Critical Marketing Metrics
Metrics are the foundation for any successful marketing strategy, but most companies fail to use many of these important metrics to calculate success or failure. Too often, companies focus heavily on the number of new leads generated, which ignores many of the complex formulas that can determine the true success of any marketing strategy.
Marketers are in a revolving cycle of constant change and flux. With the increasing number of marketing options and strategies, companies and marketers need to stay ahead of their competition. To help formulate an effective strategy, it is imperative that you understand these critical metrics and their formulas.
1. ROI (Return on Investment).
ROI is the most common formula and probably the easiest to understand. ROI is a measurement tool used to calculate the effectiveness and value of an investment. It shows the gain and/or loss of an investment by comparing and measuring the amount of return on an investment with the investment costs.
ROI is popularly used with other methods to help develop crucial business plans based on the metrics received. However, ROI calculations can be adjusted and manipulated for different uses. One company may use it to evaluate a return on a stock, while another may use it to make vital decisions on whether the new PPC or Indianapolis SEO strategy is effective.
2. CPA (Cost Per Action).
CPA is referred to as Cost Per Acquisition, Pay Per Action or Cost Per Action. It is a formula that measures the amount a business has paid to attain a conversion. CPA is also used to define a marketing strategy that allows advertisers to pay for a specified action, such as making a purchase or filling out a form from potential consumers. CPA campaigns are relatively low-risk, as costs are only accumulated once the desired action has occurred.
3. ROAS (Return On Advertising Spend).
Simply put, ROAS is a tool used to measure the profit made from advertising. It’s the most useful metric to evaluate the performance of marketing campaigns, as it measures how much revenue you get back on each dollar spent on advertising. While ROI can give you an overall view, using ROAS formulas allows you to gain specific performance measurements based on every marketing network executed. For example, you can apply ROAS to specific campaigns and ad groups to receive a better perspective on the best direction for optimizing unprofitable advertising.
4. CLV (Customer Lifetime Value).
The Customer Lifetime Value metric is used to determine the economic value a customer brings to your business, not only for the time being, but for the entire time they’re a customer. The metric considers everything from their first interaction to their final purchase with your company. This is essential to determine whether there is more value in long-term marketing channels.