Inbound marketing focusses on positively impacting people and businesses by offering a positive experience. A key component of a successful inbound marketing campaign is the measurement. Inbound marketing metrics are important because they tell you everything you need to know about prospects’ purchase decisions throughout the customer journey. With metrics, You can:
• Identify what’s working or not working
• Find ways to enhance
• Make data-driven decisions to boost performance in underperforming areas
Should you measure all metrics?
Measuring inbound marketing can be a challenge due to the staggering number of metrics available for each channel. Metrics like traffic, follows, downloads, etcetera, are good to know about, but these hardly ever resonate with executive teams. Executive teams are more concerned with ROI. If your inbound marketing metrics don’t show bottom-line impact, it is likely that your campaigns will lack credibility in the eyes of your CEO and CFO.
Below are inbound marketing metrics that will help you demonstrate how campaign spending is leading to increased customer acquisition and more revenue.
1. Cost of customer acquisition
This is the average cost of acquiring a new customer for a given period or campaign. CAC is calculated as follows:
Sales and marketing expenses/ number of new customers acquired= CAC
An effective campaign should acquire a lot of customers with as little budget as possible. If the average customer acquisition cost is high, it means there’s a problem with your campaign.
2. The ratio of Customer Lifetime Value to CAC (LTV: CAC)
This metric helps to justify marketing spend by predicting the future value that will be derived from customers. To arrive at this ratio, you must first calculate lifetime value and customer acquisition separately. It can be difficult to determine CLV if data is not integrated.
LTV= (Revenue from a customer for a given period – gross margin)/ churn percentage
Once you have your LTV, calculate the LTV: CAC ratio. For instance, if LTV is $50,000 and CAC is $1000, ratio of LTV:CAC= $50000:1000= 5:1
A higher LTV: CAC ratio implies that your marketing and sales efforts are successful. It also means you are generating enough to invest in more marketing efforts.
3. Period to recover CAC
This metric shows the time it will take to earn back the investment spent on your campaign. Calculate this metric as follows:
CAC recovery period= CAC/Customer net revenue per month
For example, if CAC is $1000 and revenue is $100. It will take 10 months to recoup your costs ($10,00/100=10 months).
This metric is important because it tells you how long it will take before you can start earning off your customers. You should aim for less than one year.
4. Impact of marketing influence on Customer acquisition percentage
This metric demonstrates the impact your inbound marketing efforts have in lead generation and closing sales deals. It is easier to get buy-in for your marketing campaigns if you can demonstrate that they contribute to the sales process. You can calculate this metric as follows:
Customer % acquired through marketing= New customers from marketing interactions/ All new customers
For example, if you acquired 1000 total new customers in a given month and marketing interacted with 600 of them during the same period, then 60% is marketing-originated. This means marketing contributed to 60% of your new customer base.
As mentioned, the metrics above are not the only ones, but they are some of the most important metrics that demonstrate the impact on the bottom line. With the above metrics, you can present campaign results in a way that resonates with decision makers. This doesn’t mean you shouldn’t track “softer” metrics such as traffic and social shares. Soft metrics are important for keeping your team “on toes” on a day-to-day basis, but they do not justify more investment spend for future marketing campaigns.