A Step-by-Step Guide to Identifying KPIs for Your Startup’s Marketing Strategy
Marketing is not a one size fits all strategy, and in fact, one way of measuring performance could work extremely well for one business and not really tell anything important for another. In order to measure the success of your marketing strategy you need to identify the key performance indicators that work the best for your startup.
Background on Key Performance Indicators
In case you are sitting there thinking, “what is a key performance indicator anyway?” we want to give you some background information that will help you as you get started. A key performance indicator (here on out as a “KPI”) is a value that can be measured in order to indicate success of different goals and targets you want to achieve. There are really two types of KPI’s that are measured” (1) high level KPI’s look at large scale business targets and may demonstrate the overall success of the business within the industry (2) low level KPI’s may focus on one specific area or department—for example, measuring the success of the sales department, quarterly.
Step One: High or Low
Knowing this background information, you need to think about KPI’s both in terms of what is important and relevant in your industry and also whether you are looking to measure a high to low objective. Are you looking to measure success in your industry against your immediate competition (a high level KPI) or are you trying to measure whether you direct sales or digital marketing department is driving the most business (a low level KPI). Most marketing strategy objectives are going to look at low level KPI’s—as do most of the steps that follow—however, it is important to not forget entirely about high level KPI’s as there are certainly times that you are going to have big picture measurements in mind.
Step Two: Consider Your Sales
While there are many ways to be successful as a marketer, the goal most businesses have in mind when they focus attention on marketing strategy is sales. In other words, one of the most important things to consider when you start analyzing your KPI’s is how much your inbound marketing efforts are driving sales. This is not only helpful in terms of understanding profit but also how to redistribute your marketing dollars and make your efforts as productive as possible. Impact Branding and Design shared that you can calculate your sales KPI with the following formula:
(Total sales for the year) – (Total revenue from customers acquired through inbound marketing)
Step Three: Figure Out What Gaining Customers Costs You
You want to calculate both your customer acquisition costs for both your inbound and outbound marketing as soon as possible. In order to figure out how much it is costing you to turn a lead into a sale you need to divide the marketing department’s monthly budget with the amount of new customers acquired that month. So for example, if your marketing department had a budget of $3000 and you gained 30 new customers from their efforts, then each customer cost $100 to become a sale. This also is a great financial component to understand how you would need to increase or redistribute your marketing budget in order to increase the number of leads you are converting to sales.
Step Four: What is the Lifetime Value of Your Customer?
Once you have figured out lead acquisition marketing costs, it is important to understand the lifetime value of a customer. As Neil Patel, digital marketing expert and contributor at Huffington Post points, out “If it costs $100 to acquire a customer who only spends a lifetime value of $50, there’s a clear problem in your business model that needs to be addressed.” For startups it is incredibly important to understand how your revenue per customer is likely to play out so that you are not spending more on achieving customer conversions than they are actually worth.
Step Five: Gain a Good Understanding of Your Website Traffic
For digital marketers in every industry, web traffic tells an important story to evaluate performance. If you do not understand your web traffic (and understand it well) then there is absolutely no way you are going to be able to understand the effectiveness of your digital marketing efforts. There are a lot of different aspects of website traffic that you can monitor through Google Analytics, but below are a few to familiarize yourself with right off the bat:
- Website Traffic (and demographics, like whether you get more mobile or desktop visitors)
- Number of Sessions
- Session Duration
- # of Page Views
- Bounce Rate
- Information on Users (% of returning users, etc)
Step Six: Understand Organic Vs. Paid Traffic
If you’ve been working on your SEO efforts for a while and are driving a ton of organic traffic, that is something to celebrate, but it is also incredibly important to understand paid traffic so that you can make your marketing budget as effective as possible. If the majority of your traffic is coming from PPC funds, then the last thing you want to do is go slashing that budget. With organic traffic, you clearly spend less acquiring customers as they are finding you through typical search rankings (rather than ads), so it is very important to monitor how your SEO and organic traffic are working so that you can constantly be revising and improving your SEO strategy.
Step Seven: Understand Social Media and Email Marketing Traffic
Do you find that your email marketing campaigns are just not performing well? Or that paying for ads on Facebook has not yielded nearly the amount of leads that your PPC search advertisements are? Social media and email marketing are integral components of digital marketing efforts and it is important to understand how your audience is impacted by these efforts. Measuring the performance of these, especially as a startup, will help you to know what you need to adjust, revise, or completely change direction on as you start out.
These seven steps are a great way to start identifying your star-ups most important KPI’s so that you can be sure you are measuring success and adjusting your marketing strategy as new information presents itself.
Which of these KPI’s does your startup (or business) find the most useful? Let us know in the comments section below!
Image Credit: darbyconsulting.com, vtldesign.com