Marketing Analytics & Metrics

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  • 0:04 Measuring Marketing…
  • 0:55 Customer Acquisition…
  • 2:30 Digital Marketing Metrics
  • 3:35 Using Marketing Analytics
  • 5:09 Lesson Summary
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Lesson Transcript
Instructor: Lucinda Stanley

Lucinda has taught business and information technology and has a PhD in Education.

In this lesson, we'll describe marketing analytics and metrics as well as predictive analytics and how these are used in today's marketing environment.

Measuring Marketing Effectiveness

If Brown's Business paid for advertising or created a web page, how do they know if they're getting a return on their investment in terms of customers buying their products and creating revenue? It all comes down to marketing analytics.

Using marketing analytics, organizations can measure the effectiveness of their marketing strategies by analyzing those strategies and managing them to make sure the organization is getting the most bang for their buck. Simply put, they want those marketing dollars to translate into customer purchases.

That's exactly what Brown's Business needs. But, what do they look at specifically to compare their marketing budget to their sales? That's where marketing metrics come in. Marketing metrics are the measurable items that can help an organization find its return on investment for its marketing strategies. Let's take a look at some of these metrics and what they mean.

Customer Acquisition Cost Metric

Customer acquisition cost (CAC) is how many marketing dollars it costs to gain the interest of a new customer. Let's look at an example so we can see how it works.

Let's say Brown's Business spent $1,000 on a marketing strategy. From that $1,000, they gained five new customers; thus, it cost $200 to acquire each customer. That gives Brown's the marketing percent of CAC, which equates to 20% of their marketing budget. Now, the organization can say, 'Wow that seems a lot for one customer,' but that is not the whole picture. They also need to look at the lifetime value of that customer or how much that customer will purchase over his lifetime once the organization has acquired him.

What if over the course of this new customer's life, he'll spend $2,000 in Brown's products? That gives him a ratio of customer lifetime value to CAC of 2,000:200 or 10:1. The customer is spending $10 for every $1 it cost Brown's to acquire him. That's not too bad.

Another way to look at it is how long it takes to pay back the CAC. If the customer spends $20 a year, that means it takes him 10 years to pay back the cost to acquire him. That may not be fast enough. However, if he spends $200 a year, it only takes one year to pay back the cost to acquire him; anything else he spends after that is profit for Brown's Business. These are measurable numbers Brown's Business can use to assess if it's using its marketing dollars wisely.

Digital Marketing Metrics

Organizations can also measure the effectiveness of their digital marketing strategies, such as blogs and web pages. Here are some of the metrics they can look at:

  • Total visits: how many people viewed the web page or blog
  • New sessions: how many of those were new to the site
  • Total conversions: how many visitors to the site actually purchased something
  • Lead to close ratio: how long was the customer there before they actually purchased something
  • Customer retention ratio: how many new customers (meaning purchasers) purchased again
  • Cost per lead: how much did the organization spend divided by how many leads were generated. For example, Browns' Business spent $1000 and gained 20 leads. That equates to $50 per lead.

This is great. These are real numbers organizations can use to evaluate the effectiveness of their marketing campaign and make data-based decisions. Marketing metrics can provide insights into the best ways an organization can meet the needs of their customers.

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