The results of your PPC campaign are rolling in, complete with a full set of metrics that can help you determine how your strategy is working. It’s all valuable, but how can you sift through and interpret it to find indicators of most importance (read: ROI) to your CMO or company leader?
Consider focusing on key performance indicators so you can cut to the chase, round up the most revealing info and maybe end up working smarter instead of harder. Among important KPIs:
- Acquisition cost per customer: Your numbers people will likely be impressed if you turn in favorable sales and marketing expenses compared to the customers your campaigns have produced. They might be further encouraged if a smaller percentage comes from marketing than sales, but that often depends on the complexity of the sales cycle.
- Lifetime value of repeat customers versus acquisition costs: The first figure is estimated by starting with the revenue a customer brings in, subtracting the gross margin that applies to that revenue and dividing that by the estimated percentage of revenues he’ll likely cancel. After comparing that with your acquisition costs, a healthy business model should generally allow for a ratio of 3:1 or greater. Higher ratios point to even greater ROI from your sales and marketing departments, though overly high numbers may indicate your company should invest more to foster growth.
- Time period in which revenues cover acquisition costs: This figure (acquisition costs divided by the margin-adjusted revenue generated) demonstrates to leaders the point at which your campaigns are paying for themselves.
- Percentage of new business from marketing-driven leads: Marketers like this metric because it demonstrates how much revenue comes directly from marketing as opposed to sales. Further improve your credibility by adding up marketing-influenced customers, such as those who’ve spent money after attending marketing events or otherwise being subject to marketing efforts.
- Average lead close rate: Your CMO may watch this closely because of its direct effect on revenues. If it’s low, it could point to poor lead quality, sales techniques, calling center staff or all of the above.
- Close rate per channel: This might reflect on the quality of leads from different channels/campaigns or the competency of calling center staff addressing the leads.
- Paid versus organic lead ratio: This separates lead generation into two categories: anything that costs you money and anything driven by free avenues like SEO, social media and blogging. You and your company may be surprised at your successful organic results — or you may find you must spend more to make more.
In this age of big data, experts say the companies able to best filter and implement useful information have the greatest advantage. Prioritization will increasingly be key.
“The key to good decision making is evaluating the available information — the data — and combining it with your own estimates of pluses and minuses,” American economist Emily Oster once said.
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