Marketing KPIs: A guide for business owners

Marketing key performance indicators (KPIs) are essential for measuring and improving your efforts

15-minute read

Measurement is a cornerstone of business management, and nowhere is that truer than for marketing. Key performance indicators (KPIs) should be the compass guiding your marketing efforts and ensuring they achieve your company’s goals.

“KPIs are critical for understanding your marketing efforts. They are also an effective way to look at your overall business strategy,” says David Girolami, Senior Business Advisor with BDC’s Advisory Services who works with businesses on their marketing.

“It’s essential for businesses to not only use KPIs, but also choose the right ones and track them properly.”

In this day and age, there’s really no excuse for finger-in-the-wind business management. KPIs allow you to make informed decisions based on actual data.

What are KPIs?

Key performance indicators are metrics that allow businesses to measure how well their objectives are playing out, and to help in making decisions and guiding their team.

It’s vital for KPIs to be closely tied to business goals and strategic planning. They form an integral part of any well-conceived business strategy and are crucial for its implementation. These metrics allow you to gauge your progress on action items and make any needed adjustments.

You should develop KPIs for every part of your business, including marketing, operations, accounting, human resources and sales.

Marketing KPIs allow you to:

  • measure the effectiveness of your marketing campaigns
  • identify consumer trends
  • optimize marketing tactics
  • prioritize resources
  • incentivize your marketing team
  • enhance accountability

KPIs must align with business goals. For example, if your goal is to increase brand awareness, you can use surveys or traffic on your website to track your company’s visibility and recognition. KPIs for this goal could include:

  • social media engagement
  • unique visits to your website
  • online search traffic
  • brand recognition

While some businesses choose to forgo KPIs, Girolami compares that kind of omission to sailing through fog with a reef just underneath your hull.

Other companies do use KPIs but make the mistake of choosing ones that don’t connect with their goals. “KPIs all have to ladder up to the business goals and objectives,” Girolami says. “If your goal is to increase revenue, then tracking the number of visits to your website isn’t an appropriate use of KPIs. That may be a good measure for one of your marketing tactics, but it doesn’t tell you anything about your revenue.”

What’s the benefit to a business of measuring KPIs?

KPIs aren’t just beneficial to businesses; they’re critical. “In this day and age, there’s really no excuse for finger-in-the-wind business management,” Girolami says. “KPIs allow you to make informed decisions based on actual data, not just gut instinct. They give you and your employees, in all business functions and departments, the insights you need to do better.”

Measures your performance

Tracks the performance of your business and its various functions and departments.

Provides customer insights

Measures customer satisfaction and loyalty, helping improve customer experience, retention, brand reputation and your overall product.

Clarifies business goals

Unites your team around your business goals and the journey to reaching them.

Helps you make better decisions

Allows your business to make informed, data-driven decisions.

Guides strategic planning

Permits you to track the progress of your strategic plan, tweak elements of the plan and understand how best to set new goals when renewing the plan.

Incentivizes your team

Lets you incentivize your team to reach your goals, holds them accountable and improves employee retention.

“If your team meets or exceeds a KPI, that can be a good opportunity to recognize that individual or group,” Girolami says. “Setting the right KPIs can significantly impact employee satisfaction and retention, which are strong focuses for businesses today.”

You need to know what your goal is to select the right metrics to track.

What are the most important marketing KPIs?

Here are examples of commonly used marketing KPIs, broken down by category:

1. Financial performance

  • Sales revenue—revenue generated by marketing campaigns
  • Customer acquisition cost—the cost of acquiring a new customer through marketing activities
  • Return on marketing investment—sales revenue from marketing, minus marketing costs, with the result divided by marketing costs
  • Customer lifetime value—total lifetime revenue from a customer
  • Average order value—average amount customers spend per transaction

2. Brand awareness

  • Brand mentions’ volume—number of mentions of your brand online
  • Website traffic—number of website visitors
  • Brand recognition—measure ofhow recognizable your brand is to consumers or your target market

3. Lead generation

  • Cost per lead—marketing cost of generating a qualified lead
  • Marketing-qualified leads—number of leads generated that are likely to convert
  • Sales-qualified leads—number of leads that are ready for the sales process

4. Social media marketing

  • Social media engagement—number of social media interactions
  • Social media followers—number of followers on social media platforms
  • Social media conversion rate—portion of social media users who complete a desired action, such as signing up for an activity or making a purchase

5. SEO and online content

  • Search traffic—number of organic website visitors (those arriving via search engine results, not paid efforts)
  • Search engine ranking—your company’s ranking in search engine results
  • Unique visits— your content’s number of views
  • Bounce rate—number of website visits in which users visited only one page, divided by the total number of website visits
  • Time spent—average amount of time users spend on a webpage
  • Inbound links (also called backlinks)—number of links to your website on other sites

6. Paid ads

  • Cost per click—cost of your online ads divided by the number of clicks on your ads
  • Click-through rate—number of clicks on your ad divided by the number of times your ad is shown
  • Return on ad spend—revenue generated by ads divided by the cost of the ads

7. Email marketing

  • Email open rate—portion of those opening marketing emails
  • Email click-through rate—portion of those clicking on links in marketing emails

8. Customer satisfaction

  • Customer satisfaction—number of satisfied customers (those giving high satisfaction rating) divided by total number of responses
  • Churn rate—lost customers over a certain period, divided by the number of total new customers
  • Net promoter score—portion of customers very likely to recommend your business or product, minus the portion very unlikely to do so

If I’m a sales rep or manager, I need to pay attention to how well marketing is generating leads and how those leads are moving into the sales funnel.

How do you set marketing KPIs

Setting marketing KPIs starts with your business goals. KPIs should measure both the progress toward the larger goal and the effectiveness of specific marketing tactics to achieve the goal. For example, if your goal is to increase sales, indicators could include:

  • Goal KPI: sales growth over a specific period
  • Tactical KPIs:
    • your social media campaign’s conversion rate
    • return on ad spending
    • return on marketing investment

You can get even more granular to look at how your tactics are doing and how to improve them. For example, you can monitor the bounce rate or time spent on specific webpages to see which content best converts visitors to sales.

“If I’m a sales rep or manager, I need to pay attention to how well marketing is generating leads and how those leads are moving into the sales funnel,” Girolami says. “I want to know the pace at which they’re moving and how many are converting into actual sales.”

Align KPIs with business goals

There’s often a disconnect between overall business goals and the KPIs used to see if they’re being achieved. “Companies often put out a new product and get a lot of traffic and visibility for it, but they don’t know why it’s not translating into sales,” Girolami says.

“More traffic doesn’t necessarily mean success. You need to set KPIs to see where visitors are going, what they’re doing on your site and how that translates into sales. You can check what visitors do once they get to your webpage or what customers think of the product. If you have a high bounce rate, maybe you need to adjust your content. Or maybe customer feedback tells you the product isn’t solving client needs very well. KPIs around each touch point can let you dig deeper into what’s going on.”

You can also add KPIs as part of problem solving, to determine where efforts are falling flat or doing well. “You may need to get even more granular, to identify the specific areas that need improvement,” Girolami says. “For example, if a lead is qualified by marketing and passed on to a sales rep, I want to know if the deal is dying at the quote stage or if the potential customer is passing on the option earlier in the sales pitch.”

Use leading and lagging KPIs

It can be useful to select a mix of lagging and leading KPIs. Lagging indicators tell you what you’re already achieved. Examples include:

  • sales revenue
  • customer retention
  • churn rate

Leading indicators give you an idea of what to expect in the future. These include:

  • social media engagement
  • marketing qualified leads
  • website traffic

Leading KPIs can be warning signs of potential challenges, allowing you to adjust course more quickly. Their downside is that they don’t always predict the future.

Lagging KPIs are important for showing historic performance and are often easier to measure than leading indicators. But past results don’t guarantee future ones. “By the time you realize sales have slumped, it’s already late in the process,” Girolami says. “Leading indicators can give you insight into whether a product is fulfilling its promise and let you make adjustments before your sales slump.”

How do you track marketing KPIs?

There’s no point in having marketing KPIs if you don’t track them and use them well. Once you identify your business goals and the right KPIs to help you achieve them, here are steps you can follow to track and make the best use of these valuable indicators:

1. Establish a baseline and targets

Determine your baseline (current value) for each KPI, then set targets in line with your business goals. It’s important for targets to be realistic and well considered. “The last thing you want to do is throw out a target for a KPI without scrutinizing it,” Girolami says.

“We often hear companies say, ‘I hired a sales manager or a sales rep. They said they had a lot of contacts in my business area, so I gave them six months to reach our sales target. Then the business owner is left wondering why they’ve been going through so many sales reps.”

Too often, the sales rep has been set up for failure because of a poorly thought-out target or a lack of granular KPIs to determine why they’re falling short. “If a sales rep is getting poor leads and he or she can’t close them, then maybe it’s not the sales rep’s fault,” Girolami says.

“There could be a disconnect between what marketing is doing and how sales reps are presenting the product. Sales reps may not be talking about the unique value propositions of the product in the same way, and the expectations and efficacy aren’t proven out. Using KPIs to look at each step in the process can show you where the problem lies.”

2. Implement tracking and monitoring

Next, set up the tracking process to gather data for your suite of KPIs. You’ll need to establish:

  • who will collect the data
  • where data will be recorded or who it should be reported to
  • how often data should be recorded or reported
  • how data should be put into a dashboard or other centralized system
  • who will analyze the data to identify areas of concern, trends and progress toward targets—and how often analysis should be conducted
  • how information will be communicated to your team

It’s essential for your team to review KPIs during regular team meetings. A good opportunity for this is during meetings to talk about progress on implementation of your strategic plan.

KPIs should ideally be pulled together into what Girolami calls “a single source of truth”—a dashboard or other tool that is accessible to employees and can display data from many sources in an easily understood format.

Business or data management software can help. Various applications offer dashboards that compile and report KPIs. Some examples:

3. Learn and adjust

Using KPIs effectively is a long-term learning process, not a one-time effort. Don’t be daunted by complex data and software. You can start by monitoring a few KPIs in a simple way (such as on a spreadsheet), then slowly add more indicators and tools as you learn and become more adept.

“Once you get the system set up, it’s not something you have to keep reinventing. You just have to do it once,” Girolami says.

As your goals evolve, you may find yourself dropping some KPIs and taking on new ones. With more experience, you can use the data to go back and adjust marketing tactics, reprioritize resources and develop your business strategy. “Working with KPIs is a process of continuous improvement and learning for the whole team,” Girolami says.

Next step

Learn how to establish a strong brand, understand your ideal customer and create a compelling buying experience with the free BDC Marketing plan template.

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