MarTech Series – Marketing Technology Insights
In a digital world, where everything is driven by technology, verifying the effectiveness of the marketing initiatives, with numbers as proof of success, is the foremost priority of a marketing agency. This numbers-driven management method has created a paradigm shift in how marketing agencies can measure success, growth and performance.
In a highly competitive marketing agency landscape, you need to have an undeterred focus on finances, effectiveness of the campaigns, performance and profitability in order to succeed and grow. This article uncovers the top 10 marketing agency metrics that you should measure to improve profitability.
Marketing metrics are the quantitative measures with which marketing agencies track, measure, and analyze their business performance and the effectiveness of their marketing activities. These marketing metrics help agencies constantly monitor the performance of campaigns, finances and business performance, and make improvements wherever necessary.
The primary objectives of a marketing agency would be to build brands, create visibility for those brands, inspire audiences to reach out, generate leads for the clients, communicate with the leads through various channels and push them towards sales conversion. In line with these priorities, marketing agencies track many different marketing metrics to improve the marketing ROI (return on investment) and ensure that their marketing campaigns are effective. Marketing metrics also let agencies make data-driven decisions that can have a significant impact on profitability.
Marketing metrics and marketing agency KPIs are important for agencies because:
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There are many marketing metrics that agencies should track in order to improve profitability. Some of the most important ones include:
One of the most important goals of marketing is to bring quality leads. Marketing agencies spend on digital ads, sponsored social media posts, SEO to bring organic traffic and various other channels to bring quality leads to the clients. The effectiveness of your marketing initiatives to generate leads can be measured by calculating the amount the agency spends on bringing every lead. The more leads you can generate within a given budget the less cost per lead you can achieve. The goal is to generate more leads our of less spending. Ideally, the cost per lead should be less than the gross profit you achieve per sale.
You can calculate cost per lead by dividing the total marketing spend by the total number of leads generated.
For instance, if your marketing spend per month is $500 and the number of leads generated during that month is 20, then
Cost Per Lead = $500/20 = $25
One of the foremost metrics that any business should be measuring is the revenue. Ultimately every profit-making business strives to bring in as much revenue as possible. Keeping track of revenues is indispensable for any business. When it comes to a marketing agency, success can be measured by how much revenue each client brings to your agency for the amount of resources you spend working for them. So, it is crucial to periodically measure revenue per client (RPC).
Measuring Revenue per client:
You can calculate revenue per by dividing the total revenue by the number of clients you have.
RPC = Total Revenue/No. of clients
For instance, if your total annual revenue is $1000000 and you have 20 clients, then
RPC = $1000000/20 = $50,000 per annum
When you are running a marketing agency, you have to make sure that your pricing is perfect. This is crucial for your profitability. Gross margin is one of those crucial marketing agency KPIs that helps you track your profitability.
Measuring gross margin helps you:
You can calculate gross margin by subtracting your cost of goods sold and labor costs from your gross income, which is the revenue that is obtained after paying for pass-through expenditures incurred (such as paying for the advertizing slots in a newspaper, sponsored posts on social media, etc.)
Gross Margin = Gross Income – Cost of goods and labor costs
For instance if your gross income over a month is $100000 and the cost of goods sold and labor costs amount to $45000, then
Gross Margin = $100000 – $45000 = $55,000
Gross margin % = $55,000/$100000 x 100 = 55%
Net profit margin is one of the most important marketing KPIs. Net profit margin helps you measure the profits that your marketing agency has made after paying for all the expenses including material and labor costs, operating expenses, taxes and overhead expenses.
By measuring net profit margin, you can:
You can calculate the net profit margin by dividing the net profit, which is the difference between total revenue and total expenses, by the total revenue.
Net Profit Margin = (Total revenue – total expenses)/total
For instance, if your total revenue per month is $100,000 send your total expenses per month is $75000, then Net profit margin percentage = ($100000 – $75000)/$100000 x 100 = 25%
In the digital world, achieving sales conversion is a challenge. Generating leads, nurturing them and leading them to the sales funnel requires constant effort and marketing communication in the form of sharing knowledge resources, product recommendations, reviews, offers, etc., through various channels. At the same time, marketing efforts need to be targeted and precise. Sending emails to leads that are not interested in even opening the emails costs resources without bringing any tangible benefit to your business. This is where one of the important digital marketing measurement metrics comes into play, namely marketing qualified leads.
Marketing qualified leads are the contacts/leads/ potential customers who are constantly engaged with your marketing initiatives and show interest in the products that you are marketing.
Marketing qualified leads is a metric that gives you an idea about:
Marketing qualified leads – examples
A lead may be considered as a marketing qualified lead when he/she:
You can measure marketing qualified leads only by observing the customer journey and tracking the behavior of leads on your site.
Sales qualified leads are among the digital marketing measurement metrics that are crucial for your marketing agency. Sales qualified leads are similar to marketing qualified leads. However, unlike marketing qualified leads that merely show interest in your marketing communication, the brand and the products that you are marketing, sales qualified leads also show interest in purchasing the products.
By counting the sales qualified leads, you can:
A lead may be considered as a sales qualified lead when he/she:
Sales qualified leads can be identified by observing the customer journey, especially in the sales funnel.
Click through rate is one of the most indispensable digital advertising metrics for marketing agencies. When you run a targeted ad campaign or an email marketing campaign, the most crucial questions to ask are, whether they reached the right targeted audience and whether they created the intended impact. Click through rate is one of the marketing metrics that helps you find answers for those aforementioned questions.
Click through rate is the percentage of clicks/actions that a digital ad or an email marketing campaign generated, against the number of target users it reached.
By calculating click through rate, you can:
You can calculate click through rate by dividing the number of times your digital ad was clicked by the number of times it was displayed.
For instance, if your digital ad was displayed 100 times to various individuals, and if it was clicked 2 times, then your
Click through rate = 2/100 x 100 = 2%
If you sent a marketing email to 1000 contacts, and if 50 of those contacts clicked the links you have provided in the email, then the click through rate of the email campaign is
50/1000 x 100 = 5%
The priorities of marketing include helping clients retain their end customers in the long run and providing a great brand experience to those customers so that they will be happy enough to spread the word positively about the brand. In the digital era, every customer’s experience matters, as it is easy for the customers to publicly review a brand, which can have a great impact on how your target audience as a whole perceives your brand.
Net promoter score is among those few digital marketing measurement metrics that measure customers’ perception of the brands that your marketing agency works with. Net promoter score encompasses key parameters for maintaining brand value, such as customer loyalty, customer satisfaction, customer advocating for the brand, etc.
Net promoter score helps to:
You can measure net promoter score through surveys with a rating scale, filled by the end customers.
In order to calculate net promoter score, you need to subtract the percentage of detractors from the percentage of promoters, discarding the percentage of passives.
For instance, if there are 90% promoters, 3% passives and 7% detractors amongst the respondents of the survey, then the net promoter score would be 90% – 7% = 83%.
When you have an omni-channel marketing strategy, you have to be judicious about how much resources you spend for your marketing efforts through every channel. You can generate leads through various channels such as digital ads, organic search results, social media, etc. However, depending on the nature of the business and where your target audience mostly are, some sources may bring more leads than others. In that case, you may have to focus on that particular channel and find ways to optimize it.
Primary lead sources is one of the marketing metrics that enables you to identify the channel/source that brings you the most number of leads.
By identifying the primary lead sources, you can:
You can track primary lead sources by counting the number of leads that you get through every single channel/source.
Engagement rate is one of the most important marketing KPIs for measuring the impact of your social media marketing initiatives. Social media plays an important role in promoting customer engagement. Engaging with customers and the target audience goes along in managing customer relations and creating a positive outlook for the brand. Measuring engagement rate helps to:
You can calculate the engagement rate by dividing the number of actions taken by the followers, such as reacts to the post, comments, replies to others’ comments, queries, etc., by the number of followers, and multiplying the number by hundred.
For distance, if the social media account of your client brand has got 1000 actions from 2500 followers, then Engagement rate = 1000/2500 x 100 = 40
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Marketing KPIs are the quantitative measures with which marketing agencies track, measure, and analyze their business performance and the effectiveness of their marketing activities
You can evaluate a marketing agency by measuring various business, financial, and sales and marketing metrics periodically.
Marketing agencies measure their success by the performance of their financial KPIs and metrics related to the performance of their marketing campaigns.
Marketing Qualified leads, Cost per lead, customer lifetime value, click through rate, etc.
Bastin Gerald is the CEO and founder of Profit.co, an intuitive cloud-based SaaS platform, integrating OKRs and task management plus 300 other data-driven metrics to help companies successfully implement the model and reach new heights. Profit.co helps companies focus, align and engage teams for optimal productivity and company success.
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