Marketing metrics

Any IT project requires a clear and objective control that displays specific metrics over a period of time. A comparative analysis of dynamics situationally demonstrates which metrics are best to use.

Business needs measurable results, but there is no perfect set of metrics. Every IT company chooses them based on product type, life cycle stage, presence of problems, weaknesses, goals.

Companies launching similar products may use different metrics if their goals are different. For example, company A cares how many people read the product information on its website, while company B cares how many visitors downloaded a test version of the app.

Metrics are a set of performance indicators (KPIs) and tools by which the success of a product in the marketplace is measured.

Where are metrics needed?

Metrics show how specific metrics change over time, demonstrating the state of the product, its quality, need closure and revenue generation.  As an IT project evolves, metrics change, outdated ones are replaced by new ones. Their purpose is to help the company and its product become better.

In IT, metrics can:

• Show the profitability and effectiveness of the project already implemented.
• Demonstrate the popularity of the solution for audience retention.
• Correct bugs by demonstrating the problem in dynamics at different stages of testing.
• Show timelines for implementation and budget consumption.
• Determine positioning as you move toward your goal.

For startups aiming to create products quickly, the need for metrics is minimal – 3-5 parameters will fully “describe” the situation. As the business grows, metrics are needed to analyze traffic and product scaling, which amounts to 10-15 items. When a business starts to expand actively, there is a need for indicators of customer retention, reputation, service availability, data security, conversion, i.e. a company already operates with 30-50 metrics.

The more variables a company has (many systems, directions, employees, data and reporting), the more complex analytics and the higher the need to be able to control and analyze everything.

Basic marketing metrics

Metrics, depending on what they measure, are divided into groups.

• marketing;
• business metrics;
• product metrics;
• engagement;
• retention;
• pre-sales;
• managerial;
• advance;
• lagging, etc.

KPI in marketing

Key indicators assess the work of the marketer, show the dependence of future profits and the rate of development on their effectiveness.  They can be strategic (profitability, market position), analytical (sales volume, revenue) and operational (short-term sales, traffic, clickability).

The main KPIs are:

• The number and efficiency of leads. Increasing them means a potential increase in sales.
• Returns to the site. Evaluation of the interest from users to the web resource.
• Lifetime value of the client (LTV). The cumulative income which the client brings for all time of work with him. LTV calculation includes the average check, monthly revenue, the number of purchases made by one customer, the percentage of churn.
• Average check for a specific time period.
• Average revenue per customer for a specific time frame.
• Return on advertising. The indicator is important for evaluating the effectiveness of online advertising.

Sales volume

Shows how many goods, works, or services are produced and sold by a company. Both profits and the total value of the company depend on this indicator. Ideally, sales volume should be equal to production volume.

The criterion is needed for:

• making effective management decisions;
• to study the market and CA demand;
• evaluation of the work of branches, departments and employees;
• optimization of the collection of goods;
• searching for new segments to launch products.
• increase in turnover.

The metric is classified by gross, net, critical and target sales volume. The metric uses indicators of the volume of products sold, their quality, cost, rhythm of production, etc. for analysis.

A decrease in the indicator signals negative financial consequences. If the company operates below the critical sales volume, losses can no longer be avoided.

CTR

Clickability is an important measure of ad quality. The number of clicks on ads does not mean conversion to purchase.

For different advertising systems (search advertising, contextual-media or advertising, banner advertising, with social networks, etc.), the “quality” CTR indicator is different. The highest clickability rate is demonstrated by snippets for branded queries (up to 70%).

The main reasons for low clickability are wrong choice of target audience, unprofitable offer or unattractiveness of the ad. CTR can be increased by changing ad campaign settings, developing strong creative, and creating a new, unique selling proposition.

CPC

Price per click is a measure of how much an advertiser pays to search engines or online venues for each click that brings a user to a site. CTR is the most popular advertising payment model on the Internet. The price per click is manageable.

The amount is not constant and constantly changes depending on factors such as niche competition, clickability, semantics, ad content, time of display, seasonality, geolocation, presence of minus or stop words, placement, promotion channel, audience quality and targeting settings.

Even a high price per click is justified, since potential customers click on the link. The higher the price, the more traffic – this is the policy of advertising networks, which give priority to expensive ads. For the marketer, the indicator helps to maximize impressions within the approved advertising budget.

CPC is widely used for targeting and contextual advertising, to a lesser extent – in affiliate networks, CPA-networks, retargeting and remarketing.

CPV

Payment for each user’s view of a video ad. The indicator is relevant for media, where the more views, the better. The initiative to view comes entirely from the viewer.

You should distinguish between two types of advertising under the acronym CPV:

• cost per view – the cost per fully viewed video;
• cost per visitor – the price of the actual visit by a unique user of the advertiser’s site (if the visitor does not pay again).

The indicator is used for those customers who are still at the top of the sales funnel. It helps gather an interested audience, as well as helps build brand reputation and increase loyalty.

CPM

Fixed fee per thousand impressions, not counting the number of clicks. In demand in media advertising, where it’s the reach that counts, not the conversions. This model is often confused with CPV, but the difference is significant. CPM is payment for displays, which often irritates users who are forced to look at ads. Until you see it, you can’t get to the content.

The payment model can be used to increase product and brand awareness.

CPA

Payment for the action set by the advertiser, performed by the user (submitting an application, paying for an order, registering, subscribing to a channel, downloading an application, viewing n-pages of content, adding a product to cart). There is no need to fine-tune the target audience and the development of ads.

When working with CPA, you won’t be able to drain the budget, because the advertiser only pays for specific conversions approved by himself.

CPL

Payment for leads, the ratio of marketing (advertising) costs and the total number of user contacts received. For CPL, the goal is to get contacts by calling, filling out a form on the site, registration.

This indicator is important for those companies that need to create databases for creating newsletters or connecting users to affiliate programs. In marketing CPL shows how effective the advertising is, and what the financial expenses of the company for attraction of the lead are. Without knowing this indicator, it is impossible to compare the effectiveness and profitability of advertising campaigns.

LTV

Lifetime customer value is the profit a company receives from one customer over a period of a long-term relationship. The most important metric for evaluating profitability.

In addition to assessing the prospects of advertising payback, the indicator helps to calculate the cost of attracting and retaining customers, ROI estimates, business forecasts, segmentation of customers by business benefits. It also identifies the most valuable advertising channels and sales funnel options, and gives insight into behavioral factors.

Knowing LTV reveals opportunities for effective development. The more input data is taken into account, the more accurate the result.

ROI

Return on investment ratio, a demonstration of success or unprofitability of advertising in order to evaluate the effectiveness of the investment. The indicator is necessary for competent budget planning, allocation of effective sales channels, determination of a successful marketing strategy, and tracking of investment attractiveness.

Considering the vast array of data needed for analysis, the metric requires automation and the use of CRM. ROI is most accurately calculated based on the results of completed activities, and the greatest efficiency is achieved through direct marketing, loyalty programs, sales promotion and customer service.

ROMI

Evaluate the profitability of individual marketing tools or investments. Exceeding 100% means that the investment in marketing has been returned in full. The indicator demonstrates the effect of advertising, as well as identifies the optimal and unprofitable means of promotion.

The indicator is required for objective evaluation of advertising campaigns, taking into account KPIs. To increase ROMI, you need to identify weak points in the sales funnel, improve the relevance and quality of advertising (and content), check the settings of advertising campaigns, and emphasize SEO-promotion work.

ER

Engagement index, which shows the activity of users in relation to the brand or company. ER is a demonstration of the interest of subscribers, the reach of the audience. Relevant for social networks without recommendations and algorithmic feeds.

CAC

The cost of customer engagement. The metric shows “how much” a company costs for a new customer. For this purpose marketing expenses divide by the quantity of clients. It is possible to calculate the index as for the whole advertising campaign, and for separate advertising channels.

The indicator is needed to optimize advertising, refuse unprofitable and invest in effective channels.

Conversion

This is the percentage of potential customers who have taken targeted actions. The metric is needed to understand growth points, the effectiveness of advertising moves and actions, and to evaluate the success of marketing. The sales funnel is built on the conversion, which allows to trace the correlation between buyers and potential clients.

The concept of conversion is used in website audits. The number of visitors depends on it. In order to increase it, it is necessary to work through the internal and external parameters of the site, improve landing pages, do SEO, and adjust contextual and targeting ads.

Marketing metrics are an endless opportunity to measure the results of business processes. Given the huge number of metrics, it’s important to choose the highest priority metrics that give the best understanding of how effective your marketing strategy, advertising and promotion are.