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The top two marketing metrics to track

By Posted in - Marketing on April 13th, 2017 0 Comments

The awesome thing about digital marketing and media is that you can get a ton of data to go with every move your business makes. The terrible thing about digital marketing and media is that you have way more data than you know what to do with.

Use your data wisely

All data is potentially valuable, but the tendency for busy business owners is to quickly check surface metrics—like number of visitors, page views, or how many likes you have on Facebook—and use those numbers to say whether their marketing is doing well or not. That data is important, but it doesn’t really help you to decide what marketing tactics are effective or how much you should be spending on any given activity.

Here are the two big questions you need to answer:

  • What is my cost per acquisition (CPA)—or what does it cost me to get a new customer?
  • What is the total lifetime value of a customer (TLV)—or how much does a customer spend with my business in the long term?

If your profit on an average sale is $200, and it costs you $100 in advertising to ultimately get to that sale, that’s a hugely important piece of intelligence to have. If you found a magic ATM that gave you $200 back every time you put $100 in, you would sit at that thing like an old lady at a Vegas slot machine and just crank away. Better yet, it lets you evaluate the effectiveness of every other marketing option that you come across. Can the new idea meet or lower that CPA mark? If not, maybe it’s not worth your budget.

A breakdown of CPA and TLV

To accurately capture CPA, you need to account for the entirety of the sales process. Here’s an example with some simple numbers for the sake of simplicity.

You run an AdWords campaign that costs $10 per click. To get a paying customer, it takes 10 clicks. Your cost per acquisition would be $100 (because you have to go through 10 prospects to get 1 one conversion). If you have multiple layers between a prospect and a sale—like follow-up mailers or the costs of having a salesperson call to follow up—account for those numbers as well to get the most accurate CPA possible.

Then go the extra mile and figure out how much a customer will spend with you over the course of a year or even five years to get the total lifetime value. If your total lifetime value for a customer is $10,000 but the immediate profit from the first sale is $90, you might be willing to spend more on your CPA knowing what the long-term return will be.

Without these numbers, it’s really difficult to make an informed marketing spend. So don’t put it off any longer!

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