Key marketing performance metrics every business should know

Metrics are the foundation of success in any marketing campaign. Yet in practice, many companies don't use these key metrics to measure effectiveness. Instead they only look at the number of leads generated and skip the more complex formulas that show how well a marketing strategy is really doing. Read the article from Mona Mediato understand these metrics and their formulas, so you can build the most effective marketing strategy.

Why measure the performance of marketing campaigns

One key rule for any analyst: you can't improve what you haven't measured. Measuring the metrics of a marketing campaign tells you, to a degree, whether the campaign is really working. From there you can make the right adjustments and get the results you want. No matter how hard you try, some part of a campaign will always need improving. Measuring the results from a marketing campaign will help you pinpoint the mistakes to remove and avoid repeating them in the future. Clear measurement and reporting on marketing campaign results also lets you justify project costs to your manager. Think about how expensive a well-run marketing campaign is. Being able to account for that spending is important, and everyone should do it. See also:

• Top 10 effective website analysis and evaluation tools

What to avoid when measuring marketing performance

Beware of vanity metrics

These metrics look good but have little real effect on campaign performance. They can make you believe a campaign is going well when it isn't. Example: A big reach won't bring you more potential customers, and it won't make customers want to buy. All it shows is how much you spent on the campaign.

Goals that aren't consistent across campaigns

If your goal is to drive traffic to your website, but your social posts aren't set up to send link traffic or your emails don't include CTA links back to the site, how can you measure the marketing performance of those channels?

Identify the data sources for measuring marketing performance

Facebook fanpages, YouTube, Instagram, Google Analytics, Google Ads… there are many channels to measure, and each one calculates metrics differently. For example, an impression on Google means something different from an impression on Facebook. Or Facebook doesn't combine video views with engagements, but your business may want to do exactly that. See more: A guide to effective fanpage SEO Because the metrics, data sources and calculation methods differ from channel to channel, if your business markets across several channels you should work with an analyst who can measure campaign performance as accurately as possible.

Too much unnecessary data in the report

In the past, before social networks grew as they have today, companies mostly advertised on TV, in magazines and in newspapers. They couldn't tell who saw their ads or whether those people were the potential customers they were aiming for. Now it's very different: sitting at your desk with a computer, you can see where Google ranks you, how Facebook is performing and how many people have seen your ads. But with that much data, you sometimes can't fit it all into your report. So pick only the metrics that are truly necessary for each channel and each campaign.

Marketing performance metrics

Return on investment (ROI)

ROI is a popular and easy-to-understand formula. It is a measure used to work out how effective and valuable an investment is, by comparing the return on investment with its cost. ROI is often used alongside other methods to build important business plans from collected data. The ROI calculation can also be adjusted for different purposes. Companies can use it to evaluate returns on stocks, and also to make important decisions about whether SEO strategy hay PPC is worthwhile or not.

Cost per action (CPA)

CPA is the cost per purchase or cost per action. This formula calculates how much a company must spend to turn a potential customer into a revenue-generating one. CPA is also used to shape marketing strategy, because it lets advertisers pay for a specific action, such as a purchase or a form completion by a potential customer. These campaigns carry relatively little risk, because the cost only arises when the business's growth activity actually begins.

Customer lifetime value (CLV)

Customer lifetime value is used to work out the value a customer brings to your business, not just at one point in time but across the whole period they remain your customer. CLV looks at everything about the customer, from the first order to the last. This helps you decide whether long-term marketing channels hold more value. For more information, see:

• What is customer value? How to measure customer value in detail

In other words, if your CLV from a particular marketing channel is higher, you will certainly want to invest more in keeping those customers. This metric also helps you judge your business's success by the long-term results of your marketing strategy.

Return on ad spend (ROAS)

ROAS is simply a tool that measures the profit generated by a marketing activity. It is the most precise yardstick for a campaign's performance, because it measures the revenue you earn for every unit you spend on ads. Unlike ROI, which gives you an overall view, ROAS lets you evaluate your activities in the finest detail for each marketing channel you run. For example, you can apply ROAS to campaigns and target audiences, and get the clearest view of how to optimize ads that aren't performing. See also:

• The most detailed way to calculate Facebook advertising costs

Customer retention rate

Customer retention rate is a figure used to analyze how loyal customers are. Winning new customers costs far more than keeping existing ones. Knowing how loyal customers are to your business will help you improve your business strategy. If you can encourage loyal customers to stay with you longer, you will also optimize your revenue. For example: if you start a quarter with 30 customers, win 10 new ones and lose 8 during the quarter, you end up with 32 customers. From there you can work out your retention rate. Today, customer behavior is shaped by many different factors. For businesses, measuring the performance of marketing campaigns is vital. Measuring campaign metrics accurately will set your business apart and improve the quality of future campaigns.