As marketing becomes increasingly scientific, it’s absolutely essential to measure key performance indicators (KPI).
In this series of four articles, we will cover nearly 40 different KPIs in three categories: business, marketing, and customer. Some are widely known, others are up and coming.
Some companies will measure all these KPIs, others might only measure a handful. The relevance of each particular KPI depends on your company and its goals. New software technology makes it easier to track the KPIs you need.
In the first article in this series, we’ll cover seven KPIs, in the business category.
Perhaps the most important KPI and most obvious is revenue. But to get real value out of measuring revenue, it’s important to break it up into different tiers. For example, you might measure direct sales versus distributors and dealers. In any event, it’s essential to drill down and look at trends within this KPI. For example, if you find that marketing-generated revenue is growing faster than overall revenue, you should invest more into marketing.
2. Market Share
This key metric helps you understand your market, opportunity, and competition. Most importantly, by revealing your share of the total market, it shows the number of customers that you can potentially acquire. This can be an extremely difficult to measure, and thus is often outsourced to agencies with specific expertise.
3. Revenue Growth Rate
This important measurement tracks revenue year-over-year. The value of tracking this KPI is in discovering why revenue is growing – or not. It can be a harbinger of changes in your market, business, the economy, and more. It can also reveal whether certain marketing campaigns are effective or not.
4. Total Number of Transactions
While this might seem like a relatively unimportant metric, it can reveal underlying business problems that need to be addressed. For example, the number of units sold might be up, while revenue is down. This might reveal a problem with pricing, which led to the negative revenue trend.
5. Average Duration
By gaining understanding into your customers’ purchasing timeframe, you can gain greater understanding into the sales cycle. You can also discover opportunities for marketing and testing. For example, you might find that by increasing the frequency of customer contact, you decrease the average duration between purchases, and thus increase revenue.
6. Average Transaction Value
It’s easy to focus on your best customers, who purchase your most expensive products or multiple products. But analyzing your ATV might reveal they’re only a small percentage of your transactions. This metric can reveal such opportunities, and help you to refocus on better promoting your more expensive products, and thus boosting revenue.
7. Average Product Mix
This KPI reveals how effective you’re selling across product lines. Perhaps you have 10 products, but most customers tend to buy only one. Tracking this KPI helps you to upsell and cross-sell, and thus increase the value of each transaction.
The first step to improving something is to measure it. KPIs are incredibly powerful tools for measuring your marketing, and improving your marketing ROI. This is part one of a four-part series; check back soon for the remaining parts.
What did I miss? What tips do you have on marketing metrics? Please comment below.