Posted by IndustryArchive Admin on 01/25/2017 KPI Metrics

Do You Know the KPI Marketing Metrics CEOs Care About?

By: Robert Hennessey

Do You Know the KPI Marketing Metrics CEOs Care About?

KPI marketing metrics that concern CEOs are important if you are interested in proving the ROI of your marketing efforts. 

Marketing metrics three major areas of performance are: 

1.  new customers (Sales)

2.  lower customer acquisition costs (Cost Reduction)

3.  higher customer lifetime values (Determinant of
     Marketing Spend)

Inundated with a never-ending list of tactical metrics the world of Internet marketing is now a challenging landscape to discern what's important. You know things like; email opens, email click-through rates, the number of downloads from landing pages, website visits, time spent and the number of pages viewed, and social media mentions and shares. However, none of these metrics measures a marketing organization's value to the company that is the only thing that the Chief Executive Officer is interested in assessing.

Given the assumption that active marketing teams have a direct impact on a corporation's bottom line, many CEOs are critical about the lack of focus marketers have in evaluating the relevant metrics that drive sales and profits.

This disconnect is the skepticism that many top executives have regarding a marketing team's ability to focus on what matters to your bosses because of an over-emphasis on marketing regarding their fixation on tactical marketing metrics.

Today top executives, expect reports on data that deals with the total cost of the marketing effort, revenue, overhead, salaries, and the cost to acquire customers. Now let's review six KPI marketing metrics CEOs want marketing to report.

Customer Acquisition Cost (CAC)

CAC is a KPI it is employed to calculate the cost a company spends to acquire new clients.

Benefit: The goal is to maintain the CAC at a reasonably small number. If CAC number rises not only does it mean that each new customer acquired is increasing in cost, but it could indicate organic sales or marketing effectiveness issues.

Marketing as a Percentage of Customer Acquisitions Cost

Another KPI is the Marketing Percentage of Customer Acquisition Cost. It isolates the marketing component of the total customer acquisition cost and expresses it as a percentage of the total customer acquisition cost number.

Benefit: Indicator of marketing team's productivity and spend impact on overall CAC. Increases in M Percentage-CAC could point to any number of causes:

  • Increases in marketing spend 
  • A payout of lower sales commissions and bonuses due to sales team underperformance 
  • Marketing team overhead is too high, or spending is too robust

Ratio of Customer Lifetime Value to CAC (LTV to CAC Ratio)

Knowing the lifetime value of your clients is critical to the decision making for overall business success. Understanding the relationship of customer lifetime value to CAC is a KPI marketing metric that compares the ratio of the total lifetime value a client to the company to the cost to acquire a new customer.

Benefit: A high LTV to CAC ratio signals a successful sales and marketing performance through increasing bottom line ROI.

However, a ratio that is too high is not okay either. If the rate is too high, the business is not investing enough in sales and marketing to grow the customer base. Increased sales and marketing expenditures will shrink the LTV to CAC ratio. An LTV to CAC ratio reduction can produce benefits by accelerating the growth of the company assuming the marketing effort is productive.

Time to Payback CAC

The Time to Payback CAC KPI determines the time it takes the company to earn back its cost of customer acquisition to obtain new clients.

Benefit: A window on the time required to begin recouping the CAC investment from the new customers that are acquired. The goal is to achieve profitability on new clients in fewer than twelve months.

Marketing Originated Customer Percentage

This KPI looks to isolate the particular new business portion that was a result of the company's marketing efforts.

Benefit: This marketing metric reflects the marketing impact on sales lead generation to acquire new clients during the customer's entire buying life cycle. Different sales and marketing team structures and relationships affect this metric so that the target ratios will vary widely generally between 20 to 80% based on your particular business configuration.

Marketing Influenced Customer Percentage

This KPI highlights the interaction between new clients who marketing impacted during the sales process when these new customers were sales leads.

Benefit: This is a marketing metric that gives strategic and financial executives a 30,000-foot view of the entire influence marketing is exerting on the overall sales process. It can provide insights into marketing effectiveness in lead generation, lead nurturing and the role of marketing in assisting the sales group close sales.

Bottom Line:

When reporting to the CEO on your marketing programs avoid tactical metrics and focus on the results of adding new customers, lowering CAC, or improving customer lifetime values. By using these CEO marketing metrics, you will demonstrate the productivity of a marketing department that deserves consistent strategic and budgetary support

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