Tracking your marketing efforts is the key to taking control, and when it comes to marketing metrics, the first thing that comes to mind is web traffic. In fact, 78% of B2B marketers plan to use website traffic as a key metric for determining the success of their marketing content campaigns this year.¹
Advanced metrics, however, take into account more than just your daily site visits. They also track your overall budget, including salaries, bonuses, commissions, ad spend and related overheads. These measures are the best indicators of the costs involved in revenue growth and customer acquisition. They tell the story of costs and results, not how you got there.
These 7 advanced metrics are often avoided or considered just too difficult to track. But, monitor and react to these measures to formulate and activate plans, and watch your business grow and profits soar:
1. Lifetime Value (LTV)
Customer Lifetime Value (LTV) is pretty self-explanatory: it is the projected revenue a customer will generate over their lifetime as a client. A very basic way to calculate the LTV of a customer is to take their average spend per period multiplied by their average lifespan as a customer. Marketing to higher LTV customers leads to longer term rewards, as their lifespan tends to be longer and they tend to spend more. By boosting customer satisfaction, you will increase their LTV. Research shows that a 5% increase in customer retention can increase profits by more than 25%.²
2. Customer Acquisition Cost (CAC)
The CAC is calculated by combining all sales and marketing expenditures, including wages, bonuses, commissions, advertising, overheads, etc., over a period of time and dividing that amount by the number of new customers acquired during that time period. If your CAC increases between measurements, it means each new customer you gained is costing you more. This indicates that your sales and marketing efforts are not having as great an impact as you hoped, and it is time to evaluate how you are promoting your service, product or brand.
3. Marketing Percentage of Customer Acquisition Cost (M% of CAC)
To establish the percentage of your marketing spend to acquire a new customer, combine all of your marketing expenditures and divide that amount by your total CAC (see above). If your marketing percentage of CAC increases, it indicates that either your sales team is not performing at its best, or that your marketing team has overspent on advertising initiatives or invested in the wrong channels. To improve your M% of CAC, it might be time to implement a sales incentive program and revisit your marketing strategy.
4. Ratio of Lifetime Value to Customer Acquisition Cost (LTV:CAC)
The ratio of a customer’s lifetime value (LTV) in relation to the cost of customer acquisition (CAC) comes from dividing the LTV by the CAC. This is a helpful metric to establish the value of a current customer vs. the costs associated with acquiring a new one. A 1:1 ratio indicates that the higher your sales, the lower your profits. However, a ratio of 3:1 signifies a higher ROI on your sales and marketing initiatives. Better than that, a 4:1 ratio shows you have a great business model, but you could probably do with an increase in your marketing spend.
5. The Time to Payback on the CAC
To determine the amount of time it will take you to recoup the costs associated with acquiring a customer, divide the CAC by the amount your customers spend with you each month. The higher the payback time, the longer it will take you to realize any benefits – not something your CEO wants to hear – but remember that B2B selling cycles are generally quite long. Between 9 to 183 months is considered a reasonable timespan to begin seeing returns from your sales and marketing efforts. If it takes longer than 18 months to recoup your CAC, perhaps it’s time to call in the pros.
6. Percentage of Marketing Originated Customers
To work out the percentage of marketing originated customers, take all of the new customers you have signed up over a period, and analyze what percentage of them started with a lead that your marketing has generated. If this number is high, then your marketing efforts are paying off and generating more business. On the other hand, it could indicate that your sales force is having difficulty and needs more tools and motivational support to acquire new customers.
7. Percentage of Marketing Influenced Customers
Review all new customers that you have signed up over a period, and determine what percentage of them had any interaction with any of your marketing activities. If the number is increasing, your marketing is doing a good job at influencing new customers to sign up. HubSpot suggests that 70% or more should be the benchmark for top-notch marketing teams.³ In fact, HubSpot has a great cheat sheet for most of the above metrics. But basically, if your percentage of marketing influenced customers is below 70%, it may be time to intensify your marketing initiatives.
Monitoring these 7 advanced metrics and putting plans into action based on your results can help you increase your profits and close rates. We can help you refine and execute your strategic marketing plan and ensure that you get a better return on your marketing activities. Contact The Mezzanine Group now!