5 Important Key Performance Indicators (KPIs) in Marketing

Marketing’s job is to keep the sales department busy and the advertising campaigns accountable.

This is why marketing literally touches every department in the house.

For good reason.

Marketing communicates with the customer. Helps R&D innovate new solutions. Ensures the warehouse has ample supply and drives growth encouraged by the CEO.

So, with so many moving parts, it’s very easy to think you have to measure every little advertising related number such as:

• Follows
• Open rate
• Unsubscribes
• Likes
• Impressions
• Audience
• On and on

What are the most important KPIs for marketing?
Key Performance Indicators (KPIs) in marketing are the most important items that are driving the success of the company. Typical KPIs include: Number of new customers gained, Cost per sale (CPS), Cost per lead (CPL), Return on advertising investment (ROAI), Number of units sold, Total sales revenue gained.

Think of the numbers that a veteran accountant would be most interested in. Accountants don't give a rip about YouTube views, retargeting audience, Twitter follows or advertising impressions. While important, none of these directly affect sales.

The accountant most cares about what goes in and out of the checking account and how they can expect to make some reasonable predictions about future cash flow.  This is why the marketing pro works with the accountant, because the marketing pro has a pulse on how well the sales department converts and how advertising campaigns produce.

When we audit marketing departments and uncover opportunities, here are the general KPI’s we start with. While every company is different, and no two accounting systems are the same, here are some very important KPI’s to get started with.

What are the 5 key performance indicators in marketing?

1. Sales transactions -- The first item we look at is the number of sales transactions. Whether last month, the last 12 months or two years back. This KPI is a core metric because it creates some baselines for us. While past performance is not necessarily a prediction of future performance, this metric gives us the first piece of information needed to organize an accurate snapshot. For example, if the company generates 1,000 transactions per month on average, this provides one important piece of information to measure against the other KPIs. Eventually, all sales transaction counts are broken down by source of the sale.
2. Sales revenue -- This important metric is a high-level gauge to take some additional, lesser important measurements against future growth campaigns. For example, if the company is doing $100,000 in sales, then we immediately divide $100,000 by 1,000 transactions to determine an average sale transaction amount of $100. Again, sales revenue counts are broken down and tracked by the source of the sale.
3. Number of customers -- If the company has 5,000 customers in their database, we can begin to calculate some very important information. First, we can set parameters for identifying new and returning customers. Also, we can survey customers, identify patterns on where they came from, and we can set some goals based on historical campaigns to gain new customers. We can also investigate the recency of purchase, and identify frequency of purchase. These trends are exceptionally important in our email marketing and direct mail marketing strategies, literally driving future growth.
4. Cost per sale (CPS) -- Also sometimes referred to as cost per acquisition (CPA), cost per sale (CPS) is a simple, powerful metric that gives us a framework for how much we are spending in order to gain a new customer.  For example, if you spend $1,000 on Google Ads and you gain 20 customers then your CPS is $50. This provides a benchmark to measure all other campaigns against.
5. Return on advertising investment (ROAI) -- This core metric is the holy grail of advertising executives. And it keeps advertising platforms honest. ROAI is a formula and it is the net income the company earned based on the sales generated from the advertising source. If the 20 Google Ads sales generated $2,000 in sales revenue (20 x $100 = $2,000) and earned $1,600 in net income ($2,000 sales - COGS), your ROAI is $1,600 / $1,000 = 160%.

Each of these important Key Performance Indicators is designed to be measured at multiple levels. First, at the highest level to get a company-wide snapshot to make great marketing decisions and measure all marketing campaigns against.

This information will help you to develop your marketing plan, literally giving you some framework for how to compose your marketing mix and your online advertising programs.

For example, if you know that the company has been spending $50 to profitably acquire a new customer, then this is your benchmark to measure all campaigns against.

About Your Strategic Marketing Partner

Sam Hirschberg, MBA, is Your Strategic Marketing Partner in Arizona. Always professional and a delight to work with, Sam is not your typical “marketing consultant”. Unlike most consultants who tell you there is a problem and say, “See you later and good luck!” Your Strategic Marketing Partner knows how to find solutions, execute programs, test and measure campaigns, and how-and-when it’s time to roll-out big! You are invited to call (602) 892-0777 to learn more about Sam’s background on his FREE 9-minute recorded message.  For more information about Sam, please visit https://strategicmarketingpartner.com.