In my very first blog post, 5 Steps to Host Your Own Census, I made this huge confession:
“Being a passionate and dedicated Marketer, over the years I have become near obsessed with measuring; measuring results, measuring profitability and of course measuring the target market.”
So as M drew closer in the ‘A-Z of Marketing’ series I was filled with excitement and jotted on copious post-it notes the measurables I wanted to share with you.
Measuring your performance, not just financially, but also your connection with your consumer gives you a reality check. It uncovers the true effectiveness of your strategies and guides you in how to improve your business and stay ahead of the competition.
5 KPI’s (Key Performance Indicators) for your Business
1. ROI (Return On Investment)
In the marketing sense ROI is used to analyse the profit on a campaign you have run, to determine the percent return on investment. The formula is:
This result would mean we had a 62.5% return on our investment. You will need to get a benchmark of what is acceptable for your own business and work to improve over time. A negative ROI means that you have lost money and in that case you would need to question the appropriateness of your strategy.
2. Wholesale Margin
Use this formula to determine the margin you are giving a retailer. Often the wholesale expectation sits between 45-55% of retail depending on the outlet.
Set the RRP you believe the market will accept for your product and then use this formula to calculate the wholesale margin you are giving to your retailer.
GST TIPS: To remove GST divide by 1.1, to add GST multiply by 1.1, to work out the GST component divide by 11.
3. GM (Gross Margin)
Use this formula to determine how much money you will make from each item you sell. As this is Gross Margin, we are only concerned with the costs associated with making the goods or service.
This is the key way we measure if a wholesale price requirement will be profitable for our business. The formula is:
4. CTR (Click Through Rate)
The CTR tells us how many people are clicking through (clicks) our online advertisement as a percentage of the total times our ad was shown (impressions). We measure CTR on the banner and badge advertising we do on websites and also when we undertake pay per click campaigns e.g. Google AdWords, Facebook Ads. The formula is:
The CTR benchmark is different by business and will differ based on whether you operate in a broad or niche category. The Sizmek Benchmarks Report 2014 lists 0.06% as the CTR benchmark on static online ads for Australia & New Zealand.
5. CPV (Cost Per View)
We recommend our clients estimate a CPV when approached with an advertising opportunity. We are all often wondering “Should I advertise in this publication?” and “Is this advertising opportunity worth it? Measuring the CPV helps you to break down the advertising costs and assess them at a leads level. If you could buy a mailing list for $1,000 and it gave you 1,000 names you would say it was a $1 per sales lead. Similarly CPV is calculated with the formula:
You would then evaluate the CPV against how valuable the lead is. Further you may want to take the distribution and cut it down to what you believe is your target market, e.g. the distribution is 20,000 of which 5,000 are your target, say Elderly Couples on the Pension, you then would work out the CPV against just your target:
Your CPV has increased greatly, but with few mediums that get in front of that target and the targets affinity with local newspapers, we would say it is a reasonable CPV.
Check your Web Stats to Monitor Web Traffic
If you have a website (is it even worth asking anymore?) you may feel uncertain at times as to whether anyone visits it, if it’s working as hard as it can for you and most importantly, is it converting browsers into customers.
Your web stats are measuring every interaction browsers are having on your website, all you need to do is logon and analyse them.
The two stats we pay the most attention to are both functions of time. When we undertake a Website Effectiveness Audit, firstly we look at the Bounce Rate. This is given as a percent and tells us how many people landed on our page and clicked off (bounced) straight away. A high bounce rate tells you that the majority of traffic to your site are arriving and deciding instantly you’re not the right fit. Work on decreasing your bounce rate by improving your home page appeal or direct traffic to the page most relevant to them e.g. product page, location page etc.
Dwell Time, is the other time based base measurement we encourage you to look at. Once we remove the people that ‘bounced’, we want to know how long the rest of our traffic stayed for. These are usually presented in bands of time e.g. 0-30 seconds, 31 seconds – 2 minutes etc. Again we want our traffic to stay as long as possible, browse many pages and convert. If you have a very low dwell time, work on engagement with your traffic, add more images, a video, a blog, FAQs, any valuable content that will increase the time your potential consumer spends on your site, getting to know you.
When you set out to measure success you need to remember that success looks different to everyone (and to every business). The key is to benchmark against realistic targets for your business. Focus on how to be more profitable whilst exceeding your customer’s needs and your business will continue to grow.
How to you measure success in your business?