If you answered no, welcome to the majority of business owners!
Not unexpected as we have a lot to be doing running our business, but at some point you need to think about measuring your marketing.
It doesn’t have to be as scary as it sounds
Tracking a few simple metrics can help you gain a deeper understanding of what’s working, what isn’t and where you need to invest your time and budget in order to grow.
1. Website conversion rate (CVR)
If your website is one of your sources of leads then start by understanding how many site visitors you get daily, weekly and monthly. You can do this with Google Analytics being installed on your website (ask your web developer/designer to give you access).
By knowing how much traffic you’re getting, you can then understand what your conversion rate is. This means how many people are calling or emailing you from visiting your website.
A healthy conversion rate for a website for a B2B business is between 5-10%. But without knowing how many visits your website gets, and how many enquiries you get – you don’t know how effective it is in driving enquiries, and as a result – you can’t improve it.
2. Cost per lead (CPL)
By understanding the above metric – website conversion rate, you can then start to work out your cost per lead (CPL). This is especially important if you run any paid marketing activities. Simply put, this is the amount you spend on attracting traffic to your website, and the number of leads you get.
For instance, if you spend £500 on marketing your website, and you get 10 leads, then that’s a cost of £50 per lead. Again, without knowing this simple information, how can you expect to improve it?
3. Cost per acquisition (CPA = cost of acquiring a new customer)
So, with a better understanding of how much it costs to get a new lead, what about the cost of actually acquiring a new customer? Although we can get really scientific and precise about this, broadly speaking this is the total amount you spend on marketing your business divided by the number of actual leads you convert into a new client.
So, for instance if you spend a total of £2000 a month on marketing, and as a result you sign four new clients then the cost of acquiring a new customer is £500.
4. Lifetime value of a customer (LTV)
The final metric that I believe is a no brainer to understand is – the lifetime value of a customer to your business. This is different to the value of their first purchase, but we want to know on average how much they will spend on average during their lifespan with your business.
This is important to understand as without knowing this figure, how do you know how much to spend on new client acquisition in order to remain profitable? For instance, if your average customer spend £1000 over their lifetime with you, and you’re spending £500 to acquire a new customer, then good news… you’re marketing is profitable!
But, if you’re spending more than £1000 to acquire a new customer, you might need to rethink things.
“If it’s not being measured, it’s not being managed”
My final thoughts on this are with reference to the quote above. As a business owners it’s your responsibility to understand the basic numbers that influence whether your business is growing profitably or slowly regressing with unprofitable marketing.