As more and more companies are going digital, the challenges of designing an effective digital strategy and measuring its success have also become more complex. The digital landscape is rapidly changing, so having a powerful digital strategy in place is of paramount importance for businesses. One of the most effective ways to accomplish this task is to identify the right set of key performance indicators (KPIs) that could help monitor business growth, unlock new insights, and aid in fine tuning the digital effort of the company, thereby achieving the business goals.
A KPI is a number or a measurable value that indicates how effectively a company is progressing towards its key business objectives thus helping in channelizing the marketing effort in the right direction. Different companies monitor different KPIs based on their key business goals. Sometimes KPIs are also related to the structure or components of their website (for example, you cannot use ”cart abandonment” metrics on a website where there is no shopping cart).
Here are eight top digital marketing KPIs to better your marketing strategy in 2019:
1. Website Engagement
One of the first places for a customer to learn about a company’s products and services is its website. It is a major contributor in building a brand for the company. This brand or website engagement can be measured using several KPIs, such as:
- Monthly unique visitors
- Monthly returning visitors
- Bounce rate
- Avg. time on site
- Avg. page views
These KPIs are very effective in understanding what your customers are doing on the website, what interests them, how much time they spend on the website, and how many of them are immediately leaving the website, etc. These KPIs lay the foundation for the digital strategy and provide a deeper insight into the customer journey.
2. Traffic by Channel
It is crucial to understand what or who is driving the prospects to your website to ensure an effective digital strategy. It is an important KPI to understand which channels are bringing the bulk of traffic and why. It is the key to finding out which channels excel at bringing traffic and how other channels could be optimized to perform better. There could be multiple channels to drive traffic to the website. Major ones are listed below:
- Organic search
- Paid search
- Mobile traffic
- Video Content
3. Qualified Leads per Month
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A new lead could be any visitor on the site that interacts with your website and indicates some interest in your company’s products or services. Some examples of lead generating activities could be submitting a “Contact Us” form, submitting a question about a product, connecting to your live chat, conducting a local site search, signing up for a free service or subscription, etc. This is an important metric to gauge whether the tactics to acquire new customers is working. It must also be noted that lead generation alone is not enough. It is more useful to know how many of the generated leads are “qualified,” i.e., how many leads have the potential to convert into customers. These qualified leads may be further categorized as follows:
- Marketing Qualified Leads (MQL) – Leads identified by the marketing team as potential customers, which they send to the sales team for further analysis
- Sales Qualified Leads (SQL) – The leads that are vetted by the sales team out of MQLs based on certain criteria and which are deemed ready for the next step in the sales cycle
4. Website Conversion Rate
Traditionally, “conversion rate” meant the percentage of visitors who became paying customers. But the meaning is now more diverse than ever. In the digital world, a conversion rate could be defined as the percentage of visitors who perform a desired activity on the website that contributes towards the accomplishment of the business goals. Hence, calculating a conversion rate depends on what action you want visitors to take. Examples of conversion rates could be a percentage of users buying a product or service on the website, submitting a form, downloading a brochure, clicking a link, or clicking paid advertisements.
5. Customer Acquisition Cost (CAC)
Customer acquisition cost is the total cost incurred by the company to acquire new customer or convince a prospect to buy the company’s product or service. It includes costs incurred for research, marketing, advertising, and manpower. CAC is calculated as follows:
CAC = Total cost (research + marketing + advertising + manpower)/Number of customers acquired
6. Customer Lifetime Value (LTV)
Customer lifetime value indicates the average revenue that a single customer is predicted to generate during the time he remains a customer of the company. Digital marketers use this metric to determine which customer segments are most valuable to the company. Companies can leverage this information and run targeted campaigns for these valuable customers to help retain them.
It is interesting to note that LTV and CAC go hand in hand and are often used together (ratio of LTV:CAC) to gauge whether the money spent on acquiring the customer is earning good dividends. LTV must exceed CAC to generate profit. Typically LTV must be three or more times higher than CAC to ensure that the CAC effort is effective.
7. Social Media Engagement Rate
With the proliferation of social media platforms, the number of users have also surged. Hence, tapping into this segment of users is indispensable. Social media is very effective for generating brand awareness, lead generation, and running campaigns. The user engagement may be measured as a percentage of users who have engaged with company’s content in some way on the social media platform. Interactions may be in the form of likes, shares, comments, replies, etc. It is calculated as:
Engagement rate = (Total number of interactions/Total number of followers)
8. Return on Investment (ROI)
One of the most important and most useful KPIs is return on investment. It answers the fundamental question behind any digital effort, “Is my digital strategy working?” It shows the financial efficiency and viability of a digital marketing campaign and indicates whether the money invested in the marketing activity is turning into profit and generating the desired results, thereby moving the company closer to its business goals. It is also seen as a financial tool to do budget planning and allocation, depending on what’s working and what’s not.
ROI is calculated as follows:
ROI = (Revenue generated from digital effort – investment cost)/Investment cost
ROI can be calculated as a total ROI or as separate ROIs for different marketing activities, such as:
- ROI for lead nurturing (cost per lead by source vs revenue per lead by source)
- ROI for traffic generation
- ROI for social media
No two companies are the same and neither are their digital strategies. Hence, it is very important to choose the right KPIs that align with your company’s goals. Also, it is quite necessary to understand the factors that affect these KPIs to effectively use them as tools to optimize your performance and hit your business goals.