The math of creating marketing KPIs

The Math of Creating Marketing KPIs

Creating Marketing KPIs can be pretty challenging, but knowing the math behind it will help you reduce your frustrations.

So, you have a new marketing campaign that needs to be launched. There’s an undefined budget, but a lofty sales goal that needs to be reached. Your marketing campaign will be the key driver for the leads on this campaign. How do you get the investment nailed down in a way that will drive results and justify the marketing spend requests?

What many creative people loathe is the solution to developing a successful experience from leadership buy-in to post-mortem marketing success…it’s in the math.

Solving the Marketing Budget Equation

Let’s say your B2B sales team has an average 40% close rate. They need to hit a $300,000 sales target for a product. The average order value (AOV) for your product is $3,500. Your company’s website has an average conversion rate of 1.2%. You have 12,000 email subscribers. Your Linkedin business page has 20 followers. Your Facebook page has 850 followers.

Let’s start with how many leads are needed. An average of 85 sales will be needed to hit the sales target. If the sales team has an average 40% close rate, we’ll divide 85 by 40% getting us to 212 leads required.

Total Sales / AOV / Close Rate = Required Leads

Now, we can point to some things that can increase or decrease the success of this campaign. If sales could close at a higher rate, we can reduce the number of leads we need. If they could close at a 60% rate, we can reduce our sales leads to 142.

There are a few ways sales might convert at a higher percentage. Some of those will be internal sales operations processes, but for marketing, we can’t dictate or control those things. For marketing, quality of leads will be a big driver in the success of increasing the sales team’s close rate. In order to achieve this, the targeting of this campaign will need to be thoroughly optimized.

Website Sales Conversions

As previously established, the website has an average conversion rate of 1.2%. One thing we need to look at is the traffic it receives and how and why it’s there.

Many software businesses have a client or employee login on their site. This can create a false sense of security when it comes to calculating traffic. You may have bloated traffic because of this traffic because so much of it is for users to access their account.

To help segment this, you should consider setting up goals for logins. This will give you a way to separate the two forms of traffic. You may actually find that for the traffic you receive, your leads conversion rates are higher than 1.2% because of the different use of traffic.

Maybe by clarifying this traffic, we believe we’re at a 2.0% conversion rate. For a campaign that points people to your website’s homepage, we’re not going to see the targeted marketing traffic we’re looking for to increase the quality of leads and so we’ll assume we still need 212 leads. That means, we need to drive approximately 11,000 visitors to your website with a conversion rate of 2%.

Traffic x Conversion Rate = Leads

Depending on your traffic, this could sound daunting or easy. Regardless, it’s still not equal value traffic. You have 11,000 email subscribers. This list is more targeted than average traffic to your website. Email has its own conversion rate.

Subscribers x open rate x click through rate = traffic

If 11,000 subscribers are sent an email and you get 14% open rate = 1,540 opens. If your Click Thru Rate (CTR) is an average of 2.5% = 38 visitors to your website.

That sounds awful, but remember these are targeted subscribers and so their engagement is higher. In the same respect, it illustrates why consistent email marketing is so effective because if you only send one email every once and a while, you’re driving fewer engaged people to your website. Just increasing your email frequency to 2x per month could change 38 to 76 engaged visitors per month.

Landing Page vs. Website Homepage

You’re rarely going to hear a marketer advocate for sending a campaign to your website’s homepage or even an internal pages vs. a dedicated landing page. There are some easy key factors as to why you shouldn’t do this if you can avoid it.

  1. Your website is telling the entire story of your business and sending a targeted prospect to your homepage will dilute your message instantly.
  2. Your navigation, blog, etc. is great for when someone finds your site and wants to learn more about you, but for a campaign that you’re investing spend into, you want to target everything you can and remove distractions.
  3. Your Call-to-Actions (CTA) need to be targeted to the value of the product. If you have multiple products, chances are, your website will have a more generic CTA such as Learn More, Schedule a Demo..which are fine for a website, but for a landing page, you may want to be even more specific to connect the message with the user.

Looking back at our scenario…by leveraging landing pages over your homepage or product pages, you may be able to increase your conversion rates to 3-5% or more. Remember how sales has a 40% close rate? Imagine sending them targeted leads that could increase their close rate from 40% to 60 or 70% or more.

A 70% close rate could mean that we need 121 leads. A landing page with a 4% conversion rate reduces our required traffic from 11,000 visitors down to 3,025 visitors.

Don’t Forget to Make Good Impressions

In order to effectively leverage your website as a sales engine, you need to look at each marketing channel individually as email, social, advertising, affiliate, mobile, desktop, etc. al have their own conversion expectations. The more you can understand that, the easier it will be to identify and develop longterm marketing KPIs for your campaigns.

If you are leveraging social media, radio, TV, Billboards, Postcards, you’ll need to calculate the impressions and conversion rates. These advertising mediums typically have very low conversion rates, yet they are still extremely effective. The reason is that massive reach you can achieve by leveraging the wide broadcast to build awareness. A billboard alone that has perhaps a .05 conversion rate but can achieve over 1.5M impressions doesn’t sound so bad after all.

There are too many ways to calculate in just a blog post, but hopefully this will get your wheels turning to help you be more effective in the way you develop your marketing campaigns.

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