Marketing analytics is necessary for businesses to remain competitive and accomplish commercial goals in today’s data-driven world. By utilizing abundant available information, companies can make informed decisions, optimize their marketing strategies, and ultimately stimulate growth.
This article will give you a peek into marketing content from a business administration perspective. You’ll learn the importance of marketing analytics and how companies can choose the ones that are relevant to their business and find examples of the primary metrics most marketers want to track for business success.
Key significance of marketing analytics in today’s businesses
One of the ways businesses understand their growth and shortcomings is through data from marketing metrics. But aside from this, there are other perks to gaining insights from your business’s data.
Align marketing strategy with business goals
Marketing analytics helps businesses evaluate how their marketing efforts align with their overarching goals. By analyzing conversion rates, customer acquisition cost (CAC), and return on ad spend (ROAS), companies can identify optimization opportunities, modify their marketing strategies, and allocate resources where they are most needed. For instance, a company seeking to increase its market share can use marketing analytics to evaluate the success of various campaigns and modify its strategies to prioritize campaigns with the highest return on investment (ROI).
Identifying and targeting customer segments
Marketing metrics allow businesses to understand their customers through metrics like customer lifetime value (CLV), average order value (AOV), and engagement rates (e.g., open rates and click-through rates). This information can be used to develop marketing campaigns that resonate with specific customer segments, resulting in increased engagement and conversion rates.
Focus on successful marketing channels
Businesses determine which channels and strategies are most effective at generating their desired outcomes through data. They do this by analyzing metrics like return on advertising spend (ROAS), cost per acquisition (CPA), and cost per click (CPC). This enables them to allocate resources and budget more effectively and to avoid investing time in unproductive channels (or, in some cases, reconfigure their strategy on some channels).
For instance, a company may determine that organic search engine optimization (SEO) is more effective at generating leads than paid marketing and alter its strategy accordingly to invest more in organic marketing.
Understand traffic volume & business visibility
Marketing analytics lets businesses track website traffic, click-through rates, and conversions. This information is essential as it shows the effectiveness of a company’s reach to its target audience through its marketing efforts. It also helps the business determine the location of most visitors and then decide if they fit into their ideal customer persona (ICP). These factors inform them whether they should revise their strategies or continue their marketing efforts on existing channels.
Track customer engagement
Metrics such as content engagement rates (likes, shares, and comments), time on site, and bounce rates provide valuable insight into the content assets that resonate with the target audience. This can increase customer satisfaction and engagement. For instance, a high bounce rate on the landing page may indicate that the company’s positioning is poor and must be revisited to attract visitors.
Identify new market trends & opportunities
Marketing analytics can assist businesses in identifying emerging trends, shifts in consumer behavior, and new market opportunities. Monitoring metrics such as search queries and trends, social media sentiment, and competitor performance reveal these valuable insights. There are several SEO tools for accomplishing these tasks, and these metrics allow companies to reevaluate their strategies and capitalize on new growth opportunities.
Using metrics to reduce business risks
Marketing metrics provide companies with data-driven insights to guide their decisions and reduce marketing mistakes. Businesses can make more informed decisions regarding resource allocation and strategy by analyzing the efficacy of marketing initiatives using metrics such as ROI, ROAS, and customer retention rates. For instance, a company might discontinue a poorly performing advertising campaign and redirect its marketing budget to a more effective channel, such as influencer partnerships or content marketing.
How to identify the right metrics for your business
Companies must choose the appropriate marketing metrics to accurately measure the successes or shortcomings of their marketing initiatives. Some of the ways to identify them include:
- Align metrics with organizational goals
Businesses must first define their goals before they can align metrics with business objectives. Then, they can identify the marketing activities that could help achieve those goals and choose the appropriate metrics to track. A company aiming to increase brand awareness may concentrate on metrics such as website traffic, social media impressions, and PR coverage.
- Identify actionable analytics
Metrics that can directly inform marketing decisions and enhance marketing performance are actionable. To identify actionable metrics, businesses must consider which metrics directly impact the desired outcomes. For example, if a company wants to increase its online sales, metrics such as conversion rate, cost per acquisition, and average order value are actionable because they can be used to optimize marketing campaigns for better results.
- Monitor short- and long-term metrics
Monitoring a combination of short-term and long-term metrics enables businesses to evaluate their marketing performance across various time frames. Short-term metrics could be increasing returns on ads spent or getting a specific number of clicks within a time frame. Long-term metrics include customer lifetime value, customer retention, and brand equity. By balancing these metrics, businesses can better understand their marketing performance.
Common marketing KPI examples
KPI is a key performance indicator synonymous with marketing analytics or metrics. This variety of data provides insight into the marketing efficacy of businesses. Among the most significant are the following:
- Return on investment (ROI)
This crucial marketing metric allows businesses to evaluate the efficacy and profitability of their marketing campaigns. By calculating return on investment, companies can determine which marketing strategies generate the highest returns and allocate resources accordingly.
Consider, for instance, a company that invests in paid and organic marketing. It needs to track the costs associated with each campaign and attribute the resulting revenue to the respective marketing efforts to determine the ROI of each strategy.
For paid marketing ROI: Consider that company HB invests $5,000 in a Google Ads campaign targeting a specific product. Throughout the campaign, sales of this product generate $20,000 in revenue. To calculate ROI, they would use the formula below:
ROI = (Revenue – Campaign Cost) / Campaign Cost
ROI = ($20,000 – $5,000) / $5,000
ROI = 300%
In this instance, the company’s paid marketing efforts yielded a 300% ROI, which shows that the campaign was highly profitable and effective.
For organic marketing: Consider that a company invests $2,000 in creating and promoting high-quality blog content over one month. (Emphasis on promoting because most times, organic marketing doesn’t convert in the short term because it takes a while to rank but it can be productive in the short term through active content promotion). During that time, the organic marketing efforts generated $8,000 in revenue from blog traffic-driven sales. The ROI of organic marketing can be determined as follows:
ROI = (Revenue – Campaign Cost) / Campaign Cost
ROI = ($8,000 – $2,000) / $2,000
ROI = 300%
Here, the company’s organic marketing efforts also yielded a 300% ROI, which shows that their content creation and promotion investment were fruitful in generating sales. By tracking and analyzing ROI, businesses can optimize their marketing expenses, make more informed decisions about where to invest their resources, and ultimately create greater profits and development.
- Customer acquisition cost (CAC)
CAC is the entire cost of acquiring a customer, which includes marketing and sales costs. It plays a significant role in determining the efficacy of various marketing channels to acquire new customers. It informs the business of the marketing channels it should prioritize to acquire more customers at a lower cost.
Paid channels, such as Google Ads, Instagram ads, and influencer marketing, are typically costlier than organic channels, like blogging and social media marketing. This is because paid channels require more financial investment for ad placements and potential collaboration fees while organic channels rely on their own content.
Consider a business that utilizes both paid and organic channels to acquire customers. Due to the costs associated with bidding on keywords and ad placements, the company might discover that its CAC for paid search advertising is $120 per customer.
However, their organic search CAC driven by content marketing and search engine optimization (SEO) could be as low as $60 per customer. The reduced cost of the organic channel can be attributed to the fact that the company’s investment in content creation and promotion is cheaper, has a longer-lasting impact, and can continue generating traffic without additional advertising expenditure.
- Customer lifetime value (CLV)
Companies can calculate CLV by approximating the average lifetime revenue of a customer, multiplying this figure by the average customer lifespan, and deducting the initial customer acquisition cost.
It is a crucial metric that enables businesses to comprehend the long-term value of their consumers, enabling them to make informed decisions regarding customer acquisition, retention, and marketing strategies as a whole. To calculate CLV, businesses must consider multiple factors, such as revenue generation, consumer lifetime, and acquisition costs.
CLV tracking aids in determining how much should be spent on acquiring new customers and retaining existing ones. A focus on increasing CLV can encourage businesses to improve their customer experience, build customer loyalty programs, and establish long-lasting relationships that foster sustainable growth and profit.
- SQLs to conversion rates
Sales qualified leads (SQLs) are prospective customers who have demonstrated interest in a company’s product or service and are deemed more likely to become paying customers. Companies could generate SQLs through gated content downloads, newsletter sign-ups, whitepaper or eBook downloads, and demo requests, all designed to engage prospects and encourage them to take the desired action.
Explaining the sales funnel is important when discussing SQLs and conversion rates. A sales funnel depicts a prospect’s path from being a lead to becoming a paying customer. It includes stages such as awareness, consideration, and decision-making. Conversion occurs when SQL becomes a paying customer.
By monitoring the SQL-to-conversion rate, businesses can identify any sales funnel bottlenecks or inefficiencies and optimize their lead nurturing processes. For instance, a low SQL-to-paying customer conversion rate may indicate that the sales team’s approach requires improvement or that the leads are unqualified. In such situations, the marketing team can reevaluate its lead generation strategy, concentrating on targeting more relevant prospects and enhancing the qualification procedure.
- Marketing qualified leads (MQLs)
MQLs are prospective consumers with sufficient interest in a company’s products or services. Businesses can generate MQLs through engagement from content marketing, social media, online advertising, email marketing, and webinar attendance. Tracking MQLs helps them evaluate the efficacy of their lead generation efforts and identify optimization opportunities.
It also allows them to track the number of MQLs generated and the sources that produce the highest-quality leads. It enables them to optimize their marketing strategies and allocate more resources to those channels to boost business results. For instance, if they get more MQLs from their active engagement on LinkedIn, they may incentivize employees to talk about the company on LinkedIn to improve social marketing.
- Customer retention
Customer retention reflects a company’s capacity to retain and expand its customer base. It refers to the number of consumers who continue to do business with a company over a specified time frame. This is monitored by companies in the following ways:
Cohort analysis: This system groups customers based on specific periods, such as the date of their first purchase or subscription. Businesses can identify patterns and tendencies that influence consumer retention rates by analyzing the behavior of various cohorts.
Retention rates calculation: Calculating the retention rate involves dividing the number of customers retained at the end of a period by the total number of customers at the start, then multiplying the result by 100.
Tracking customer touchpoints: By monitoring customer touchpoints and interactions across multiple channels, including email marketing, social media, and customer support, businesses can gain insight into the factors influencing customer retention. This data can be used to optimize communication strategies and enhance the customer experience.
Tracking customer retention as a marketing metric helps businesses learn how to retain customers more effectively, increase revenue, gain customer insights (via feedback on their products), and enhance their brand reputation.
- Unique website visitors/traffic
Unique website visitors are the number of unique visitors to a website during a given time frame. Monitoring unique website traffic helps businesses determine the efficacy of their online presence and marketing initiatives in attracting potential consumers. This allows businesses and marketing leaders to determine whether the campaign was successful. Any business can verify this using SEO analytics tools, such as Ahrefs, Semrush, SimilarWeb, and others.
- Sales revenue
The revenue generated from selling a company’s products or services is its sales revenue. Monitoring sales revenue as a marketing KPI enables businesses to evaluate the efficacy of their marketing efforts and identify which strategies contribute most to revenue growth.
To optimize its marketing mix, a company may analyze sales revenue from various marketing channels, such as email marketing or paid advertising. This allows the company to determine which initiatives to prioritize to boost its overall business growth.
- Churn rate
The churn rate is the proportion of consumers who cease doing business with a company within a given time frame. A high churn rate shows that users are dissatisfied with a product or service and the business may need to investigate potential causes. Potential causes could be a sudden hike in the price of the product, bad customer support systems, or poor onboarding processes.
Marketers can calculate the churn rate by dividing the number of customers lost during a given period by the total number of customers at the start and then multiplying the result by 100. This calculation enables businesses to monitor their churn rate and identify trends that may impact customer retention and satisfaction.
What’s the goal? The objective is to enable businesses to evaluate the efficiency of their customer retention strategies and optimize their efforts using data-driven decisions. A decreasing churn rate can indicate the success of these initiatives, whereas a growing churn rate may indicate the need to adjust the marketing strategy.
- Bounce rate
Bounce rate is the proportion of visitors to a website who leave after viewing only one page. A high bounce rate may suggest that a website’s content could be more engaging or that the user experience could be better. It may also indicate that visitors are unable to find what they are looking for on the page.
By monitoring bounce rates, companies can identify improvement areas and adjust their website’s design and content to engage visitors more effectively.
Professional development
We’ve seen that understanding the significance of data is crucial for developing specialized marketing expertise, which in turn largely impacts the overall performance of the business. For this reason, professionals from varied business environments might desire to gain an advanced qualification that will expand their knowledge on every aspect of a business. For example, the MBA online program offered by St. Bonaventure University showcases a wholesome curriculum that prepares students to tackle real challenges in the business world. The program structure allows the students to customize their education by providing a range of electives to choose from. Fully accredited courses like this can enhance the business competencies of professionals and help them stay on top of business trends.
Conclusion
Businesses can gain valuable insights into the performance of their marketing strategies, identify caveats, and make rational decisions based on the metrics. Marketing metrics aid businesses in identifying new industry trends to capitalize on. The management can also encourage their employees to gain relevant qualifications that will contribute to the success of the business. Overall, business analytics empower their ability to remain viable, profitable, and influential in the industry and their category.
To learn more on how retail stores can use analytics to better connect with their consumers, please see the resource below.
Infographic provided by Riveron – expert accounting and finance functions