The CMO’s Guide To Marketing Metrics
These days, companies are plunging up to 9.5% of their revenue back into their marketing, dedicating it to a variety of high-performing channels from social media to pay-per-click. CMOs also reported a 10.4% growth in their marketing spend, and with more spend comes even more accountability.
With the success of your business riding on the success of your marketing campaigns, being able to accurately track various marketing metrics—and knowing which ones to track in which instances—is critical.
Here we'll explore the definitions and formulas behind various metrics that are important to help CMOs justify their marketing spend, allocate their budgets optimally, and scale company revenue.
What Are Marketing Metrics?
Marketing metrics are measurable values used to determine how marketing campaigns are performing. The metrics tracked will vary based on campaign type, objective, and channels. Measuring them may require simple to complex calculations, including the use of various marketing analytics software.
Marketing metrics are crucial to the success of marketing campaigns and future strategic planning. As marketing attribution can help CMOs determine what channels are most productive and where to optimize their budget for better performance.
Marketing Metrics Vs KPIs
The marketing metrics used in determining the performance of your campaigns are different from KPIs. Key Performance Indicators help you to determine the overall goal for your marketing efforts, and act as a desired outcome (e.g., increase website visitors by 50%).
Once you’ve identified KPIs, you outline the marketing efforts that can help to achieve it (e.g., improve SEO ranking for more organic traffic). You then use marketing metrics (for SEO, in this case) to analyze your marketing data, which in turn gives you an outlook on how well you’re doing in terms of your KPIs.
Why Are Marketing Metrics Important?
In simple terms, marketing metrics are important to help measure the effectiveness of marketing campaigns. 89% of marketers in a recent study done by Google and MIT indicated that metrics like CLV, market share, and gross revenue are important indicators of marketing campaign effectiveness.
These metrics help them to:
- Know the channels yielding the highest ROI
- Make informed decisions on future budget allocation
- Know where to maximize efforts for lead conversion
- Justify marketing budget increase
Common Marketing Metrics
For General Marketing:
Return On Investment (ROI):
ROI is the metric that helps you make sense of all of your marketing investments. It defines your revenue growth and profit based on the success of your marketing initiatives, and is often displayed as a ratio. ROI can be calculated holistically or based on each campaign. It’s a good way to justify the efforts of your sales team and the budget of your marketing team.
To calculate this, divide your net income by your cost of investment and then multiply by 100. You could also calculate it by determining how much of your marketing budget is used to acquire each new customer (CAC) and how much revenue the customers generate for your business on average, within a specific period of time.
A good marketing ROI should be a 5:1 ratio or 10:1 in exceptional cases, but it should ideally never be below 2:1. Of course, specific benchmarks can vary by industry.
A good ROI indicates that your CLV (customer lifetime value) or average revenue per customer is higher than the cost of acquiring them (CAC). Ideally, the margin must be wider.
Conversion Rate (CVR):
The conversion rate is a metric that describes how people interact with your marketing materials across channels. Your conversion rate will depend on the goal of the campaign, and reflect how well it appealed to your prospective customers. If the percentage of sales from a marketing channel (e.g., an ad placement) is high, it reflects that the promotional materials are appealing and persuasive enough to your audience, hence the high conversion rate.
Conversely, if your conversion rate is low, it can be an indication that you’re either not targeting the right audience, your marketing isn’t persuasive enough, or there’s a problem somewhere on your marketing funnel.
Customer Lifetime Value (CLV):
Customer Lifetime Value is the projected amount you expect that a customer will spend in total on your business, or a measure of the revenue from a customer within a specific period. It differs from business to business due to differences in the pricing model, existing data from similar customers, potential upsells, and forecasts from available data. Your CLV helps you determine the direction of marketing efforts toward your existing customers (quality) or toward gaining new ones (quantity).
A simple way to calculate the CLV is to multiply the average customer purchase value by the average lifespan of customers and purchase frequency.
Customer Retention Rate (CRR):
The CRR describes how well the business can retain customers and have them returning for your services. If your CRR is high, it could be an indicator of effective marketing and great customer relationships. If otherwise, it could signal a waste of marketing efforts, where acquired customers are not retained over time. It could be calculated in the short or long term, depending on the kind of business.
To determine this, identify the period you want to calculate, the number of customers at the start and end of the period, subtract the new customers gained, divide the difference by the number you had at the beginning, and multiply by 100.
For example, if you had 12 customers at the end of a particular month and you had 10 at its beginning and gained 4 during the month.
Here’s how to calculate your CCR:
(12 (total at the end) – 4 (gained))/10 (existing at the start) * 100
8/10 * 100 = 80% CRR
Net Promoter Score (NPS):
This metric is measured to determine the chances that a potential customer will recommend your offerings to other people. It’s determined on a -100+ basis. The higher the referrals you get from your existing clients, the higher your net promoter score. It can be a good way to measure customer satisfaction in the business and potential for word of mouth marketing.
For Digital Marketing:
Website Traffic:
This metric describes how many visitors make it to your website via all of your marketing campaigns. You can easily determine the source and amount of your website traffic using the right marketing analytics tool (often Google Analytics). They can be great to help you evaluate the effectiveness of various aspects of your campaigns, the demographics of your website visitors, and how to attract new visitors and retain existing ones.
Bounce Rate (BR):
The bounce rate is the degree to which new website visitors arrive on your page and click away without interacting with it. If you don’t have relevant, interesting, or engaging content for your target audience, you may experience high bounce rates on your website. It’s also an indicator that your website content is not at its best, either due to wrong content placement, poor aesthetics, and long loading time. It’s a good way to determine the overall health of your website or landing page.
Customer Acquisition Cost (CAC):
The CAC is a metric that helps you determine the overall cost of acquiring a customer with the revenue the customer is expected to generate for the business. It describes all of the marketing efforts including the cost of equipment and property that are required to make a prospect buy and keep buying. It’s an important metric that’s often used to determine how well the business is doing. For instance, if all the business expenses exceed the average revenue acquired from customers within a timeframe, the business may not be viable.
To measure CAC, calculate all total expenses involving marketing and sales and divide it by the total customers acquired.
i.e CAC= TE/CA
Your total expenses should be an addition of all of your acquisition-related marketing campaign costs, wages paid in marketing and sales, software costs, payment for professional services, and other overhead related to marketing and sales.
Cost Per Acquisition (CPA):
As you aim to gain maximum value for every cent spent on marketing, the CPA is an important metric that shows you how you’re doing. It describes the total amount spent on acquiring a new customer. To determine this, you can narrow it down to measure it per each marketing channel, campaign, or even season.
Data from your sales gives you an idea of how much it cost to acquire each customer and determine which marketing channel yielded the most returns on the campaign budget.
If you spent $100 on marketing a product via Facebook ads, and 10 out of 20 leads purchased your product which cost $200 each; to know your CPA, divide the cost by how many people bought.
That would be $100 (budget)/ 10 (conversions) = $10
This means that it costs you $10 to get each customer.
The CPA is a great metric to determine the profitability and sustainability of the business.
Cost Per Lead (CPL):
The CPL refers to how much it cost to acquire a new lead, who has shown interest in your product or services. You can measure it as per your overall marketing efforts or channel. It also gives you the best measure of where the most leads are coming from, justifies your marketing spend or helps you identify the need for budget adjustments.
If you want to know your CPL, it’s best to do so frequently. To measure this, determine the total marketing spend during the period and the number of leads acquired. Narrowing it down to channels like ad placement and social media monitoring platforms can give you a better idea of how your leads are acquired.
Just like in the CPA example, the CPL for that scenario would be calculated as:
Total spend ($100)/ Total acquired leads (20) = $5
This means that it costs you $5 to get each lead from that ad budget.
For Email Marketing:
Open Rate (CTOR):
This metric helps you to measure the ratio of your email recipients to the number of people who open your emails. Open rate is important to the success metrics in email marketing, which is why it’s desirable to make emails more relevant to subscribers through personalization. If you want to improve your open rate, test different subject lines, send date/time, or frequency.
To calculate open rate, divide the number of emails opened by the number of total recipients and multiply by 100.
Click-Through Rate (CTR):
As important as the CTOR is, the CTR is even more important. This shows the next step in the recipient’s journey, the rate at which your recipients are reading your email copy and are taking action by responding to your CTA (call-to-action).
Whether it’s clicking a link, a button, or signing up for something, it can also indicate the aspect of your email that is working most effectively. If you’re wishing to improve your CTR, try placing your CTA higher in the copy (above the fold) or making it more obvious with a button or colored or bolded text.
To calculate your email click-through rate, take the number of people that have clicked through your email campaign and divide that with the number of emails sent. To show it as a percentage, simply multiply that number by 100.
Unsubscribe Rate:
This is another metric that email marketers should look out for. Although you often don’t want your subscribers to leave, it could also be a great indicator that you’re probably targeting the wrong audience if you have a high unsubscribe rate. The good thing is, you know the kind of people who want to hear from you and can determine their persona and target more prospects like them.
To calculate your unsubscribe rate, divide the number of unsubscribed users by the number of emails delivered, then multiply that number by 100.
For Social Media Marketing:
Follower Count:
If you’re a social media user, chances are you’re already very familiar with follower count. This is an indicator of how many followers you’ve gained or lost in a specific period, and can provide a sense of how many people are resonating with your content. A high follower count can be used to measure brand awareness and is a great opportunity to educate customers or share special offers, though keep in mind that without a correlating engagement rate, follower count can easily be a vanity metric.
Impressions or Reach:
These metrics are important to determine how many people are seeing your content and how often your content is shown to them. Low impressions or reach can help you identify if your content marketing campaigns are effective in reaching your target audience, or can signal if you have a bigger problem such as shadow banning (when a user’s content is hidden or restricted without the user being notified).
Engagement Rate:
With bots and other technology able to falsely inflate metrics like follower count, engagement is a much more reliable metric for how well your content is doing. Engagement rate takes the total interactions on your posts (e.g., likes, comments, shares, saves, etc) and divides that by the number of followers on the account (multiply by 100 for a percentage). It can be a great indicator of your page health and helps you to keep tabs on whether your target audience is still engaged or perhaps experiencing content fatigue.
For Search Engine Optimization (SEO):
Monthly Search Volume (MSV):
Keywords are important for SEO rankings, so it’s best practice to research the top keywords ranking for your industry through proper keyword research tools. Monthly search volume helps you to understand the relevance of a keyword by how many searches are made for it each month. The MSV can be a good predictor of how well a keyword performs, as it shows the average monthly search for the last 12 months, including seasonal fluctuations.
Traffic Potential (TP):
Traffic Potential describes the average amount of traffic that a website page or pages can receive from Google’s SERP monthly. This metric is important to your SEO strategy as it helps you understand the relevance of the keyword you’re working with. To estimate your TP, a tool like Ahrefs Keyword Explorer can be handy. There are other marketing analytics tools and templates that can help you arrive at your traffic potential estimates as well.
Cost Per Click (CPC):
Cost per click is a metric used to describe how much you would need to pay per click on your ads or per page views. When you use advertising platforms like Google Ads, Amazon Advertising, media.net, etc., they place your ads on third-party websites, where your potential audience can view them. The CPC is the cost you’re billed per each click. Most platforms will let you bid your CPC based on your advertising budget.
Generally, the CPC is calculated by dividing the total advertising cost by your total ad clicks. The actual cost per click may still vary based on your ad preference.
Set Your Key Marketing Metrics
While all of these metrics are important to CMOs, it’s crucial that you identify what’s most important to your overall business goals and for each individual campaign. For example, your marketing goals for email marketing will differ from those for SEO. Once you’re aware of your goals, it helps to streamline your metrics. If you’re not sure what you want, it’s easy to lose focus and try tracking metrics that may not be relevant to you at the time.
For more fascinating marketing metrics, check out our articles on marketing efficiency ratio and cost per mille. If you found this article helpful, subscribe to The CMO newsletter for even more marketing tips, trends, techniques and tools for success.