The marketing strategy your company is using will make or break your business. It doesn’t matter how great your services or products are if nobody knows about them. It’s your marketing strategy that will help get the word out and drive sales. If you feel like your marketing is stalling and you could be doing better then you have to look for areas to improve.
The idea is to use your data to give you some clues as to what part of your program is not hitting its targets. These data points are your key performance indicators or KPI. It’s simply the metrics used to evaluate your performance and this will allow you to see what you should be working to improve. In this article, we will go over several of the KPIs that you should be paying attention to.
1 – Customer Acquisition Cost (CAC)
It’s very important to acquire new customers. Yet, it is doubly important to not spend too much money to acquire them. There is a cost incurred for your marketing including materials and the like as well as the commission for your sales teams when they convert a lead to a sale.
This is the CAC and is very important to understand. Take some time to evaluate every resource that goes into lead generation, the sales funnel, and the cost to onboard a new customer. There should be a cost for every step of the process of acquiring the customer.
At each point, there is an opportunity to lower that number and bring that cost down. This is especially important if the lifetime revenue from one customer is limited.
2 – Lifetime Value
The lifetime value of a customer is how much money they are likely to spend once you have gotten them as a customer. There are different monetization models that will determine how much value each customer has. If you have a membership revenue model then the lifetime value of a customer is quite considerable.
On the other hand, if the lifetime value is the cost of a single purchase then it is limited. The ideal CAC should be based on the lifetime value of the customer. Try to find ways to add more possibilities for customers to spend money over time. Include building an email list in your strategy to have more ways to get revenue from the first time they became a customer.
3 – Return on ad spend
Part of your marketing strategy is surely paid ads in some form or another. There is a metric that will give you an idea of how much money is generated by the ads. This is part of the CAC mentioned earlier so this is a good opportunity to lower the cost and have customer acquisition be lower.
The bigger the ratio from revenue to cost is better. Look for ways to tweak your ad spend by doing things like A/B testing or trying different models for ads. You may simply be spending the money in the wrong areas.
