Most important metrics to measure marketing return on investment.

Measuring the return on your marketing, digital and advertising dollars is one of the most important things you can do to ensure you minimise wastage on your marketing budget and maximise returns. Regardless of how you spend your marketing budget, you will be in a great position to optimise your efforts if you add these three key metrics to your advertising, digital and marketing reporting.

Measuring sales and customer acquisition return on investment

Cost per acquisition

A simple but very effective way to measure how successful your marketing efforts are over time is measuring your cost per acquisition or CPA.

Why is it important?

Cost per acquisition measures how much you pay in marketing to acquire customers at a given point in time. When you are aware of how much you pay in marketing to grow your business, it allows you to see how much value you need to generate from your customers and whether you are over or under spending.

So how do you measure cost per acquisition?

It’s good to measure this when you have a few months worth of data and then you can track it monthly, quarterly or annually.

You add up all your marketing costs, including all advertising and production costs. This may include creative production costs, media costs, adwords, facebook advertising costs. You add this up and it is your total cost. You then divide this total figure by the number of new clients or customers you have appointed. This equals your cost per acquisition.

It’s important to keep measuring this every month or quarter because it should reduce over time. You might have launched a new campaign in one month and incurred production costs which makes that month have a high CPA but usually the number of leads and sales are relative to your spend for that month. That’s assuming your investment is working!

CPA calculation:

Cost per acquisition = marketing costs / number of new customers

Track your business’s CPA over time and you will gain valuable insights into how effective your marketing investment is.

Cost per lead

Just like cost per acquisition, measuring cost per lead is equally as important. Cost per lead or CPL is a really important metric to measure how much you are paying per lead.

CPL calculation:

Cost per lead = marketing costs / number of leads

It is important to use data from the same period of time. For example, if you want to measure ROI for marketing activity from January to March, use marketing spend and lead data for those 3 months only.

Sales conversion rate

Just like cost per acquisition and cost per lead, the final metric in the trifecta is the sales conversion rate. This allows you to understand how well your business is at converting the leads into sales. It can also highlight the quality of leads you are getting. One marketing campaign may be more effective than another at getting you higher quality clients.

For example, if you got 50 leads in a month and 3 sales, your sales conversion rate would be 6%.

Sales conversion calculation:

Sales conversion rate % = number of sales / number of leads x 100

All this math might sound rather dull and boring but trust me, using these metrics will help you understand how successful your marketing efforts are and put you on the path to getting stronger return on marketing investment.

Get in touch if you’d like more information on measuring success.