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Marketing KPIs: Fundamental Metrics For Measuring Performance

Marketing KPIs

Marketing KPIs: Fundamental Metrics For Measuring Performance

Essential guide to the leading Marketing indicators, fundamental for understanding the performance of a business: here are which KPIs (Key Performance Indicators) to keep under control, how they are calculated and which ones should be used to measure performance and improve website and eCommerce results, email and social media. 

Marketing KPIs are those metrics or indicators that serve to measure the objective results, i.e. the effectiveness and efficiency of initiatives to attract and conquer a customer, the acquisition of contacts, the level of satisfaction and engagement, the quality of the experience, the Return on investments in the production and promotion of content, and then carry out a quantitative analysis of the ROI of the allocated budget.

What Are KPIs (Key Performance Indicators), And What Are They For?

In general, metrics (or KPIs) are indicators that synthetically offer a measurement of the performance and results of an activity, an organizational unit, or an initiative. The metrics are often expressed in relative or percentage terms to make different phenomena comparable to each other by sector, characteristics, size, and location.

The importance of metrics did not arise with digital. Financial statement analysis has always made use of metrics and indicators to quickly frame the performance of a company, evaluating its profitability, liquidity and capital solidity. Anyone a little familiar with this type of analysis has undoubtedly encountered some of the most widespread ones, from ROE to ROS, from the debt-to-equity ratio to liquidity indicators to asset rotation, to mention the best-known ones.

However, even if metrics have always existed, digital platforms, making every activity traceable, measurable and immediately comparable, have increased their importance and diffusion. In particular, in marketing, alongside the more usual communication, creative planning, customer relationship and business management skills, highly analytical and technological skills linked to the management of digital platforms and analysis are becoming increasingly important.  Some data.

Today, one of the fundamental pillars of digital marketing is made up of web analytics tools, marketing intelligence, and data analysis, up to the most recent applications in the field of artificial intelligence and automation. The rapid evolution of digital marketing and the adoption of increasingly advanced MarTech tools means that metrics evolve accordingly, managing to detect increasingly granular dimensions of customer experiences and touchpoint performance.

A survey conducted by Statista in 2022 in 35 countries shows that 88% of respondents indicated revenue as the leading indicator they take into consideration to measure performance, followed by 87% customer satisfaction metrics and analyses conducted on the web/mobile. Indeed, no less important are the metrics regarding customer acquisition cost (CAC) and Customer Lifetime Value (CLV), explained in detail below. 

The figure illustrates the survey results. Two thousand twenty-three promises to bring new and developing significant trends in the field of Marketing KPIs.  A key trend that is emerging, as highlighted above, is the increasing emphasis on advanced data analytics and artificial intelligence. 

Traditional KPIs remain critical but are being supplemented with more advanced KPIs that reflect the complexity of marketing today. Companies that adopt a data-driven and marketing intelligence approach will be able to gain a significant competitive advantage by maximizing the performance of their marketing efforts.

KPI For Traditional Marketing: The Gross Rating Point (GRP)

In traditional advertising, for example, for a television campaign, the fundamental metric for evaluating advertising “pressure” has always been the GRP, or Gross Rating Point, obtained by multiplying the relative coverage (or reach ) (i.e. measured with respect to the target) for the frequency of passes made.

In practice, if the target of a campaign is made up of 5 million people and a television program reaches 1 million people, the relative coverage is equal to 20%. If there are three advertising passages within the broadcast, the total number of impressions is equal to 3 million. Therefore, the frequency is equal to 3. 

Thus, the total GRP is obtained by multiplying 20 by 3, i.e. 60 GRP. This result is obviously based on the statistical measurement of the audience reached. In Italy, Auditel, Audiradio and Nielsen, to name the best known, provide these estimates every day, on which the fortunes and misfortunes of network directors, advertisers, advertisers and publishers depend.

KPIs For Digital Marketing: Dynamic Metrics

What has changed with digital? Almost everything. Marketing KPIs have increased their importance, first of all, because a much more precise and extensive use of metrics and, in particular, dynamic metrics is now possible. The distinction between traditional metrics and dynamic metrics is quite simple. The former generally depend on a large number of factors, are difficult to control and vary in the medium to long term.

ROE, Return on equity, is a perfect example: numerous factors determine a change, and their relationships and variations are complex. Furthermore, the results can only be appreciated in the medium to long term. With dynamic metrics, on the contrary, it is possible to enjoy significant variations even in the space of a few weeks by acting on a few factors, at most just one.

An Example: What Influences The KPIs Of An Email Marketing Newsletter

To give an example, let’s imagine sending a newsletter and not being satisfied with the open rate obtained, equal to only 25%, much worse than the sector average of 35%. Several newsletter parameters can be modified to find out if better results can be achieved. Trying to list some of them: the target, i.e. the segment to which the email was sent. 

The day or time of shipping, the subject of the email, the message or its design or layout, the call to action (i.e. the action requested from the recipient, the CTA or C2A), even the tone of voice or the color of the background. Each of these changes, preferably carried out separately to evaluate the individual effect, could cause the opening rate to vary, for better or worse. In practice, it has been discovered that even a small change can change the result of an email campaign.

For this reason, the open rate is undoubtedly a fundamental dynamic metric for evaluating the effectiveness of email marketing campaigns and editorial newsletters. With this approach, a trial and error approach is possible and widely used, which involves sending slightly different emails to different groups from the beginning, evaluating the effectiveness of a specific call to action, a particular layout, or a message. 

All digital platforms, and in particular social networks and eCommerce, continuously carry out A/B tests, subjecting distinct groups of users to different versions of the same message, of the same platform, or new and other features. The approach is, therefore, that of continuous optimization.

Fundamental Marketing Indicators

Generally speaking, every single initiative, platform, or campaign requires its own unique set of metrics to measure results. No package is generically valid always and for everyone; however, it can be said that at least two are the fundamental metrics for (almost) all initiatives, allowing one to evaluate from their comparison the validity and profitability  (ROI) of an initiative or communication campaign or an entire business. These two metrics are the CAC (Customer Acquisition Cost) and the CLV (Customer Lifetime Value).

Customer Acquisition Cost (CAC) And Customer Lifetime Value (CLV)

The Customer Acquisition Cost is the cost incurred to acquire a customer. To calculate it, divide the marketing and communication investment aimed at reaching customers by the number of customers acquired in the period. Note that there are industry benchmarks that help you evaluate your performance.

The CAC cannot be evaluated absolutely: to understand its quality, it is necessary to compare it with another fundamental metric, the Customer Lifetime Value (CLV, the value of the customer in its life cycle). The CLV, in fact, measures the average contribution to the profit generated by the individual customer. To calculate it, the marginal donation of the single sale, measured as the difference between the average order value and the direct variable costs, is multiplied by the number of average orders of each customer during the period examined.

An activity is economically profitable only if the CLV is much greater than the CAC. Mainly at risk are activities in which the marginal contribution of a single sale is minimal (at most a few euros or cents of euros), in which case the customer loyalty rate must be very high, and the deals must be repeated. Are CLV and CAC an invention of the digital age? No, they could be calculated for any initiative. However, the precision and traceability enabled by digital technology have dramatically increased its use and value.

The Minimum Set Of Marketing KPIs To know

Without any claim to completeness, below is a sample of metrics applicable to anyone involved in marketing, communication, and customer care, especially in the digital sector. Reach represents the number of unique people who view content, which can be a video, a post on a social network, or an article. For videos, in particular, views are essential. Practically speaking, it is the crowd reached.

  1. Impressions, then again, count the quantity of perspectives on a piece of content. Contrasted with reach, it estimates the numerous suppositions made by a similar client.
  2. The bounce rate, on the other hand, is the bounce rate; it measures the number of users who abandon a site or page within a few seconds without taking any action or activating a session, in practice, without making any call to the server after opening the page. 

In email marketing, the term bounce rate also indicates the rate of non-delivery of a newsletter, in which a distinction is made between hard bounces (if the recipient’s address is actually non-existent or unreachable) and soft bounces, when, for example, the recipient has the mail is full. The Unsubscription Rate is also essential. Remaining in the newsletter context, the open rate, i.e., the opening rate of the newsletters, and the click rate, i.e. the click rate of the email campaigns, are fundamental as seen.

Website, eCommerce And Social Media Metrics

Moving on to consider the marketing KPIs regarding a website or an eCommerce, we obviously measure the visits, the average time of a visit, the number of unique users, the number of pages visited, the average time on page, the rate of conversion ( Conversion Rate), i.e. the ratio between the number of users who complete an activity requested by a CTA (call to action), for example registering on the site, or purchasing a product or subscribing to a newsletter, divided by the number of users to which the CTA was subjected, with the ultimate aim of increasing online sales.

If the CTA requires visitors to a site to leave contact, the visitor transforms into a Lead; therefore, it is possible to measure the LAC, or the Lead Acquisition Cost, or cost per lead, with the aim of growing the list of contacts. If the intended action asks the user to click on a link, on a banner, or a post, the rate at which this happens is measured through the Click-Through-Rate (CTR), i.e. the ratio between the number of clicks obtained and the number of impressions of the content itself.

As regards social media analytics, we obviously consider the fans/followers of the page, i.e. the number of reactions, likes, shares, comments, reviews, and mentions generated by the content. The number of interactions linked to a piece of content divided by the number of followers of the page represents the Engagement Rate. If you are interested in measuring the engagement generated by the page, you calculate the average value across all content using the Average Engagement Rate ( AER ).

There are also many metrics for online advertising. The cost of advertisements and initiatives is measured, depending on the objectives of the campaign, in the cost necessary to reach a specific audience through the CPM, Cost-per-Mille, or the promotional cost to be incurred to get 1,000 users. That is the CPC, cost-per-click, and the cost of obtaining a click on an advertisement. While the first metric is used in the case of awareness campaigns, the second is used in conversion campaigns. In the case of video advertising, the CPV, cost-per-view, is also measured, i.e. the cost incurred to obtain a view of the video.

Marketing KPIs Drive Strategies And Objectives

We have listed just a small set of all the possible metrics that organizations and businesses constantly monitor to verify the interest rate, engagement, responsiveness and profitability of all of us digital users and customers. These are anything but abstract topics. When we receive offers, rewards, and discounts from telephone operators or other utilities without having requested anything, it is most likely because we have ended up in a cluster of customers at risk of abandonment. 

The Churn Rate, or abandonment rate, is, in fact, one of the most feared metrics by anyone involved in marketing and customer care. The next time we receive a call of this type, we will know that the meticulousness with which the company measures and takes care of minimizing the churn rate is probably to blame.

Read Also: Marketing Automation And Personalization: A Possible Combination

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