Welcome back! In part one of our series, we exposed some of the most common challenges to reporting, and 40+ industry-leading experts revealed what it takes to create a high-powered digital marketing report. In our second instalment, we’re going to take a deeper dive into marketing KPIs, and show you how to choose the right ones so that you can effectively measure the progress of your marketing.
Creativity is the lifeblood of marketing.
It can be used to transform businesses and is a tangible competitive advantage.
That said, there’s more to marketing than just creativity.
The ability to understand and communicate marketing data is an increasingly important skill for many businesses, and as marketers, we’re responsible for researching, hypothesizing and validating our creative endeavours.
When it comes to marketing measurement, there’s a plethora of KPIs that you can choose from to track the effectiveness of your campaigns. But, by tracking the marketing KPIs that matter, you can make important decisions that will help drive your business forward.
Interestingly, when asked to share the fundamentals of a digital marketing report, the majority of our respondents took the opportunity to list what KPIs they’re using to evaluate their success.
So, in part two of this series, we’re going to take a deeper look into the following topics:
- What are Key Performance Indicators (KPIs)
- How to choose effective KPIs
- What KPIs can you use to measure your marketing performance
Let’s dive back into this series and start by taking a look at the definition of a marketing KPI. Then, we’ll move on to a list of KPI metrics recommended by our industry-leading experts.
Please Note: If you want to learn about this topic, then you can go ahead and download the secrets to creating a digital marketing report. This report contains additional information from our respondents on what it takes to create a high-powered digital marketing report.
Note: This is a 4,000+ word guide. So, as per usual, I have added a table of contents so that you can jump to the topic that is most relevant to you.
Table of Contents
What are Key Performance Indicators?
Before we go any further, let’s take a moment to explain the definition of a Key Performance Indicator.
In its most basic form, a KPI (Key Performance Indicator) is a measurable component that can be used to measure and demonstrate the effectiveness of your marketing efforts.
Let’s say your boss set an overall goal to increase annual revenue by 20%.
Each department would need to define their unique goals to help reach this overall objective.
Once you’ve worked out your goals, you would then need to assign KPIs to help monitor your progress.
KPIs keep your departments aligned and allow employees to measure and prove their true impact on organisational growth objectives.
How To Choose Your Marketing KPIs
Now that’s covered, it’s time to choose your marketing KPIs, but what is the appropriate number of KPIs that you should use to help track your performance?
It’s impossible to say…
That said, Dan Pilay, Head of CampaignHero, believes that “Less is usually more”.
“A fundamental error I see is the crowding of reports with data, with no real structure or connection between the data points. It’s extremely common to add new data to a report, add a slide or chart, but it’s comparatively rare to see a confident marketer remove or streamline something,” says Dan.
In my experience, if you have more KPIs than you need, then they’re not necessarily “key”.
They’re just Performance Indicators.
To help define and re-evaluate your measurement strategy you could use “The Magical Number Seven, Plus or Minus Two” formula.
Back in 1956, George A. Miller, Cognitive Psychologist, ran a study on the human brain.
What he discovered was that most humans were able to store between five and nine pieces of information in their short term memory.
So, if you’re measuring more than seven KPIs, then there’s a good chance you’ve overlooked some vital information about your marketing.
While ‘Millers Law’ is a useful technique to help define your KPIs, there’s no general ‘rule of thumb’ on how many you should measure.
Robert Stoubos, Founder of Odyssey New Media, believes that “some campaigns require only reporting on certain metrics, while others are multi-channel and require many more metrics to gauge cross-channel performance.”
Just make sure your KPIs pass the SMART criteria before you apply them to your measurement plan.
Specific, Measurable, Attainable, Relevant, Time-frame.
- Is the KPI SPECIFIC enough
- Is it possible to MEASURE the progress?
- Is the goal realistically ATTAINABLE?
- How RELEVANT is the KPI
- Can you set a TIME FRAME?
If you want to go that extra mile, then you can upgrade from the ‘SMART’ to ‘SMARTER’ criteria with the addition of EVALUATE and READJUST.
Specific, Measurable, Attainable, Relevant, Timeframe, Evaluate, Readjust.
Let’s say, for example, one of your goals is to drive inbound sales by 20% by the end of December.
By the end of quarter two, you’ve exceeded this goal.
You’d need to evaluate to determine whether you’ve set the bar too low. Then, you’d readjust your KPIs to ensure that you’re moving the needle.
So, now that we’ve covered Miller’s Law and the SMART criteria, I’m now going to walk you through some additional factors that can help you define and choose your most effective KPIs.
Align KPIs with Organisational Growth Objectives
We’ve touched upon this already, but we must iterate so that you don’t fall at the first hurdle when it comes to choosing the right KPIs.
Aligning your KPIs make it possible for everyone to see how they contribute to the organisation in the most efficient way.
Phil MacKechnie, Digital Marketing Expert at Radfield Home Care, told me that they “simplify all their marketing metrics (across all channels) down to the most relevant three.“
He explained that “this way we can recognise our common goals and drivers in terms of what each channel contributes. Each channel can, of course, have additional secondary metrics. But, by having three in common, we can understand our common goals regardless of what channels we’re responsible for.”
The most effective KPIs are closely tied to common strategic objectives and allow you to take action.
Before you choose your KPIs, you must understand the objectives that you’re performing against.
Start with the basics:
- Write down your overall business objectives.
- Think about how you would achieve these objectives. For example, what campaigns would you run?
- Identify the questions decision-makers and stakeholders would need the answers to.
- Set your department objectives.
- And, assign the relevant KPIs.
Focus on Revenue Where Possible
As a marketer, you should always be proving why your work matters to your company, and using a revenue marketing approach is the perfect way to do that.
Marketers are being held increasingly accountable for the need to connect their efforts with revenue growth.
That said, 18% of our respondents found measuring and attributing revenue to their marketing efforts a challenge.
“Profitability is what ultimately matters, and it is surprising how many marketing reports we see that make no reference to this,” says Andy Hunt, Strategy Director at We Influence.
He added, “most businesses can provide an idea of the average margin they’re making on their sales. It is extremely easy to combine this with known marketing costs (ad spend as well as any known costs of management, third party or internal) and include a profitability estimate within these reports.”
Focusing on revenue where possible, is an effective way of showing your bosses and clients that you genuinely care about their success and business growth.
You can use revenue-led metrics to display a measurable value and show your progress on revenue growth (which we will get to shortly).
Listen To Your Clients Needs
Now, this is significant if you provide a service to clients.
In my experience, clients don’t always know what they want.
Mainly because they don’t know enough about digital marketing, and at times, struggle to articulate their business objectives.
As a marketer, it’s your job to listen and understand your clients’ needs, so that you can work together and set the right goals.
If your clients are struggling to outline their objectives, then you can ask the following questions to get a better understanding of their business model:
- How does the client typically generate revenue?
- What does growth look like in their industry?
- Who are their customers?
- What is holding the client back in their day-to-day operations?
Avoid Vanity Metrics
Vanity metrics don’t add value to your business.
They can trick you into thinking that your marketing campaigns are generating results when they’re not.
Adhering to the SMART framework is typically the best way to avoid the common ‘vanity metric pitfall’. That said, you can also ask yourself the following questions to help weed out your less effective KPIs:
- Can you take action from your KPI?
- Is the KPI related to anything significant?
- Can you control or repeat the data a meaningful way?
- Is this data from the KPI a true reflection of your performance?
Key Performance Indicators (KPIs) For Marketing
Let’s take a look at some KPI examples so that you can put your new techniques into practice.
There’s not a “one-size-fits-all” approach, but using the techniques above should help you distinguish what KPIs are most important to your overall objectives.
Jack Giddens, Head of Biddable at Katte & Co, told me that their “reports consist of a data sheet including performance metrics.”
He added, “we always split these out by different targeting options, and campaign types, to get a true view on performance at each level.”
So, on that note, we’ve organised the following marketing KPIs into four categories:
1. KPIs To Measure Marketing ROI
2. Lead Generation KPIs
3. Advertising KPIs
4. Website Performance KPIs
KPIs To Measure Marketing ROI
“The most important inclusion is being able to demonstrate financial returns. That means showcasing conversions, cost-per-conversion and return on investment at the very least,” says James Brockbank, Founder & Managing Director at Digitaloft.
That said, one of the most challenging demands for marketers is to prove their impact on the bottom line.
To achieve the best return on investment requires a revenue-driven approach and the right KPIs to back it up.
John Warner, Senior SEO, Content & Marketing at Click Consult, believes that “while there are plenty of metrics you could offer as integral to a digital marketing report – from sessions through to conversion rate – the one area that is often neglected is more top-level.”
He added, “We often forget that reports are shared among stakeholders, many of whom will be unfamiliar with the work you are doing. For that reason, reports should communicate your progress, and its impact on top-level KPIs (revenue, products sold etc.) in a manner understandable to someone that may have no idea what digital marketing is.”
So, let’s dive in and look at some KPIs that can help you calculate your marketing ROI, but more importantly, prove your impact on the bottom line.
Cost Per Action (or Conversion)
“Front and centre of all our reports are focused on the number of conversions. Calls, form enquiries, purchases, downloads, any actions taken on the client’s website which impacts their business,” says Charlotte Fallon, Account Manager at Embryo Digital.
An action could be something as simple as an eBook download, newsletter sign up, or demo request. You can use the following formula to calculate your Cost Per Action/Conversion:
“Every report we send is focused on conversion,” says Matt Cocking, PPC Manager at Fifteen Design.
He added, “Without conversions, businesses wouldn’t make money. So, why would you target yourself against anything else?”
Cost Per Lead
Similar to Cost Per Action, except the Cost Per Lead metric tracks how cost-effective your marketing channels are when it comes to generating qualified leads for your sales team.
Customer Acquisition Cost
Customer Acquisition Cost is the total cost of acquiring a new customer via a specific channel or campaign. It’s a measurement metric used to track the revenue impact of your marketing activities.
Customer Lifetime Value
Customer Lifetime Value is a metric used to indicate the total revenue a business can expect from a single customer. It is a key metric for SaaS companies, as well as business owners who offer services on a monthly retainer.
To calculate your Customer Lifetime Value, simply take your customer’s revenue value, and compare that number to their predicted lifespan.
Return on Marketing Investment (ROMI)
“All reports need to have the standard metrics, like impressions, clicks, conversions and conversion rate. However, our agency has a strong focus on ROI. We always try to put a value on each conversion, even if it’s a lead generation campaign. Ultimately, the client needs to be able to see a return,” says Cristiano Winckler, Head of Performance at Somebody Digital Ltd.
Return on Marketing Investment tracks how much revenue a campaign or channel is generating compared to the overall marketing costs.
Part of the problem with measuring ROI is that there can be so many intangible gains from marketing that don’t necessarily add obvious pounds to your bottom line.
Daisy Foster, CEO at Digitool, shared what formula they use to calculate client marketing ROI.
“We first work out the average ROI. This allows the customer to have a glance at whether their marketing is working. All we need to know from the customer is their average job value and their average conversion rate,” says Daisy.
Using the following formula, Daisy works out an average ROI:
Daisy added, “the second part of our digital marketing report allows customers to work out an exact ROI. Thanks to the help of Ruler Analytics, our customers can listen back to every call and read every email to assign an exact job value. We know the amount of work booked in, so this allows the report to calculate an exact ROI.”
“Customers like this reporting method as there is an option for a glance, and if they want, they can dig deeper to listen back to calls. Work out exactly what they’re getting from our marketing efforts” Daisy explained.
Lead Generation KPIs
Whether you sell to consumers or other businesses, you need a consistent supply of new leads to help scale your business.
Below is a list of lead generation KPIs to help you effectively track and measure your customer acquisition initiatives.
Conversion rate is the number of conversions divided by the total number of visitors.
For example, if you received 200 visitors in a week and had 50 eBook downloads, the conversion rate would be 50 divided by 200, or 25%.
“Our clients are most interested in cost per conversion and conversion rate. However, they’re also interested in whether introducing Click Guardian has an impact in terms of enabling and measuring whether removing click fraud and general click wastage has a positive impact on their KPIs,” says Roy Dovaston, Managing Director at Click Guardian.
Lead by Source
Lead by Source is an individual that has engaged with your product or service through a segmented source, i.e Organic Search, Google Paid.
“One of our clients is a new and emerging retailer who had pooled the majority of their marketing budget into PPC activity and had little focus on offline advertising. We decided to include site-wide and multi-channel attribution sales and revenue data to measure the brand halo effect across other traffic sources,” says Alexandra Ingram, Director of Paid Media at Trafiki eCommerce Marketing.
Product Note: With the Ruler Analytics source report, you can connect your sales and marketing data to determine which marketing channels are generating the most revenue.
Leads To Opportunity %
Lead to opportunity % is the number of leads that move down the funnel and transform into a sales opportunity. This metric allows marketers to measure the quality of their leads and track which of their marketing activities are having the best impact on sales.
Marketing Qualified Leads (MQL)
“Ultimately, the real outcome our clients are looking for is the number of MQLs (marketing qualified leads) generated. Being able to present this along with accurate attribution models means that we can steer our clients towards scaling their success with data-driven insights,” says Chris Coussons, SEO Executive at Durhamlane.
A marketing qualified lead (or MQL) is a lead that is considered sales-ready based on intelligence, but not yet ready for direct contact.
For Amy Wilkinson, Director of Disruptive Thinking “lead generation is always an important aspect to include.”
“Ensure that your client understands the criteria behind a lead, and the stages they go through, from lead nurture right through to acquisition,” says Amy.
Sales Qualified Lead (SQL)
A sales qualified lead (SQL) is an MQL that is validated by the marketing and sales team as a viable prospect. SQLs are moved onto the next stage of the buying cycle and are contacted directly by the sales team within a specific timeframe.
Understanding which KPIs are most relevant to your PPC success is tough, as there are countless different metrics at your disposal.
Jeff Lyall, Head of Search Marketing at Be Found Be Chosen, told me that most of their paid clients look at “ROAS, cost, and revenue.”
“Our customers care about how much money they’re making, so we do exactly that. No fluff, no numbers for number’s sake, just the hard-hitting ones that they’ll have to report to the board,” says Jeff.
So, here are a few ideas to help you get started.
Every touchpoint starts with a click (this sounds like a title of a song).
This KPI tracks how many times individuals click on your advertisement. Keep in mind that you shouldn’t measure the performance of your PPC campaign based on the number of clicks.
In its most basic form, Click Through Rate measures the number of clicks you receive divided by the number of impressions. For example, if your advertisement had 100 impressions and one-click that would be a 1% CTR.
Cost Per Click
The cost of your ad will be based on the number of clicks received. Cost Per Click is the amount you pay each time a user clicks on your ad.
An impression is counted each time your ad is shown on a search result page or another site on the Google Network.
“We recommend a ROAS (return-on-ad-spend) driven approach. This enables us to focus on what is working well, alongside seeing what isn’t,” says Aaron Crewe, Managing Director at Novi.Digital.
ROAS is a calculation that divides the amount of revenue generated from ads by the amount spent on advertising.
The goal of measuring ROAS is to determine if the cost of advertising yields an acceptable amount of incoming business revenue. It lets you produce reports showing exactly how much revenue your ad campaigns generate for the business.
“If a company’s main goal is to have a particular ROAS, the data should add valuable insights into whether this goal has been achieved in a particular week or month. In the case of ROAS, this could refer to conversion rate, cost per click and ROAS split by campaign, to gain insights into where there’s a positive and negative impact on the main business goal,” says Matt Sellars, Account Director at Converted.
Website Performance KPIs
If you use Google Analytics, you will know that there’s an endless list of KPIs at your disposal when it comes to measuring the performance of your website.
As exciting as this sounds, try and keep the “Magical Number Seven, Plus or Minus Two” formula in mind when it comes to choosing your most relevant KPIs so that you don’t get carried away.
As there are a lot of website performance metrics available, I’ve decided to list the KPIs purely recommended by our respondents. You can head over Klipfolio for more options.
Measure keyword performance to show how effective you are at driving organic traffic.
Paul Baguley, MD at Internet Sales Drive told me that his reports present “Google Analytics data such as traffic, top pages and keyword rankings compared to competitors.”
Average Time on Page
Average session duration in Google Analytics measures how much time, on average, a user spent on your website during their visit.
According to a study, average session duration is the 4th-most-tracked metric marketers are tracking from Google Analytics. (Only Users, Bounce Rate, and Sessions ranked higher.)
Pageviews is a metric defined as the total number of pages viewed.
With page views, you can identify the most popular areas on your site. Allowing you to replicate processes and drive your marketing forward.
A Session (sometimes referred to as a visit) is the set of interactions made by a single website visitor. Sessions often contain multiple activities, such as page views, events, or transactions.
“We report on overall website traffic. We show how much of that was delivered via organic, how many leads they got overall, and how many of those were thanks to organic,” says Marty.
He added, “our reports also show a table of their best-performing keywords. Where they were when we started, where they are now, monthly increase and search volume.”
So, what have we learned so far in this series:
- A Key Performance Indicator is a measurable component that can be used to measure and demonstrate the effectiveness of your marketing efforts.
- According to Millers Law, the human brain can store between five to nine pieces of information. So, if you’re measuring over 7+ KPIs there’s a good chance you’ve overlooked a vital piece of information about your marketing.
- The “SMART” and “SMARTER” criteria can be used for effective goal setting and KPI selection.
- KPIs keep your departments aligned and allow employees to measure and prove their true impact on organisational growth objectives.
- As a marketer, you should always be proving why your work matters to your company, and using a revenue KPIs is the perfect way to do that.
- If you provide a service, it’s your job to listen and understand your clients’ needs, so that you can work together to set the right goals and KPIs.
- Vanity metrics don’t add value to your business. They can trick you into thinking that your marketing campaigns are generating results when they’re not.
I hope you enjoyed this second instalment of our digital marketing series. I’ll see you in, Part 3: Fundamentals Of A Digital Marketing Report – Turn Data Into Actionable Insights.