As modern marketers, we all tend to focus on measuring. Metrics are becoming more important to marketers than Mad Men -style booze-infused meetings and hand-drawn concept boards. But are we measuring the right metrics?
Here, we are presenting two vital metrics that are not properly measured in most organizations. The first one will solve most of your budgeting problems, while the second one is one of the most important measurements for content marketing efforts.
BTW, that coffee from Starbucks you were looking at is actually worth $14 000 a cup. That’s the price Starbucks can pay to get you to purchase your first cup of coffee and still be profitable. Here’s why:
1) Customer Lifetime Value
Customer Lifetime Value might be the single most important marketing metric to measure and it’s practically impossible to maximize your marketing efforts without taking it into consideration. Customer Lifetime Value measures the projected revenue that a customer generates during their lifetime.
There are several ways for calculating the Lifetime Value
. One of the most popular equations is: (average purchase value X average amount of purchase) x profit margin / (1 – retention rate)
How to use this information?
Marketer A knows that his average purchase value is $500 that leaves him with a net profit of $50. He also knows that 0.5% of his visitors will convert into clients. Therefore he is willing to spend a maximum of $0.25 ($50*0.5%) per click.
Marketer B has calculated customer lifetime value a bit further and has the same information as A, but is also aware that his clients are making four orders per year on average and that his customer retention rate is 60%.
With that information, he is able to calculate a customer lifetime value of:
($500*4)*0.1/(1-60%) = $500
Therefore, he would be breaking even by paying $2.5 per click to acquire a new customer.
In this example, Marketer B would be able to gain market share from Marketer A by aggressively paying higher prices for clicks. Marketer B is also in better shape to optimize their ROI for marketing activities because he knows the true value of a new customer.
2) Gained organic links
Gained organic links measure the number of links acquired for a site, page or a piece of content without actively participating in link building activities. This is a great KPI for tracking the effectiveness of produced content.
The easiest way to track it is to keep track of the links that your organization is actively building and then deducting the total number of those backlinks from the total amount of all backlinks pointing to that piece of content. This is often a better measurement for engagement than the number of social shares, as the barrier of linking is much higher than the barrier of sharing. Backlinks are also often more effective at bringing relevant traffic to the site compared to social shares.
What are the most under-utilized marketing metrics in your opinion? Post a comment below!