117. How to measure the effectiveness of your marketing

Apr 7, 2021

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This episode comes from a blog post I wrote in December and I'm sharing my highlights here because it's worth revisiting.

Below is the original post shared below (I don't talk about all of it in this episode, though):

When I work with clients, there are an infinite number of data points and layers we could look at to shape our work.

But at the end of the day, only a few high-level KPIs matter most as it relates to measuring the effectiveness of your marketing.

The KPIs that matter most at the end of the day are the following:

1. Number of leads

It could be subscribers, chat inquiries, telephone calls, contact form completions, appointments booked, it doesn’t matter.

All that matters is the total number of people who gave you their contact information and expressed interest in your business.

Subscribers are the grey area, but nobody subscribes to your list without some interest in what you offer, so I call that a lead if it makes sense for your business and is part of your sales funnel.

The main thing is that you captured their contact information.

2. Number of qualified leads

Now that we know the total number of inquiries (whose contact information you collected), we want to figure out how many of those leads are in the buying mode and qualified.

It could mean that they have the money, means, and interest in buying what you have to sell.

The definition is yours to create, but I wouldn’t consider subscribers “qualified” until they express actual buying interest.

3. Number of new clients/customers

Needless to say, this is a critical number.

If you sell products or services at various price points, break down the number of new clients by product/service so you have a better picture of where your sales are coming from.

This will matter more in the next few points, too.

4. Total marketing spend

So how much are we spending on marketing, all-in?

You’ll want to track that closely so you can figure out the next few KPIs.

Break it out by channel/type so you know where you’re spending your money, too.

I track all this in one single spreadsheet, by the way.

4. Cost per lead/qualified lead

Divide the total marketing spend by number of qualified leads in that period and you have your cost per lead.

You can do the same for total leads in general, or just qualified leads depending on what/how you’re measuring.

I mostly care about qualified leads.

5. Cost per new client acquisition

Divide the total marketing spend in that period by the number of new clientsyou signed up.

This is your cost per acquisition. This is the golden number and tells you whether your marketing is profitable or not.

But the only way you’ll know that is if you have a good idea of the next number.

6. Customer lifetime value

It’s crucial to have an idea of your lifetime value (LTV). Even if it’s a rough estimate.

There are too many ways to calculate it in this quick post, but a quick Google search will give you some formulas.

Break it out by service so you have a distinct LTV by service.

7. Weighted average expenses

Let’s say you sell consulting. It’s 80% of your revenue. You also sell a membership, which is 10%, and an eBook, which accounts for another 10% of total revenue.

I like to weight marketing expenses based on the total expected revenue in a business.

In this case, I’d allocate 80% of all marketing spend towards my consulting, 10% towards memberships, and 10% towards eBooks.

Now, I’m able to figure out my approximate cost per lead and cost per acquisition based on the weighted average.

It’s not perfect, but it works really well to give you a glimpse into whether you’re profitably acquiring leads and customers/clients for each service.