One of the first things we do with every new customer we onboard is getting crystal clear on the actual goal of a new project and how we are going to measure our efforts towards reaching that goal. Because the issue is, if you keep measuring the wrong stuff (quantity of leads, traffic numbers etc.), you create the illusion of progress, which might work in the short term, but will leave you stranded eventually.
In this short article, let me outline three metrics that actually have a sustainable impact on the bottom line of your company and tell you whether you are moving in the right direction.
1. Brand Awareness Through Branded Google Searches
Let's start with brand awareness. Consistent investment into branding (e.g. through content marketing) is one of the highest-leverage activities you can do in the long-term, because it compounds fast if you keep at it. To measure brand awareness can be a daunting task. But if you do a lot of Top of Funnel activities like podcasts, social media content promotion etc. you need to at least have an idea if you are getting noticed in some fashion.
How to measure it: I would suggest to start lean here. Measure the number of organic Google brand searches over time (through Google Search Console). If you do a lot of social, you can add profile views or website click-throughs to the mix here. If you make a lot of noise, but these metrics stay the same, it's an indicator to re-evaluate or ramp up your efforts.
2. The Number (and Source) of Leads who became customers
One of the major mistakes I see marketing teams make is to take the quantity of marketing qualified leads (MQLs) as their key success factor. This is really dangerous, because you incentivize the acquisition of as many email addresses as possible without taking the relevance of those leads into consideration. So if you acquire 200 leads per month, but you are closing only 1% of them, that's a waste of money and (sales) resources. You want to increase the percentage of leads who convert to customers first (through attracting the right ones in the first place), and then focus on getting to 1000 leads per month.
How to measure it: You want to measure the number of leads every month who convert to customers and where they came from (so that you can double down on that channel). To do that, you need to able to track an incoming lead from the source of acquisition (e.g. Google Ads Campaign XYZ) to the closure of a deal.
If you don't have a lot of leads right now, do this process manually looking back 3-6 months of closed sales and doing your best to track that customer back. And if you do generate a lot of leads already every month, but can't track them through to the sale this should be your first priority. Otherwise there is no way for you to know what works and what doesn't and allocate your money accordingly. And if you keep shooting into the dark, you will eventually lose credibility with your CEO management, or your team.
3. Customer Lifetime Value
Customer lifetime value (CLV) is a metric that estimates how much money an individual customer will spend on your products or services. Increasing your average customer’s worth not only improves your financial metrics but also allows you to spend more on acquiring new customers.
How to measure it: This is the most basic formula to calculate CLV:
Avg. Order Value x Avg. Annual Purchase Frequency x Avg. Customer Lifespan
If your AOV is CHF 100, customers buy the product four times a year, and they stay loyal to your company for three years on average, the CLV would be 10043 = CHF 1,200.
Naturally, you need to have at least a few years of sales history to get the metrics for CLV calculations. But if you already have this, you can also estimate which of those three metrics need improving the most. If you increase any of them, overall CLV goes up.
Summary: Tie Your Activities to Revenue
If you measure these three metrics, you will have a solid high-level picture of how well your marketing efforts perform from acquisition to retention and if you actually contribute to moving the company forward.
As we discussed here in the past, your effectivity as a marketer depends on how well you can link back your marketing activities to the revenue of the company. Unless you can deliver these numbers, you will be stuck in the hamster wheel of traffic and lead numbers and will have a hard time to be taken seriously by management, the product team and sales (take that from someone who has been there, it sucks!).