6 Important Marketing Metrics To Your CEO
Marketing has become easily and effectively measurable besides being accountable to CEOs and CFOs due to increased knowledge on metrics, analytics and spreadsheets as a result of internet marketing.
Despite these advancements, still many CMOs are struggling on how to lay their hands on the right metrics to give them a clearer CEO and CFO credibility besides realizing real marketing contributions.
It is believed that best metrics take into account total marketing costs with inclusion of programs used, team salaries, overheads and other result related costs. Other important aspects include customer acquisitions and revenues.
Although most CEO focus more on costs and net results, there are other interim steps and logistics that should be used for proper assessing of the marketing team. These include:
- Cost per page view
- Cost per lead
- Cost per follower.
These help you to determine where your efforts should be concentrated on besides helping you in making proper and informed decisions. Here below are the most important metrics that you CEOS will need to see from his team.
6 Metrics that you should be keen on
i. Customer Acquisition Cost (CAC):
This takes into account the sales and marketing costs. This means that all the costs used in adverts, commissions, bonuses and overheads within a specific duration are summed up and divided by the total number of customer acquired during that time.
ii. Marketing percentage of customer acquisition cost:
This can be shortened as M%-CAC. This means that you can acquire the portion CAC by M-CAC after which you compute it as a percentage of overall Customer Acquisition Cost. M%-CAC can only change with time to signify a change in strategy or effectiveness.
An increase will suggest the following:
- A lot of money is used in marketing.
- Low sales as a result of missing quota.
- Demand to increase sales ahs let to higher spending on marketing besides providing high quality leads.
Companies engaged in outside sales and have a long complicated selling cycle can only manage a M%-CAC of 10-20% while those engaged in inside sales and have less complicated sales cycles are likely to have a M%-CAC of above 20-50%. An M%-CAC of more like 60-90% belongs to those companies with low costs complemented with simpler sales cycles and humanless sales.
iii. Customer Lifetime Value to CAC Ratio (LTV: CAC):
It is important for companies with recurring revenue streams to consider the present value of their customers in relation to what is used in acquiring the new customer.
LTV is computed by subtracting the customer’s gross margin from the revenue paid by that customer in that period and then divided by the rough churn% (known as the cancellation rate) of the customer in question.
After acquiring the LVT and CAC, you can compute the needed ratio. A higher ratio translates to higher GOI in your sales and marketing. On the other hand, a very low ratio translates to restraint growth due to lack of sending on sales and marketing. You will need to increase your spending if you should grow.
iv. Time to Payback CAC:
This can be described as the time spent in months in earning back CAC spent on acquiring your customer. It is computed by dividing CAC by margin adjusted revenue attained per month for the average number of new signed up customers. Incase customers are required to meet a one time upfront payment; it should be greater than CAC to avoid loosing money.
This makes this metric less relevant. On the other hand if your customers are meant to make monthly or annual payments, make sure that the payback time is less than a year in order become profitable from new customers before a year is gone. This will help you to start making money.
v. Marketing Originating Customer Percentage.
This percentage is intended to highlight the number of customers driven by marketing. It is computed by taking all the newly signed customers and looking at the percentage which was started with a lead generated by marketing. Though this can be achieved through a time consuming manual way, it can be easily solved by a closed-loop marketing system.
This metric is important in the sense that it shows the specific potion of the acquisition originated due to marketing. Depending on your preference, you may use revenue instead of customers when computing this percentage.
vi. Marketing influenced Customer %:
This metric is similar to (v) above but it goes an extra mile to add all the new customers touched and nurtured by marketing during any time of the sales process instead of only originating the leads.
This metric is without dispute higher than the “originated” %. In most companies, it ranges between 50%-90%. For instance, if a person found a lead and he ended up attending a marketing through which he got closed, it can be concluded that new customers were influenced by marketing.