The whole point of any business to exist is for it to generate profits, and for that to happen it must create a return on any investment made. That is not just the capital that the company’s shareholders or owner have invested but relates to return on investment on all aspects of the business such as product development, staff training, and marketing for example.
Given we are an SEO agency, one of the most important ROIs we look at for any client we work with is that which is generated from the online marketing that we do for them. Within that overall return on investment there are specific metrics that we and our clients can assess, and in this post, we are going to look at 5 of the most important in detail.
Cost Per Lead
The definition of a lead may vary from industry to industry but for us, it means someone who has indicated that they interested in a product or service. That indication might mean they have entered their email in an opt-in box for more information or clicked on a link, which subscribed them to a message bot series.
Bear in mind a lead is not yet a customer, but the cost of acquiring leads from any marketing campaign is important. This applies particularly to PPC campaigns especially as it a simple metric to calculate as follows: Ad spending divided by the number of leads created. Otherwise, it will be the amount spent on marketing divided by the number of leads.
Cost Per Acquisition
This takes us a stage further when assessing how much it costs to obtain each individual customer. In other words, this is measuring those that actually make a purchase or agree to pay a fee for services.
Here it does not matter how much they spend, and that means that regardless of the product, service, or goods, and how much they cost, the cost of acquisition is not affected in any way.
The calculation made for a specific campaign is simply to divide the total number of individual sales that have been made during that period, by the total marketing costs of a campaign.
This will give the figure for that campaign, but it can also be done over longer period of time such as a year, and will thus take account of all marketing costs, and the total number of individual customers acquired that year
Customer Lifetime Value
A big mistake that many marketers and business owners make when determining the success of any marketing campaign is that they only consider, the immediate returns. In other words, the return is based on what the customer buys now, rather than what they spend over the lifetime of their dealings with the company.
This applies in particular to service type businesses where a client will use that service multiple times. An example is an accountancy business where a marketing campaign brings them a client who might continue to pay fees for many years to come.
While it may be impossible to predict for each individual client or customer, it can be done as an average across the business. That then gives you your average customer lifetime value by which you can measure your ROI when assessing marketing campaigns.
Cost Per Click
This applies to pay per click campaigns, and if you are ever involved with one, you will learn that this is a key metric. The reason it is key is down to the fact that the cost of the campaign will be determined by two numbers: 1) The number of clicks, and 2) the cost of each click.
Obviously, the more clicks you generate, the more traffic that you will have going to your website, so to make that as cost-effective as possible, and maximise your ROI, getting clicks for as low a cost as possible is essential.
A well planned and researched PPC can help keep the cost per click down by identifying keywords that are relevant, but which do not cost as much as some of the more popular ones.
Everything we have discussed so far will be for nothing, if, when anyone comes to your website and enters into your sales process or funnel, they buy nothing. Presuming that some do, the measure of that is your conversion rate, and it can be calculated in different ways.
For PPC campaigns it is calculated by dividing the number of sales by the number of clicks. For example, if you get 20 sales, from 100 clicks, then your conversion rate is 20%.
When you wish to work out how many leads from all marketing sources are being converted into buying customers, you simply divide the number of leads by the number of sales. This tends to get looked at over a longer period than PPC, as PPC campaigns tend to run for shorter and specific periods.
If your conversion rate is giving you cause for concern then you might want to look at your website design, your sales copy, or your sales team, depending on the type of business and sales processes you use.