There’s a slew of marketing metrics out there, but which ones really matter? In an ideal world, marketing professionals could spend all day watching the metrics, adjusting accordingly and keeping everyone from the CEO to the receptionists up to speed.
But that world doesn’t exist. If you keep an eye on the most important metrics, though, you can boost the bottom line. When it comes to builder marketing metrics, they’re not all created equal. Different industries focus on different metrics. Generally speaking, however, four major metrics are worth watching day in and day out.
1. Customer Acquisition Cost (CAC)
To get the base figure, all marketing and sales costs need to be gathered. This means everything from sales and employee bonuses to the printing costs for bookmarks. The accounting department should be able to crunch these figures. Nothing can be overlooked here; anything that goes under marketing or sales needs to be included in CAC analysis.
Once that figure is determined, select a certain time frame. It can be one week, one month, a quarter or a year. Divide the figure by the number of customers in that period to reach a benchmark amount. Keep an eye on this number throughout the year. That will show you the peaks and lulls, and it can be used as a metric for cutting unnecessary costs.
2. Marketing-Originated Customer Percentage
This metric indicates how many new customers were acquired via marketing. The simplest way is to take all new customers within a given period and look at what percentage were acquired via marketing efforts. Of course, this will require you to keep close and accurate tab on those details.
A closed-loop system is the easiest way to determine these figures. Some folks have gotten by doing it manually, but most eventually switch to a closed-loop system. This metric shows just how effective new marketing measures are. They can be switched up and compared to determine the best approach.
3. Time To Pay Back CAC
Once a business knows the CAC, it’s necessary to figure out how long it takes to earn that money back. Say a business spends $5,000 for every new customer. How long does it take to retrieve that $5,000? The time to pay back CAC is calculated by taking the revenue generated by new customers and dividing it by the CAC.
Knowing this amount is crucial to building a business. Some professionals might believe it’s not worth the trouble—at least with their current marketing efforts—to outreach to new customers at this point.
If it takes years or decades to get that money back, it’s probably not the best approach. Instead, focus your energy on streamlining marketing activities and cutting costs.
4. Marketing-Influenced Customer Percentage
This is similar to number two, but it encompasses all customers within a certain time frame—not just new ones. The calculations are done the same way, however and a business can expect to see a much higher percentage here. The ideal is anywhere from 50 percent and up and if that level isn’t being reached, there’s a problem.
No matter which metrics a business uses, it’s important to know exactly where the sales and marketing money is going, who the customers are and how these two factors influence each other.
Most importantly, these metrics have to be shared with everyone who has a stake in the operation. Information is gold and there’s no telling who might have an idea to improve the bottom line.