Metrics and Data
Data is increasingly vital for improvement and decision-making across all fields. In digital marketing, it’s essential because your results hinge on data analysis. We’ll highlight the top four key digital marketing KPIs that Convert prioritizes to track and measure for businesses to achieve better performance.
1. Return on ad spend (ROAS):
Definition:
ROAS measures the revenue earned for every dollar spent on your campaigns.
Importance:
ROAS gauges the effectiveness of your advertising campaigns by showing how ad spend translates into revenue. This metric is crucial for assessing revenue generation if that’s your campaign’s ultimate goal.
Key insights:
- A higher ROAS indicates a more effective campaign in terms of revenue generation.
- It allows for revenue-based comparison between campaigns.
- It enables optimization of campaigns and advertising strategies to enhance revenue generation.
Challenges:
- Attributing revenue to specific campaigns can be complex, especially in multi-channel campaigns.
- ROAS primarily evaluates the short-term value of customers, neglecting long-term customer value if the campaign targets long-term outcomes.
2. Return on Investment (ROI):
Definition:
ROI measures the profitability of the advertising campaign relative to the expenses or campaign cost, ROI is concerned with profit rather than revenue as the ROAS metric does.
Importance:
ROI evaluates the overall profitability of marketing efforts, and its financial efficiency. Return on investments is one of the most known metrics and it is the baseline for decision making and strategic direction and budgeting.
Key insights:
- A positive ROI indicates that the investment has generated more revenue than its cost.
- Helps you in comparing profitability across different campaigns and initiatives.
- Can be calculated for single campaigns, multi-channel campaigns, determined period or the overall marketing efforts and campaigns.
- Assists your decision-making and budgeting process.
Challenges:
- Accurately calculating net profit in some businesses could be challenging, as cost allocation is a complex process.
- As ROAS, it may not capture the long-term effect of marketing efforts and campaigns.
3. Conversion Rate:
Definition:
Conversion rate measures the percentage of visitors/leads (depending on your marketing funnel) who complete a desired action (such as making a purchase or signing up for a newsletter).
Importance:
Conversion rate is all about effectiveness; it answers the question of “Are my marketing efforts, the offering, and the flow persuasive enough for the customer to take my desired action?”
Key insights:
- Conversion rate could be calculated in different manners depending on your marketing funnel (e.g., newsletter sign ups vs. visitors / E-Commerce purchases vs. check-outs / purchases vs. phone call leads, etc.)
- For each single funnel, it answers many questions, but usually related to the offering, campaign performance, customer and user experience, and overall marketing strategy and funnel.
- Conversion rate might be associated with sales more than marketing if the funnel conversion stage requires sales rather than marketing.
- Helps in identifying bottlenecks across the marketing strategy and funnel.
Challenges:
- Conversion rate is dependent on the customer value, low-quality or high-quality conversions or traffic might disrupt the metric indications. Hence, it is recommended to always define and measure customer value.
4. Customer Acquisition Cost (CAC):
Definition:
Customer Acquisition Cost measures the average cost required to acquire one new customer.
Importance:
CAC is crucial for understanding the efficiency of your marketing and sales efforts. It provides key digital marketing KPIs that can inform your strategy, channels, pricing, budgeting, and profitability.
Key insights:
- A lower CAC indicates more cost-efficient marketing and acquisition strategies.
- Reveals the importance of customer retention, as acquisition might be costly.
- Helps you in optimizing your marketing strategies, budgeting and channels.
- Provides the means to calculate your customer lifetime value vs their original acquisition cost (when comparing low-quality conversions vs high-quality ones).
- Provides the baseline for your pricing strategies and profitability evaluation.
Challenges:
- CAC might require detailed tracking and analysis if multi-campaigns are being run on multi-channels.
Where should I start?
Depending on your business, sector, and current stage, you may want to create a marketing strategy that initially prioritizes specific key digital marketing KPIs to avoid excessive measurement and decision-making confusion. This approach prevents overwhelming decisions that lead nowhere.
At Convert, we craft tailored marketing strategies based on benchmarking and extensive experience with vivid and prioritized measures that can facilitate informed decision making, contact us to know more!
