B2C Marketing Analytics for Beginners

How to Measure Performance of your Marketing Strategy

Marketing is a key function of most businesses and a fundamental lever for growth so it’s important to be able to measure its performance. The last lesson focused on selecting metrics to measure the success of individual channels and campaigns. In this lesson we will discuss how to measure the success of your overall marketing strategy – the roll up of all of your individual initiatives and campaigns.

We’ll start by reviewing the common metrics used by B2C marketing teams and then discuss how to select the best metric(s) to measure the success of your marketing strategy.

Common Metrics

Brand Awareness

Brand awareness refers to how many people know about your company. This metric is the “fuzziest” of the ones in this list because, there isn’t a precise or absolute way to calculate it. As we discussed in the last lesson, it’s almost impossible to measure this at the campaign level. However there are techniques to measure it at the aggregate level, across all marketing, over time.

Some companies partner with 3rd party providers that have algorithms to find references of their brand across social media platforms or who conduct representative surveys to measure brand awareness. A less sophisticated way to gauge brand awareness is to use Google Trends to track how often users are searching for the company name (perhaps relative to competitors) and to track mentions of social media handles. This works best if the company name is rather unique.

Traffic

Site traffic refers to how many users are visiting your site. It’s typically reported as users or MAU (monthly active users). It is often cut by whether the users are new to your site or existing customers.

Signups

Signups refers to the number of users who registered for your site, usually by providing their email address or other contact information. Signups are important because they allow you to have a direct way of communicating with the user in the future – usually through a channel (email) that is significantly cheaper than other forms of paid advertising. It’s typical to track both the total number of signups and also the signup rate (signups / new users)

Conversions

A conversion is a generic term that refers to the number of actions that you care about. For most e-commerce sites, the action is usually making a purchase (converting a user from a visitor to a purchaser). Other sites might use signing up, watching a video, etc… as a conversion. Like signups, conversions are usually measured both as a raw number and also as a rate. Conversion rate is the rate of users who made a purchase (or other conversion) out of all the users who visited the site. These metrics are often cut by whether the users are new to your site or existing customers.

Revenue

Revenue is the amount of money made by the company. Depending on a company’s business and accounting model, companies will report either gross revenue or net revenue. As with many other metrics, revenue is usually split by whether the users are new or returning.

Return on Investment

Return on investment (ROI) is a measure of how efficient each marketing dollar is. To over simplify, ROI is the net revenue driven by marketing divided by marketing spend it took to acquire those customers (net revenue / spend). If a company made $10,000 from users and spent $5,000 to acquire those users, the ROI is 2 (or 200%).

There are several nuances for calculating ROI, however. How long should the time window for calculating customer revenue be? Which revenue is incremental and due to the marketing expenditure? Which costs should be taken out of gross revenue to define net revenue? These are questions that have to be answered up front and usually require input from marketers and finance.

How to Determine Success of Marketing Strategy

While there are many marketing metrics companies measure, ultimately what defines success is specific to each business.

Before reading your metrics, ideally before even implementing any marketing strategy at all, it’s important to clearly define what you want to accomplish with your marketing strategy. This should closely align with the greater business goal of your company. You then need to translate that goal into a metric (or two). These are your primary metrics – ones that you define goals for and measure your performance against.

How many primary metrics should you have? In general, the fewer the better, since a main purpose of primary metrics is to focus on the most important contributor(s) to success. So the more metrics you have, the less focus there is. For this reason, you should limit yourself to as few metrics as possible, ideally one or two.

You can also have other metrics as secondary metrics. These serve to give context to the primary metrics or to find opportunities in how to best drive the primary metrics. But you shouldn’t be actively trying to drive improvements to these metrics for their own sake, only if they are intended to be drivers for the primary metrics.

Translating most marketing objectives into metrics is relatively straightforward, but it requires practice reviewing the possible metrics and thinking about which one(s) would best represent that objective. We’ll illustrate this with a couple examples.

Example 1: E-Commerce Site

Scenario: An e-commerce site is doing a good job converting users who visit, but it isn’t growing fast enough for investor expectations. It wants to make an incremental $25,000/month in revenue from new users and is willing to invest up to $100,000/month to make this happen, confident that the lifetime value of the users will compensate for the investment in the long term.

Proposed Primary Metrics

The key success metrics for this company are monthly new user revenue and 1-month ROI. Performance will hinge on whether revenue is growing by an incremental $25,000 per month, while maintaining at least a 25% 1-month ROI.

New user traffic and conversion rate would be great secondary metrics to help assess whether there’s opportunity in the quantity or quality of the new traffic attracted with the new expenditures. You’ll likely also want to look at metrics by channel and campaign types to see which are working better / worse to keep learning and tweaking your implementation.

Example 2: Online Dating Site

Scenario: A new online dating app is looking to dramatically increase the number of user who signup for their service over the next 6 months. It can’t start charging for its service until there are enough members on the platform to have a selection of matches for each user. It has a fixed budget and wants to triple the monthly rate of users signing up to the platform by the end of 6 months.

Proposed solution

Clearly, the marketing team needs a single-minded focus on user growth. A good option for this company would be to track monthly signups as its primary metric.

Good secondary metrics would be new user traffic and signup rate to tease apart whether it needs improvements in driving traffic or in getting the traffic to sign up. As in the first example, you’ll likely also want to look at metrics by channel and campaign to keep learning what works / doesn’t work.

Conclusion

To best measure the performance of your marketing strategy, you first need to explicitly define its primary objective and convert that into one (or two) primary metrics. You should set goals against those metrics and measure your success against whether you’re meeting those goals.

Additionally, to help you understand what works and doesn’t work with your marketing, you’ll also want to monitor several additional metrics. However these secondary metrics are for context and to help find opportunities, not to measure overall success of your marketing strategy.