Marketing Performance Measurement: Is My Marketing Working?

Mar 12, 2024 | Commentary, Data & Analytics, Strategy

In the ever-evolving landscape of marketing, one question reigns supreme: Is my marketing actually working? It’s a query that plagues businesses of all sizes, yet the answer lies in the data. It’s essential to delve into the metrics of customer acquisition cost (CAC) and customer lifetime value (CLV). By comparing these figures over time, you can gain valuable insights into the sustainability and profitability of your marketing strategies.

Comparing Customer Acquisition Cost vs. Customer Lifetime Value

Here’s what you need to know to calculate these crucial metrics:

  1. Set Timeframe: Begin by selecting a specific timeframe for your analysis, whether it’s a month, quarter, year, or the entirety of your business operations.
  2. Marketing and Sales Costs: Gather data on the total costs incurred for marketing and sales efforts during the chosen period. This would include money and resource time spent.
  3. Number of New Customers: Determine the number of new customers acquired within the specified timeframe.
  4. Customer Lifetime Value: Calculate the average revenue generated per customer during the selected period.

With these data points in hand, you can now calculate your Customer Acquisition Cost (CAC) by dividing the total costs (marketing + sales) by the number of new customers acquired. This figure provides insights into the investment required to acquire each new customer.

Next, compare your CAC against the Customer Lifetime Value (CLV) to assess the profitability of your efforts. The CLV represents the total revenue generated from a customer over their entire relationship with your business. If your CAC exceeds your CLV, it may indicate that your marketing efforts are not yielding sufficient returns.

By conducting this analysis regularly and adjusting your strategies accordingly, you can optimize your marketing initiatives to maximize profitability and drive sustainable growth. Remember, the key lies in continuously monitoring and refining your approach to ensure long-term success.

Video Transcription

 The question of is my marketing actually working? It’s really kind of a simple calculation. What is the cost that you have as it relates to marketing and sales and divide that by the customers that you’re acquiring over a given period of time.  So the idea is that to know if your marketing is working, you have to compare it to something. You can say, if you just started in one month and you’ve got kind of your initial results, well, that’s not, you’re not going to have anything to compare it to because you haven’t had a formal digital marketing approach or any marketing approach. Prior to that,  if you are starting to institute a digital marketing approach or a digital marketing strategy, and you’re engaging in new platforms well, then now you need to be measuring that customer acquisition cost and then measuring that over time, comparing it month over month. You know, quarter over quarter, year over year, that kind of thing. And that’s when you’re going to get a sense of, is my marketing working or not? Because ultimately if your customer acquisition cost is well beyond the kind of revenue that’s coming in, well, then it’s not a viable investment for your business. So that is kind of the, the, the key metric to understanding is my marketing working. Now you can get way more nuanced. You can say where are the leads coming from? Um, where’s the new business, where the sales coming from, how are we tracking and analyzing each individual channel and source? That’s where it gets a little bit more complicated and you can start to understand, okay, well, our conversion rates potentially are much higher on this channel than on this channel. But again, it all starts with that, that investing in the digital marketing strategy and digital marketing efforts.  If you’re doing kind of some things here and there. You’re not necessarily going to get the data set that’s going to be something that you can really rely on.  What you need is at least about a six month timeframe of executing digital marketing tactics and strategies, um, or any, any marketing traditional as well, but running that for at least six months to get a data set where you can actually analyze it and determine is, is your marketing working.

The Importance of Time & Consistency

Consistency in digital marketing is not merely a matter of brand presence; it’s a fundamental pillar for generating actionable insights and understanding performance metrics effectively. One of the primary reasons consistency holds such importance is its role in providing a robust and reliable data set for analysis.

When marketing efforts are inconsistent or sporadic, the data collected becomes fragmented and unreliable. Without a consistent stream of data points, it becomes challenging to identify trends, gauge effectiveness, or make informed decisions.

Whether it’s website traffic, engagement rates, conversion rates, or customer acquisition costs, having a consistent data stream allows for more meaningful analysis and comparison over time.

By analyzing data collected over consistent intervals, marketers can pinpoint correlations between different marketing activities and their impact on key performance indicators (KPIs). This deeper understanding of how various tactics and strategies influence outcomes empowers marketers to optimize their efforts for better results.

Channel-Specific Marketing Performance Measurement

Delving deeper into channel-specific tracking and analysis enables businesses to pinpoint the most effective channels for customer acquisition. Whether it’s social media, email campaigns, SEO efforts, pay-per-click advertising, or content marketing, understanding the performance of each channel is paramount.

For instance, social media platforms offer robust analytics dashboards that provide insights into audience demographics, engagement metrics, and conversion rates. By monitoring key performance indicators (KPIs) such as click-through rates, conversion rates, and return on ad spend (ROAS), businesses can refine their social media strategies to maximize ROI.

Similarly, email marketing campaigns can be tracked using metrics such as open rates, click-through rates, and conversion rates. By segmenting email lists based on customer demographics, preferences, and behaviors, businesses can deliver targeted messages that resonate with their audience, driving higher engagement and conversions.

Search engine optimization (SEO) efforts can be tracked using tools such as Google Analytics and Google Search Console. By monitoring organic traffic, keyword rankings, and inbound links, businesses can assess the effectiveness of their SEO strategies and identify areas for improvement.

Pay-per-click (PPC) advertising campaigns can be tracked using platforms such as Google Ads, Meta Ads, and Bing Ads. By analyzing metrics such as click-through rates, conversion rates, and cost per acquisition (CPA), businesses can optimize their PPC campaigns to increase visibility, drive targeted traffic, and maximize ROI.

Yet, achieving actionable insights requires more than sporadic marketing efforts. To unlock a comprehensive data set, it’s imperative to commit to a sustained marketing strategy for at least six months. Whether you’re venturing into digital or traditional marketing realms, this timeframe provides the necessary depth for meaningful analysis and informed decision-making.

In essence, measuring marketing performance isn’t just about crunching numbers; it’s about deciphering the story they tell. By diligently monitoring customer acquisition costs, tracking lead sources, and analyzing conversion rates, businesses can navigate the complex terrain of marketing with confidence and clarity.