The beauty of digital marketing lies in the fact that nearly everything can be tracked. Free tools like Google Analytics give you instant access to the actions, behaviors and locations of prospects visiting your website, and more robust tools like Marketing Automation software can trace attribution across channels like email, social media and events.
But this data is useless if it doesn’t relate to your business goals. That’s where Key Performance Indicators (or KPIs) come into play. A KPI is a measurement that will directly affect your marketing objectives. For example, if your goal is to increase sales efficiency, you’ll want to measure the total amount of sales divided by total leads. By tracking the right KPIs for your business, you’ll be able to measure the most meaningful analytics and make more educated marketing decisions.
While each business will undoubtedly have custom needs, the five KPIs listed below should be unanimous across digital marketers everywhere.
1. Digital Marketing Return on Investment
This is the most important KPI for digital marketers because it effectively answers the question, “Is this digital stuff even working?” Not surprisingly, this simple question is also one of the most difficult to answer. To calculate dmROI, you need to be able to directly attribute new sales to your online marketing efforts. Failure to measure ROI is one of key reasons that agencies get fired, marketing departments get restructured and CMOs get fired. Putting processes in place to track and increase ROI should be a top priority for any digital marketing manager.
How to Measure dmROI: (Total Revenue Attributed to Digital – Total Cost of Digital Marketing)/(Total Cost of Digital Marketing)
2. Website Conversion Rate
Your website should be your number one salesperson, tirelessly working for you 24/7 to attract new leads and guide them through the sales funnel. This can be tracked by measuring the number of form submissions, tracked phone calls and tracked emails coming from your website. If one of your major tactics is increasing website visitors every month, you should monitor conversion rate like a hawk. What good is doubling website traffic if your conversion rate gets cut in half?
How to Measure Conversion Rate: (Form Submissions + Tracked Calls + Tracked Emails)/(Total Website Visitors) = Conversion Rate
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3. Cost per Lead by Source
The number of leads alone does not designate a successful digital campaign. You want to keep lead acquisition costs low so that you can maintain healthy margins and see meaningful growth. By measuring cost per lead for different web sources, you can focus on digital activities that will be the most profitable for your business and reinvest your marketing dollars accordingly.
How to Measure Cost Per Lead: (Total Spent on Campaign)/(Total # of Leads) [note: do this for each source]
4. Revenue per Lead by Source
On the flip side of Cost per Lead, we also want to measure the approximate sales value of each new lead. This will help you forecast future sales based on expected traffic and conversion rates. This KPI will help you determine where your most profitable leads are coming from so that you can reinvest in those channels.
How to Measure Revenue per Lead: (Total Attributable Revenue)/(Total # of Leads) [note: do this for each source]
5. % of Sales from Digital
This last KPI is often overlooked but will justify the role of the digital marketing manager for many companies. By increasing the share of total sales attributed to digital marketing, you will effectively justify your value to the company’s bottom line and make a case for more investment in your department. Building a sound strategy and supporting it with the right people and technology is key to increasing this number over time.
How to Measure % Sales from Digital: (Total Revenue Attributed from Digital)/(Total Monthly Sales)
Using KPIs to Make Better Decisions
While these KPIs are useful in tracking progress and proving the effectiveness of your digital campaigns, they are essentially useless if you don’t use them to make educated decisions about your goals, strategies and tactics. You must learn which factors will influence each of these metrics so that you can continue to optimize and improve your site.
Red Bamboo Marketing can help you with the planning and execution of your digital marketing campaigns to help you see meaningful results. Contact us today to see how we can work together as a team to drive digital results.