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Marketing Metrics ROI

Marketing Metrics and Marketing ROI: 

Keys to Effective Small Business Marketing

If your small business does not have a process in place for tracking marketing campaign performance, effectively measuring marketing ROI and benchmarking against your marketing metrics (KPI’s) – how can you know which marketing efforts are working? Let alone, create an optimized marketing budget. Tracking marketing ROI and establishing marketing metrics should be a part of your marketing process.

Small Business Marketing Metrics

Your business model will drive your marketing metrics. If you are doing online marketing and generate leads through your website, you will have marketing metrics prior to the lead completes the “Contact Us” form on your website. Once the lead completes your sign up form, there is a new set of metrics, and once the new lead enters your internal sales process, you have a whole new set. The key is tying the very first marketing metric all the way through the last business metric.

Marketing ROI – Campaign Tracking – Performance Tracking

Let’s take a hypothetical, fairly common example of a widget manufacturer. Let’s presume this manufacturer makes a variety of widgets, uses an online advertising campaign (let’s say Google AdWords for this example), generates leads through the company website and creates quotes for prospective customers. Now let’s take a look at some of the marketing metrics you would want to manage in this example. This example presumes we are looking at data for a given time period (i.e. a month, quarter, year, etc.).


Marketing Metrics for Performance and ROI Tracking

  • Marketing Campaign Metrics (AdWords in this example)
    • Impressions – Number of times the ad was served
    • Clicks – Number of times the ad was clicked on
    • Click Through Rate (CTR) – Clicks divided by impressions
    • Cost per Click – Advertising campaign cost divided by clicks
    • Conversions – Number of times a goal was completed (i.e. Contact Us form completed)
    • Conversion Rate – Conversions divided by clicks
    • Cost per Conversion – Marketing campaign expense divided by conversions
    • Note: these marketing metrics are automatically generated through AdWords
  • Internal Performance Tracking
    • Quotes – Number of quotes generated
    • Quote Rate – Quotes divided by Leads
    • Cost per Quote – Marketing campaign cost divided the quotes
    • Sales – Converted (booked) sales
    • Sales Rate – Sales divided by number of quotes
    • Cost per Sale – Marketing campaign cost divided by number of sales
    • Sales Dollar Ratio – Sales dollars divided by marketing campaign cost
    • Marketing ROI – Profit divided by marketing campaign cost, usually shown as a percentage

Linking Internal Metrics and Marketing Metrics

If you are wondering how you can effectively synch up your internal performance metrics with your campaign’s marketing metrics; there are several options available to you. The simplest way is to create an Excel spreadsheet and track this information manually. This method will be labor intensive and require some coordination – but if you are just getting started it’s not a bad way to start tracking marketing ROI. If you are ready to take a more automated approach, then your best bet is to utilize some sort of Customer Relationship Management (CRM) system. CRM systems improve small business marketing efforts, and there are several options available to you, including developing a custom in-house CRM system (expensive), or utilizing one of the many web based “in the cloud” CRM systems (far more affordable). SalesForce is a popular and reasonably affordable CRM solution.

Integrating Marketing and Sales

If executed properly, a CRM system will fully integrate your marketing process with your sales and even customer service processes. What does this mean for your business? Well, it means your various business functions will be connected from the very start through the very end. Marketing metrics and marketing ROI will be generated virtually automatically. The possibilities really become endless at this point – if you consider cross-selling opportunities, reactivating customers, marketing budget optimization, and more. But those topics are for a different discussion.

Tracking Marketing Performance with Longer Sales Cycles

In the case of a short sales cycle the example above makes more sense. However, if you read that example and started wondering about the timing of your sales cycle – you’re right, it’s an important element when evaluating marketing ROI. A longer sales cycle adds another variable to this example. Let’s say you are looking at the month of January; in that month you spent $10,000 on marketing and received $20,000 in profit. So, marketing ROI is 200%, right? Not exactly. If your typical sales cycle is 6-12 months, the sales generated during the month of January don’t directly tie in to your marketing spend for that month. What then?

A CRM system can help simplify this. You will begin tying back sales data to specific marketing campaigns and analyze those campaigns’ performance over time. Once you have enough data – year to year or month to month marketing ROI comparisons become more relevant.

Tracking Marketing ROI – Summary

In closing, you don’t necessarily need to do all of these things at once. If you can, that is optimal, but if resources are limited, it’s better to start with baby steps. The first step is to embrace the process of quantifying marketing campaign performance. Establishing marketing metrics and tracking marketing ROI directly contributes to optimizing your marketing budget, thereby increasing revenue and eliminating unnecessary expense.

Contact Marketing Practicality to create marketing metrics, calculate marketing ROI and implement a CRM system for your small business.