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3 Metrics to Measure Marketing Effectiveness

October 2019 / Share
Consult these marketing metrics for insight into performance.

Metrics are a business's best friend. It is crucial that owners, leaders and other decision-makers have insight into performance across the business. Now that big data analytics have entered the mainstream, just about every company has the tools to track key performance indicators.

Marketing effectiveness is a priority for companies to measure, as it directly impacts sales and customer acquisition and retention, among other factors. Yet there is no lack of marketing metrics that have proliferated recently, making the choice of what metrics to track difficult. Here are three to start measuring today to generate insight and inform strategy.

1. Lead velocity rate (LVR)

While it sounds a bit advanced, lead velocity rate is actually a fairly simple calculation that gives a deep view into the effectiveness of your marketing on potential customers. To begin with, you need two numbers: qualified leads for the current month and the preceding month. Let's say you had 130 qualified leads this month, an improvement over 115 from the last month. 

  • Subtract the number of last month's qualified leads from the current month: 130 - 115 in this case.
  • Then, take that number and divide it by the number of qualified leads in the current month (15/130).
  • Multiply the result by 100 and you have LVR, which is about 11.5 in this example, a pretty high rate of growth.

Generally, anything positive is a good result, though anything below 5 could likely be improved on. More importantly, LVR, if calculated on a rolling basis, may help expose a pattern of negative growth. You could then use that data to refine marketing efforts, like in audience targeting or social media.

2. Customer acquisition cost (CAC)

It takes money to make money, but spending too much on marketing without hitting goals for customer acquisition is an untenable situation. We've actually talked about CAC before, but it's relevant and useful here, too.

You have to be sure that every dollar you put into marketing is well-spent, meaning it contributes toward acquiring new customers. CAC is the best gauge of this performance: Just add up all of your sales and marketing costs for a given time period, and then divide that amount by the number of new customers you acquired in that same time frame. You'll essentially get a 1:1 ratio on how effective each marketing dollar has been. You calculate this metric on a monthly, quarterly or annual basis; CAC is flexible enough to fit different needs. 

3. Conversion rate

It takes time to nurture a lead to a buying customer. The conversion rate for various assets or campaigns, like those through email or social media, will let you know just what consumers think of your products, your brand and your pitch. If your marketing is strong, it will show through in conversion rates. Conversely, the effects of weak or unoptimized marketing will manifest in conversion rates that fall off.

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