Tips for Measuring Marketing Effectiveness


The following is a guest post by Raul Harman. Raul is editor in chief at Technivorz blog. I have a lot to say about innovations in all aspects of digital technology and online marketing. You can reach me out on Twitter.

Marketing isn’t a static aspect of a business. That’s why marketers follow it constantly and make endless adjustments to optimize for better performance.

Without measuring the effects marketing has on overall business, there is no way of knowing its results. If left unchecked, this can cause pointless spending that leaves people questioning its value to the company.

However, marketing is very much capable of delivering results, and this can be proven. All you need to do is measure it.

Take a look at these tips and metrics for measuring marketing effectiveness. Use them to evaluate your own marketing efforts, and they will help you understand how important it actually is for your business.

Determine KPIs (Key Performance Indicators)

KPIs are metrics used to measure how effective a business is at achieving its key goals. It also helps determine whether your ROI is positive or negative.

When talking about marketing, this translates into metrics the track and measure performance across multiple channels. By setting up KPIs to measure the relevant features of marketing, you have an accurate, data-based overview of what tactics work for your business.

While KPIs include multiple types of metrics, from conversion to engagement, deciding what to follow can be a difficult task. That’s why you need to focus most of your attention on actionable metrics, such as retention, which calculates the revenue from repeated business.

This also makes you stop measuring vanity metrics that don’t drive the business forward, and concentrate on actually measuring marketing for performance.

Track Conversion Rates

Conversion rates are used to determine how effective your marketing efforts are at driving leads along the sales funnel. Tracking them across multiple channels allows you to check how much the leads are converting into customers during the buyer’s journey.

You can also use the conversion rates to measure the effectiveness of your content. This will help you make adjustments to increase content performance, especially when using A/B tests to double the conversion. So, while you may think that another CTA button on your landing page is too insignificant, it might boost the clickthrough rate and turn a couple of leads into buyers.

Generate Relevant Data

While marketing relies heavily on analytical tools to generate data, sales and customer support don’t. They interact with real people on a daily basis, which allows them to gather more accurate information and know why, for example, the company saw a spike in sales during the last month.

Staying oblivious to this kind of data prevents marketing from knowing how to act and react in certain situations.

One way of getting around this problem is through performing paid surveys online. It allows marketers to receive relevant feedback from customers and align campaigns according to first-hand information, as well as analytics.

To generate the most authentic results, remember to target a large test group, and stay focused on one piece of information at a time.

Calculate Customer Acquisition Cost (CAC)

The cost of acquiring new customers is a key marketing metric for determining how much a business needs to spend in order to earn. It also has the potential of being used to establish the marketing budget, and prove the spending is warranted.

It’s also fairly simple to calculate. Add up all the spending on marketing for one month (including payroll) – that’s your monthly marketing budget. Now, divide it with the total number of customers acquired for that same period. So, for example, if you spend $5,000 per month on marketing and receive 50 new customers, your CAC is $100.

Regularly calculating this number gives you an overview of how productive your marketing efforts are, and how much you will need to spend to move it forward.

Work Out Customer Lifetime Value (LTV)

After knowing how much it costs to acquire a customer, you will need to calculate how much that customer is worth to your company. This is their LTV. To calculate a customer’s LTV, multiply the standard amount the customer spends with the number of repeated purchases and the average retention time.

Say your customer has an LTV of $75, and your CAC remains $100 - that’s not good for business. However, if your customer annually spends $75 over four years, your business makes $600, so the cost of $100 for their acquisition is reasonable.

Since no customer is the same, comparing CAC with LTV lets you figure out the effectiveness of your marketing when it comes to delivering the right kind of customer to your business.


Use these performance metrics to see how much business is being driven solely by marketing. This will not only measure the effectiveness of your marketing efforts across all channels, but also their quality.

Remember to use multiple metrics over a longer period of time. In doing so, you will have a blueprint of how, where, and when to invest money into marketing in order to achieve quick results and long-term goals.

Are You Leaving Money on the Table?

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Earlier this week we wrote about scale. Specifically, we wrote about scaling those marketing programs that you know are working.

Too often, marketers leave money on the table. And they don’t even know that they’re doing this.

Why? Because they aren’t scaling. They aren’t even trying. And there are a few reasons for that.

1. Next Big Thing Syndrome

Whether this says something about the type of people who wind up in the marketing field or the way technology has hurt our collective attention span, there is a tendency in many marketing departments to spend far too much time chasing the latest and greatest solution.

You might think that this is a good thing, that we should be moving forward and staying on the cutting edge. Unfortunately, most companies don’t have the budget or the bandwidth to operate this way. And what happens too often is that we sacrifice those programs and channels that are proven and reliable, ignoring opportunities to grow.

Before moving onto the next big thing, make sure you’re getting as much as you can out of your existing campaigns.

2. Budget Mismanagement

A common issue in companies of all sizes occurs during the budgeting process. When we put together the marketing budget for the upcoming month, quarter, or year, we do it backwards. We start with at the top, picking a number of dollars to spend, and then work our way down to individual campaigns and programs to determine what percentage of our money we should spend where.

The proper way to build a marketing budget is to start at the bottom and build up. Create line items for each channel or program that ensure you are maximizing those opportunities before moving on to the next one and adding them all up. If you are limited by budget, the things that get cut should be the ones that don’t have the ROI or the scale to support your business.

To avoid leaving money on the table, get smarter about how you budget.

3. Lack of C-suite Buy In

It’s not the CEO’s or CFO’s responsibility to make sure your marketing is optimized. It’s the marketing department’s job to convince them that what you’re doing is working. If you are able to do that effectively, there will be no hesitation to spending the money.

What often happens when there is opportunity to double-down on efficient marketing programs is that marketing stands there with their hands out, but those in control of the finances say no. It’s not because they don’t want to grow. It’s because we didn’t do our job to sell them on the potential of our plans.

To get C-suite buy in for those marketing programs that are working best, it is important to learn how to develop detailed plans and presentations. You want to show them exactly what value you can provide the business if they invest in your ideas.

4. Poor Execution

The last, and, unfortunately, most common reason marketers leave money on the table is simple lack of execution. In this case, the marketing team gets the buy-in they need, correctly measure ROI and chooses to invest in the right areas. But they go about growing their budgets in the wrong way.

To effectively scale, it is important to recognize what has succeeded to this point. Simply spending more money isn’t enough. You have to spend it in the right way. This means identifying the specific reasons for success – whether it’s the proper targeting, the right creative, or offers.

If all you end up doing is spending more to get the same results, you will have failed in your efforts to grow the business. So learn how to execute at scale if you want to succeed.

What Are Your Key Performance Indicators?

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How do you know if your business is doing what it is supposed to do? How do you know if you are doing well or not?

Sounds like an easy question to answer, doesn’t it. But for too many companies, it is not so black and white.

But it should be.

What Are Key Performance Indicators?

Key Performance Indicators (or KPIs) are the business-defining metrics that you will use to answer the questions posed above. And the only person that can tell you what those KPIs are, is you.

Each industry and each company might have different ones. You might have just one of you might have five. They might be focused solely on revenue or they might be focused on new customers.

Not Just Any Metric

The key is in the name – Key Performance Indicator. This is not just any metric. This is the one that gets right to the heart of success. If the metric is positive, you are doing well. If not, you have work to do.

A good test to decide whether a metric is truly a KPI is to think about a situation where said metric was moving in the right direction, and yet the company itself is moving in the wrong direction.

For example, let’s say you choose a new customer metric. Is it possible that you could be seeing strong growth in new customers, but at the same time see shrinking revenue? If so, than new customers alone is not a great KPI.

Can You Have Too Many KPIs?

Yes. Most businesses will have more than one. But it is important to limit it to as few as possible.

Why? Because the more metrics you have to look at to determine the overall health of your company, the more difficult it becomes. They don’t have to tell you what’s wrong when things are wrong, that’s what analysis is for.

A good rule of thumb is to keep it to 5 or fewer.

In Conclusion

KPIs are the metrics that you use to answer the question, “how is the business doing?” They should be readily available and easy to understand and explain.

Measure WHEN Your Sales Happen

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Ecommerce companies that have grown smarter about data and analytics are starting to ask themselves questions that they may never have asked before. We are asking questions about how our users are interacting with our websites. We are asking questions about what marketing campaigns or special offers lead more people to purchase. We are asking questions about what elements of our website are preventing people from converting into paying customers.

But there is a question you are not asking, or have not asked yet, that could be just as important-

When do people buy from us?

In retail, or any type of business with a physical presence, it makes more sense. We want to know when our store is busy, so we can make sure to staff the right amount of people. And we might even run special offers to try to get people in the store during down times.

But online, the question might at first seem counter-intuitive. Online stores are open all the time. There is no staff required. People can buy when it’s convenient for them, so why do we care?

But the answers to that question are actually quite simple. By knowing when people buy, we can optimize our marketing efforts in the following ways:

  1. Send out special offer emails on days and during hours that are more likely to lead to conversions
  2. Make sure your live chat and phone support personnel are available during the busiest hours
  3. Utilize promotional banners and offers on the website to increase sales during times when purchases typically are lower
  4. Run your advertising campaigns during hours when they are most likely to have the desired impact
  5. Run disruptive tests or website/server updates during times when there is less risk to sales

Do You Trust Your Data?

It is, and always will be, possible to find data that supports your theory. Data is not perfect. And though many of us treat it that way, it is this imperfection that will end up tricking us into doing things that aren’t to our benefit.

For example, if I want to prove my point that a specific page on your website needs to be updated, I could show you the page’s bounce rate, exit rate, or conversion value. I might show you that the bounce rate for your product page has gone up 20% over the last 30 days. So clearly something is wrong.

But what if during that time the traffic sources also changed drastically? Or perhaps the bounce rate on the entire site went up by 20% because of some change in consumer behavior we haven’t factored into our analysis.

Successfully data scientists and analysts get paid good money for a reason. It’s because they are able to tell when the data is lying to them. They have trained themselves to do everything possible to keep their own bias and subjectivity out of their work. They let the data speak to them instead of starting off with a guess about what the data will say.

The best analysts know that not all metrics are created equal. They weed out the metrics that don’t matter to find the ones that truly show us what’s happening with the business. For some companies, the average pages per visit on your website might matter a great deal. And for others, we could care less.

It’s about identifying the right data for the right purpose.

Trust the data. But that doesn’t mean you shouldn’t question it. The key is to make sure you are trusting the right data.