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The Marketing Metrics Your Founder and CEO (Should) Care About

How does marketing impact the company’s bottom line? This is what every founder and CEO wants to know from their marketing team. By answering with the right marketing metrics, you can make data-informed decisions and take the right action to grow your company.

Marketing Metrics in Context

Just like with any key metrics, it’s important to understand what your company objectives are and how marketing contributes to those objectives. Once this is clear, your metrics will become more focused and relevant as you set goals and benchmarks aligned with the company objectives.

Some marketing metrics are so detached from business objectives and marketing efficacy, they are simply vanity metrics that have no impact on revenue growth or profitability. However, the following eight high-level marketings metrics have a clear impact on the company’s overall growth and performance.

Of course, many other more granular metrics (e.g. page views, time on site, social shares, email open rates, etc.) are available to help marketers refine their tactics. However, for this post, we’ll focus on the marketing metrics that matter to the founder/CEO and the company as a whole - metrics that every marketing leader needs on their dashboard.

8 Key Marketing Metrics

So what are the most important, high-level marketing metrics? Here’s a quick overview of each one and how to calculate it.

1. LTV:CAC Ratio

What is it?
The ratio of customer lifetime value (LTV) to customer acquisition cost (CAC) helps you determine how much you should spend to acquire a customer. Calculating this ratio will indicate if you’re spending too much per customer or if you’re missing growth opportunities from not spending enough.

How to calculate it:
The average lifetime value of your customers is the average monthly revenue per customer adjusted for monthly churn and gross margin. You can also calculate LTV using annual recurring revenue and annual churn.

($) Average MRR per account X (1/monthly churn) X gross margin (%) = ($) LTV

The cost of acquiring a customer is simply the sum of all marketing and sales expenses (including salary and overhead costs) over a given period divided by the number of new customers added during that same period.

($) Total sales and marketing expenses / (#) new customers acquired = ($) CAC

Once you have both LTV and CAC calculated individually, it’s easy to find the ratio between them. Just divide LTV by CAC. For example, if your customer lifetime value is $3,000 and your expenses for acquiring a customer are $1,000, then your LTV:CAC ratio would be 3:1.

($) LTV / ($) CAC = (#) LTV to (1) CAC Ratio

View the pros, cons, visualization examples, benchmarks and more for the CAC:LTV metric here.

2. Marketing ROI

What is it?
Marketing Return On Investment (MROI), sometimes referred to as return on marketing investment (ROMI), is the percentage of profit gained by investing in marketing. Marketing ROI shows the viability of marketing and how marketing contributes to a company’s bottom line.

How to calculate it:
The basic calculation for ROI is (Profit - Investment) / Investment. This formula can be applied to marketing in a couple different ways. The most common, high-level metric is to subtract your average monthly or annual marketing investment from your average monthly or annual gross profit, then divide it by the marketing investment. Since marketing ROI is usually displayed as a percentage, you’ll want to multiply the result by 100.

[ ($)Gross profit - ($) Marketing Investment ] / ($) Marketing Investment = (%) Marketing ROI

Alternatively, you could calculate MROI for a specific campaign or replace gross profit with customer lifetime value (LTV). The latter would look like this: (LTV - Marketing Investment) / Marketing Investment = Marketing ROI.

View the pros, cons, visualization examples, benchmarks and more for the marketing ROI metric here.

3. Viral Coefficient (Virality)

What is it?
Viral Coefficient is the number of new users an existing user generates. This metric calculates the exponential referral cycle - sometimes called virality - that accelerates company growth. Virality is the result of an inherent incentive for customers to refer friends or colleagues to your company.

How to calculate it:
In order to calculate the viral coefficient of your product or service, you need three numbers: the number of current users, the number of invitations sent (referrals, shares, or whatever best represents an invitation to use your product/service), and the average conversion rate of those invitations. Then multiply those three metrics and divide by the number of current users to get the viral coefficient (often referred to as the ‘k’ value).

[ (#) current users X (#) invitations sent by current users X (%) conversion rate ] / (#) current users = (#) Viral Coefficient

View the pros, cons, visualization examples, benchmarks and more for the Viral Coefficient metric here.

4. Website Conversion Rate

What is it?
Broadly defined, the website conversion rate shows the percentage of website visitors that take a desired action on your site. This action converts them from visitors to leads (or customers). The desired action might be downloading an ebook, signing up for a trial, completing a purchase, subscribing to a course, downloading a mobile app, booking a demo, or something else.

How to calculate it:
Calculating your website conversion rate is straightforward as long as you know what a ‘conversion’ is for your site. Simply divide the number of website sessions by the number of conversions to determine your website conversion rate.

(#) of website sessions / (#) conversions = (%) Website Conversion Rate

If you have multiple conversion opportunities (e.g. downloading an ebook, signing up for a webinar, and subscribing to an email list), then you can calculate this metric two different ways: 1) separately for each conversion using only the sessions from the specific page(s) the offer is listed, or 2) all the conversions combined using all the sessions for the entire website.

View the pros, cons, visualization examples, benchmarks and more for the Website Conversion metric here.

5. Website Traffic Growth

What is it?
Website traffic growth is a marketing metric that measures the increase or decrease in visitors to your site typically either month-over-month or year-over-year.

How to calculate it:
You can calculate your website traffic growth by first subtracting the number of sessions last month (or year) from the number of sessions this month (or year). Then divide the result by the number of session last month (or year) and multiply the outcome by 100 to convert to a percentage.

[ (#) sessions from current month - (#) sessions from previous month ] / # session from previous month X 100 = (%) Monthly Growth Rate

View the pros, cons, visualization examples, benchmarks and more for the Website Traffic Growth metric here.

6. Brand Recall

What is it?
Brand Recall is the percentage of individuals who can recollect your brand. Usually, this percentage is calculated by sending out a survey and measuring the results of the respondents. This more traditional metric can be split into two different types - aided and unaided.

Aided brand recall, also referred to as brand awareness, has a consumer identify your brand from a list of competing brands. Unaided brand recall provides a category for the product or service and the consumer responds with whatever brands come to mind for that category.

How to calculate it:
To calculate Brand Recall, simply divide the number of survey respondents who correctly identified or suggested your brand by the total number of survey respondents. Then multiply the result by 100 to convert it to a percentage.

[ (#) survey respondents who correctly identified or suggested your brand / (#) survey respondents ] X 100 = (%) Brand Recall

This metric helps you understand the efficacy of brand awareness investments and you can view the pros, cons, visualization examples, benchmarks and more for the Brand Recall metric here.

7. Net Promoter Score

What is it?
The Net Promoter Score (NPS) is a virality metric used in marketing to measure the number of satisfied customers and the average degree of satisfaction. It’s a survey indexed from -100 to 100 that asks the question “On a scale of 0-10, how likely are you to recommend [company] to a friend or colleague?” The NPS score serves as a leading indicator to the viral coefficient and word-of-mouth growth.

How to calculate it:
The Net Promoter Score classifies respondents who selected any number between 0-6 as a detractor. Respondents who selected 7 or 8 are considered passives and respondents who selected 9 or 10 are considered promoters.

You can calculate your NPS score by subtracting the number of detractors from the number of promoters, divide by the total number of respondents and then multiply by 100. (Note: Although the NPS score is technically a percentage, it is always shown as an integer.)

[ (#) promoters - (#) detractors ] / (#) total respondents X 100 = (#) Net Promoter Score

View the pros, cons, visualization examples, benchmarks and more for the Net Promoter Score (NPS) metric here.

8. Cost Per Acquisition (CPA)

What is it?
Cost Per Acquisition is the total cost of acquiring a new customer via a specific channel or campaign. While this can be applied as broadly or narrowly as you want, it’s often used in reference to media spend. In contrast to cost per conversion or cost per impression, CPA focuses on the cost for the complete journey from first contact to customer.

Cost Per Acquisition is also differentiated from Customer Acquisition Cost (CAC) by its granular application - looking at specific channels or campaigns instead of an average cost for acquiring customers across all channels and headcount.

How to calculate it:
To calculate the cost per acquisition, simply divide the total cost (whether media spend in total or specific channel/campaign to acquire customers) by the number of new customers acquired from the same channel/campaign.

($) total spent to acquire new customers via specific channel or campaign / (#) new customers acquired via the same channel or campaign = ($) Cost Per Acquisition

View the pros, cons, visualization examples, benchmarks and more for the Cost Per Acquisition (CPA) metric here.

Visualizing Your Marketing Metrics on a Dashboard

Having these key marketing metrics in front of your team on a daily basis will help them focus their work. Don’t bury these critical numbers in a static document or spreadsheet. Your key performance indicators are only actionable when shared and monitored all the time.

Obviously, we believe a great way to do this is by getting the metrics on a TV dashboard in your office so everyone can see how marketing contributes to the company’s bottom line.

Want to put your marketing metrics on a dashboard? Try Geckoboard for free, no credit card required!

Here’s an example of what a marketing metrics dashboard might look like.

example-marketing-metrics-dashboard

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