When it comes to data, marketing executives are frequently under the microscope. According to research by Gartner, the average company spends more than 10% of its yearly revenue on marketing, and the majority of CMOs expect that percentage to increase in 2020. Due in part to these typically large budget allocations, CMOs are consistently asked to show how their team’s marketing efforts are contributing to the overall success of the company.
With shifts in the economy, CMOs are also beginning to look for new opportunities to rationalize and create efficiencies with their spend. Part of creating those efficiencies is spending money where they know it works: paid media. An increase in media spend parallels the importance of analytics. CMOs claim that competitive insights and analytics are the two most important capabilities supporting the delivery of effective marketing strategies.
Indeed, CMOs have access to many types of data, and while much of it can help inform day-to-day decisions, it also needs to be unified data that conveys the value that the marketing team is bringing to the organization. These four metrics will be some of the first on their mind:
Return on Investment
Return on Investment (ROI) is probably the most important metric for marketing departments. With a robust share of the budget, CMOs have to be able to show CEOs the benefit of expensive campaigns, paid media efforts, and more. Simply put, ROI is the practice of attributing profit growth to the impact of marketing initiatives. Ultimately, this will help CMOs justify marketing spend, better distribute marketing budgets, measure campaign success, and establish baselines.
Before calculating ROI for your particular marketing organization, it’s important to consider what expenditures your team will account for. Marketing encompasses many specialties and therefore can include a diversity of expenses including events, campaign spending, agency costs, and much more. To calculate ROI for a particular time period, simply use this formula:
(Sales Growth – Organic Sales Growth – Marketing Cost) / Marketing Cost
Customer Acquisition Cost
Customer Acquisition Cost (CAC) is one metric that has grown in popularity alongside the rise of digital. As the Internet and Account-Based Marketing (ABM) tools have become more sophisticated, marketers are able to more effectively target customers. CAC is the cost of attaining each customer. This is a metric that a CMO will frequently be asked to share with outside investors.
Marketers are constantly trying to optimize on CAC by getting the most out of their advertising investments. With so many marketing channels and such a wide global market, most marketers find it useful to calculate CAC based on individual marketing channels. The best way to improve CAC is by increasing online conversion rates, improving the customer experience, and implementing a Customer Relationship Management (CRM) system. CAC should be monitored diligently and often; if your CAC is higher than your revenue for a long enough period of time, your business won’t sustain itself. The simplest way to calculate CAC is:
Money Spent on Sales and Marketing / Number of Customers.
Many marketers will claim that one of the strongest ways to get consumers to buy your product is simply by getting them to remember it. Whether that’s with your logo, a catchy jingle, or because a consumer saw your brand used by a notable person, brand awareness helps justify a lot of marketing efforts. Today, most companies grow and maintain their brand awareness via public relations, content marketing, and social media. Because brand awareness and brand equity have a lot to do with the consumer perception of your product, it can be hard to measure.
To really assess the state of brand awareness for your organization, it’s best to look at a variety of metrics. First, you’ll want to look at the total coverage broken down by feature articles, byline mentions, and syndicated coverage. Coverage should also be measured using share-of-voice (SOV), which measures the percentage of conversations on various platforms about your brand in relation to your competitors. However, not all coverage is created equal; a company will want to evaluate the number of impressions created from coverage to make sure that coverage is from quality sources. Finally, a company will want to look at the success of their content. High traffic, conversions, and social shares indicate high engagement and therefore increased brand awareness.
Customer Lifetime Value
A CMO worries not only about acquiring new customers but also about retaining the ones they already have. Customer Lifetime Value (CLV) is the revenue an organization can expect from a single customer account. CLV is calculated by considering a customer’s revenue value over time and the company’s predicted lifespan. The longer a customer remains loyal to a company, the larger their lifetime value becomes. By considering CLV in relation to CAC, a marketing team can gain a better idea of how long it will take to recover the initial investment in acquiring that customer.
CLV is arguably one of the most important metrics to consider when worrying about the stability, scalability, and sustainability of your business. But, it isn’t the most straightforward to calculate. Not every company uses the same business model so no method for calculating CLV will look the same. For more detailed information on how to calculate CLV for your business, check out this formula laid out by HubSpot. By improving CLV, you can improve your business in several ways. A clear idea of CLV will help your business improve sales, increase customer retention, optimize onboarding, encourage brand loyalty, and more.
Another way marketers can improve customer retention and positively influence all of the important metrics listed above is to take steps to ensure that the online customer experience they provide is fast, engaging, and ready to meet the demands of younger digital audiences.
A fast, reliable, and secure digital experience will reflect well on your brand, directly and indirectly, improving the analytics that help increase your bottom line. For more information on how to use WP Engine’s WordPress Digital Experience Platform to create a remarkable customer experience, check out our plans page.