your immediate sphere of influence as a marketer.
  • Standard CLTV models don't take account of factors like referral. If a customer or segment of customers actively refers new customers (either prompted or unprompted) then you should make an allowance for this - by factoring into the sales of the referring customer or by reducing your acquisition costs.

Download our free eBook & start using the performance metrics that matter

Net Present Value

NPV is often overlooked by marketers but it's a valuable output of a CLTV calculation and will help you make smarter, customer-level investment decisions as well as giving context to your CLTV metrics.


Essentially NPV looks at a customer, product or services value today and whether they will be worth more in the future. You can make decisions on whether a particular customer is worth acquiring with major implications for your selection of communication channels and contact strategy.

Check out this piece for a good, more detailed overview of NPV and how it can be applied to marketing. 


Retention Rate

The % of customers that remain active over a given period. This is also sometimes know as the attrition rate.

To calculate it you will need the number of active customers in Time Period A and the number of these customers still active in Time Period B; then divide the Time Period B value by the Time Period A value.

How you define active will depend on the nature of your business: it could be purchasing, accessing content or renewing a service after its expiry date.

Whatever the nature of your business, customer retention is an absolutely critical metric to measure and to understand the dynamics behind as its a major driver of CLTV.

What's a good retention rate?

This will really depend on your particular circumstances - category competition, price point and maturity have a massive effect. We have worked with clients where retention rates of 80% were considered an issue and others where 20% were considered class-leading.

 

Reactivation Rate

It's often more cost effective to reactivate lapsed customers than it is to recruit new ones.

By measuring your reactivate rate you will understand whether lapsed customers organically return to your brand (which in turn may challenge how you think about the customer lifecycle and what a lapsed customer really is) and if any of your marketing activities are supporting improvements in reactivation.

In combination with a value metric, you can make sound judgements about the relative value of reactivation and trade-offs between reactivation and acquisition investments.


Repeat purchase rate

Perhaps the ultimate measure of customer satisfaction (with a nod to NPS - see below).

Regardless of the length ofyour purchase cycle, what proportion of your customer re-purchase from you? And is the repeat purchase of the same product and same value?

In a high velocity sector like FMCG this will be mointored closely but we find that it doesn't form part of the consideration set in many other sectors.


Share of wallet

Share of market is useful but share of wallet is critical to know.

How much of your customers' spend in your category is with your business? And is it getting better or worse?

Without this context, you won't have a rounded view of customer loyalty and know a 'good' retention rate is masking an increase in customers shopping elsewhere.

Cost per Acquisition

Most marketers will have a handle on this.

Areas of particular focus should be how you measure CPA across communication channels and different product areas. 

This raises the thorny subjects of:

  • Atrribution - how to allocate costs and sales where customers have 'tocuhed' multiple channels. Should you attribute the conversion and cost to the last channel or blend it across all the touchpoints?
  • Traditional advertising and how you can allocate the costs and acquisitions to these sources (TV, Radio) when you don't really know if customers were exposed to the advertising or if it had any effect on their behaviour.

We'll address these subjects in a future blog.

 

FRY

Frequency, Reach and Yield are the core customer levers of optimising your marketing performance.

You can find out more detail here but it's worth a focus on Reach (or Customer Volumes). 

Customer volumes

The absolute number of customers by segment and stage in the lifecycle (top of funnel, middle of funnel and bottom of funnel).

This is basic but it's not uncommon for businesses not to have a measure or for their to be widespread disagreement about the absolute levels (for example, do you count customers at a household or individual level).

You should create a standard definition for your marketing as it's as an important measure of velocity as sales or profit.

 

Net Promoter Score

Another good measure of customer satisfaction provided that it is collected consistently and at every customer interaction.

If it is captured only sporadically then it becomes a fairly meaningless measure that gives you no true understanding of causality.

 

Return on Investment

Essential. The metrics above should help you to get a handle on the ROI of all your activities.

This should be the headline on all your performance measurement.

 

So what's right for you?


You will note that there's a pattern here: the metrics are all related to one another (eg. retention rate is a key input into CLTV calculations) and will create a balanced scorecard for your marketing objectives. 

The metrics that we have outlined are broad and will apply to many sectors and categories. They aren't however exhaustive and there may be some that you don't think apply to your business or marketing objectives.

The key is to equip yourself with a small suite of metrics: a powerful set of performance metrics that will allow you to accurately measure what you are doing and flex each of the variables to help set where you should focus next.

Download our free eBook & start using the performance metrics that matter

Sign Up for Blog Updates

Recent Posts

skydive3.jpg
author avatar

This post was written by Simon Spyer

Co-founder & Insight Partner at Conduit, professional insight-monger, dad, lover of all sport and Spurs.

Connect with Simon