Business leaders without a background in marketing or technology may have a problem measuring marketing success. We’ve got the information you need to help.
There are many little white lies small business owners tell themselves when it comes to marketing. Have you told yourself any of these?
There’s the notion that marketing is not a priority for small businesses. Entrepreneurs who adopt this train of thought often justify their belief by arguing they get most of their clientele from word-of-mouth marketing anyway.
Other arguments crop up when it comes to SEO and content marketing. Some business owners have the impression that these marketing subfields are all smoke and mirrors. They may resist “tech-oriented” changes even though upgrades such as CRM could save time while increasing productivity.
Unfortunately, these misnomers may prevent you from enjoying the marketing success you so desperately long for. Keep reading as we take a closer look at the importance of measuring marketing effectiveness.
How to Know If Your Marketing Strategy Is Working
What are among the top questions that business owners have when it comes to marketing? They often ask questions related to how to measure the effectiveness of a digital marketing campaign.
Unfortunately, the answers to these questions don’t often prove self-evident. As a result, many entrepreneurs come to the faulty conclusion that marketing isn’t a major priority for their small businesses. But this conclusion couldn’t be further from the truth.
What about companies that claim they get most of their business by word-of-mouth? Word-of-mouth recommendations are fantastic but don’t stop there.
Why? Because this passive approach to attracting new clients and customers alone won’t sustain your enterprise over the long-haul.
If you want to grow your business and gain a steady stream of clients, you need marketing. What’s more, by diversifying the streams funneling prospects to you, you can rest assured you’ll always have new customers, even when word-of-mouth traffic inevitably fades.
You may also have questions about the effectiveness of strategies such as SEO and content marketing. After all, these buzzwords have trended online ad nauseam for years, making many business owners wonder what gives.
But you’ll never honestly know what marketing has done for you until you learn how to measure your marketing success effectively. With that said, let’s take a closer look at measuring marketing effectiveness through the SMART marketing goals system.
SMART Marketing Goals
The SMART marketing goals system is based on a catchy acronym that will help you remember its basic principles. SMART stands for:
Let’s take a closer look at each of these principles so that you can start crafting definable and measurable marketing outcomes for your business.
Do you feel like you lack clarity regarding what is and isn’t working when it comes to marketing? If so, you’re far from alone.
What’s the best way to remedy this situation? By writing goals that are clear and refer to specific aspects of your business. Be as unambiguous and concise as possible with the outcomes you create.
Why? Because they will provide clarity when it comes to assessing precisely what it is you’ve achieved.
Besides making objectives specific, they also need to be quantifiable. After all, if you don’t know how to measure your achievements, how can you properly assess them? How can you make adjustments over time to see improvements?
What might measurable goals look like? They might include increasing traffic to a landing page by 25 percent or reducing bounce rates by 15 percent. Remember to identify both start and end points so that you can track your company’s track record over time.
You should also make realistic objectives. Why? Because pie in the sky dreams will get you nowhere but discouraged.
Shooting for the impossible sets you up for failure. Instead, focus on incremental growth. Remember that SMART goals must also be achievable goals.
You also want to make sure that the outcomes you select are highly relevant to your business. Otherwise, how will you make this objective a priority? If you don’t know why your company needs to achieve a goal, it’s more than likely not the right one for your business.
Finally, frame your SMART goals within the context of time. By setting a deadline, you remove the temptation to procrastinate. You also infuse your objective with urgency, which will provide the impetus to help you meet this outcome.
How to Measure Marketing Success Using SMART Goals
Now that you know what the SMART goals for digital marketing systems are, let’s drill down into the best metrics for measuring outcomes. There are a handful of terms that you need to know about. They include:
- Return on investment (ROI)
- Cost per win
- Cost per lead
- Conversion rate
- Purchase funnel
- Incremental sales
- Customer lifetime value (CLV)
- Multi-channel funnels and attribution
By getting a handle on these different approaches to measuring your marketing efforts, you’ll better understand the different types of SMART goals possible. We’ll start by taking a look at how to evaluate return on investment.
Return on Investment (ROI)
Of all the terms we’re about to discuss, you’re probably most familiar with return on investment or ROI. That’s because it refers to the sales revenue a campaign earns on every dollar spent.
In other words, if you’ve spent $1,000 on a marketing campaign that brings in $5,000 in profits, this equates to an ROI of 400 percent or $4,000.
ROI represents the best key performance indicator (KPI) for assessing how effective your marketing campaign has been. What’s more, ROI measures the overall quality of the leads you do receive.
Cost Per Win
What does cost per win measure? It assesses the expense associated with each sale. In other words, a $1,000 marketing budget may not prove useful if each sale costs $300.
What’s more, you can use this essential metric to compare various marketing campaigns. Bear in mind that cost per win often gets referred to interchangeably as the sale.
Cost Per Lead
Another way to measure the cost-effectiveness of a marketing campaign is by looking at the cost per lead. The cost per lead metric lets you hone in on each prospect or customer won to your company by a given campaign. That said, it doesn’t allow you to measure the quality of leads as cost per win does.
A marketing campaign’s conversion rate is also known as its goal completion rate. What does conversion rate refer to? It measures the percentage of visitors who’ve converted into customers or leads (a.k.a. your website’s conversion rate).
When you consider conversion along with bounce rate and other behavioral data, you’ll gain priceless insight into the quality of traffic visiting your website.
The conversion rate applies to more than website traffic. But you should also focus on the conversion rate of individual campaigns to gain a better sense of how each marketing effort has performed. Here are six more facts every entrepreneur must know about conversion rate optimization.
You can also measure and analyze your current sales processes with Google Analytics or another tool. This figure provides insights into the leads created by each marketing campaign (e.g., percentages for visits, interactions, leads, sales, conversions).
As you review your purchase funnel information, keep an eye open for drop-off points. These points will provide you with important information about your sales and traffic cycles.
Are you interested in knowing more about incremental sales at your company? This metric measures the contribution of marketing efforts in the context of sales numbers. When you explore this number, you’ll understand how well your marketing activities generate sales.
Customer Lifetime Value (CLV)
Another incredibly valuable metric to watch is your brand’s customer lifetime value. Customer lifetime value is determined by multiplying “average sale per customer” by “average number of times a customer buys annually.”
While CLV can prove time-consuming to compile, it’s well worth it. It remains the best way to see which of your marketing efforts best attract and keep customers. Find out more about how to calculate customer lifetime value.
Multi-Channel Funnels and Attribution
What we’ve talked about up to this point are metrics that let you compare individual marketing campaigns. At some point, though, you’ll want to step back and gain a better sense of your overall marketing efforts. Attribution modeling and multi-channel funnels let you gain this holistic perspective.
Measuring Marketing Effectiveness
We’ve covered plenty of territory in this post on how to evaluate marketing success. Topics have included everything from how to set SMART marketing goals to why you need them.
We’ve also gone over some of the most common metrics business owners use to evaluate marketing campaigns. These metrics can help you craft specific, measurable, attainable, relevant, and time-based objectives.
If you’re ready to dive deeper into how to measure your marketing success, subscribe to get actionable small business tips, including digital marketing courses.