Business Metrics

Question 1

KPI’s

Answer 1

How to measure success on their key business objectives.

Question 2

Business Process Flow

Answer 2

Business has 2 primary goals: 1. Increase Revenue and 2. Reduce Costs

Question 3

Metrics do what?

Answer 3

Help businesses know if they are 1. Increase Revenue and 2. Reduce Costs i.e. business executives need to think about costs incurred building, promoting and carrying out their business like website, marketing salaries etc.

Question 4

Two Growth Objectives

Answer 4

Business question of growth for customer base can occur in two ways: 1. Get new customers 2. Get current customers to increase their orders or make repeated orders. Break these down to how we can quantify or measure the answer.

Question 5

Customer Journey

Answer 5

Track Journey

Awareness
Interest
Desire
Purchase
Post Purchase

Question 6

Marketing Funnel

Answer 6

Analyze each step with data.

Question 7

Impressions & Reach

Answer 7

Capture the person seeing the ad.

Question 8

Lead generation

Answer 8

Visiting the website.

Question 9

Impressions

Answer 9

At the top of funnel were trying to build awareness and get name in front of potential customer. Can use ad platforms and SEO to do this. The metrics are the number of people who saw the ad.

Question 10

Click Thru Rate /Cost Per Click (CTR/CPC)

Answer 10

Some people who click the ad and are taken to the website. To be counted the user should have clicked through the ad or email sent to them. Metrics are Click Thru Rate Cost Per Click.

Click through rate (CTR) is an indication of whether the ad campaign is generating enough interest in potential customers. When the CTR increases, it is an indicator of an effective and interesting content in your ad campaign and that maybe you should increase the number of impressions for that ad.

CTR measures the success of an advertising campaign or email campaign. As potential customers view the ads, some of those potential customers will click the ad and be taken to the website for the company. To be counted at this level, the user needs to click through the ad and the metric we use here is Click Through Rate.

Question 11

Cost per lead (CPL)

Answer 11

User is counted because they visited the company website, but just because user visited doesn’t mean they are interested in buying a product. Most sites try to capture some other piece of information to determine if you’re interested. The most common is your email and send you marketing emails to try and convert you. They call this a lead. Other ways they gauge your interest is by downloading a document or creating an account. If a user engages in any of these actions, the user is considered a lead. Marketers want to know how much it costs a business to get to this level. The metric we calculate is cost per lead.

Question 12

Customer Acquisition Cost (CAC)

Answer 12

Final step, customer makes a purchase and becomes a paid customer. The lead converted to a paid customer. The goal is to maximize conversions at the bottom of the funnel.

Interpreting CAC - Interpreting CAC
The CAC metric is an indicator of how much it cost to acquire a customer. If your customer service team is doing a good job of keeping the paid customers happy, that can lead to future leads and paying customers, and thus keep the cost of acquiring customers low. The company’s goal is to keep the CAC low, while increasing revenue as this has a positive impact on the profit margin and profits.
Additional note regarding the timeline of the customer journey. If you are unsure of the timeline of your customer journey, think about when the ad was placed online, how long it was out, and when the ad was pulled out. That gives you a rough timeline of when you started getting paid customers, and estimate how much time an average customer took from seeing the ad to buying your product.

Question 13

Impressions

Answer 13

Impressions record an instance of an advertisement appearing on a website when it is viewed by a visitor. So if you visit the page 4 times, say in one hour, the gross impression count will include each repeated viewing.

Question 14

Clicks

Answer 14

Every time a website visitor views the ad and clicks it, this gets included in the Click count.

Question 15

(CTR) Calculation

Answer 15

Click Through Rate = (Number of Clicks / Number of Impressions) X 100

Question 16

Average Click Through Rate (CTR)

Answer 16

In general a 2% CTR is good but averaging 1.9 - 2.35 depending on industry.

Question 17

Interpretation of (CTR)

Answer 17

The Click Through Rate is an informative metric that informs your marketing team whether they should try and increase the number of impressions or when they should reword the ad to increase clicks. Remember, if a person clicks through the ad, it does not mean the customer purchased, but rather they are showing interest in what the ad is about. When your CTR is low, your ad campaign is not generating enough interest. When the CTR increases, it is an indicator of an effective and interesting content in your ad campaign and that maybe you should increase the number of impressions for that ad.

Question 18

Cost Per Click (CPC)

Answer 18

Cost Per Click (CPC) is an indicator of the cost effectiveness of the ad platform and a useful tool to compare and strategize about which marketing platforms is yielding higher impression and reach and resulting in potential leads.

Cost Per Click refers to the cost to get a click on your ad. It helps us gauge the cost of advertising on the specific platform, so we can see which platform is generating more leads. CPC is an indicator of the cost effectiveness of the ad platform and a useful tool to compare and strategize about which marketing platforms is yielding higher impression and reach and resulting in potential leads.

Question 19

(CPC) Calculation

Answer 19

Calculation

CPC = Cost of Advertising on Source Platform / Number of Viewers who Clicked on the Ad

Question 20

Comparing platforms

Answer 20

Since platforms charge you for the number of ads on a page, you can compare the CPC for the different platforms you are advertising on and see which platform is generating more interactions with your website, or generating more traffic to your website. CPL is an indicator of the cost effectiveness of the ad platform and a useful tool to compare and strategize about which marketing platforms yielded more leads.

Question 21

Interpretation of (CPC)

Answer 21

Different ad platforms cost differently, and it is important to remember that while one platform might be cheaper it may not necessarily deliver you as many potential customers as another platform.

This is an important tradeoff that analysts and marketing teams have to consider. Some marketing channels or platforms convert amazing results but they are small and may not generate as many customers.

While you may decide to continue using them, you will also need to identify marketing channels that deliver more potential leads.

Question 22

Cost Per Lead (CPL)

Answer 22

Cost Per Lead (CPL) is an indicator of the cost effectiveness of the ad platform and a useful tool to compare and strategize about which marketing platforms yielded more leads.

Remember, a lead is when a potential customer visits your website and does something on the website in response to a prompt, such as share their email , or download a document, create an account.

Once the viewer takes that action, we know the viewer is showing some interest for the product or service, and this could possibly lead to a sale.

With Cost Per Lead we are tracking whether the potential customer turned into a lead within a given time period, that could be a 30-day window or 60-day window.

Question 23

Cost Per Lead ( CPL) Calculation

Answer 23

Cost Per Lead (CPL) = Cost of advertising on the source platform / Total number of leads

Question 24

Customer Acquisition Costs (CAC)

Answer 24

Customer Acquisition Cost (CAC) is a useful metric used to get an estimate of how much it cost us to acquire the customer in the period the money was spent to reach out to them.

Metric for last step in the funnel for someone who actually bought the product. Use CAC to figure out how much it costs to acquire a paid customer.

This is the last step at the bottom of the funnel. Higher level conversion for the minimum costs of sales and marketing. This is linked to optimizing the funnel.

A good rule of thumb is you want the CAC to be 25% of the revenue, the money you earn from all your customers. CAC should be a 1/4 of your revenue. If you’re spending less than that you’re losing business opportunities.

Question 25

(CAC) Calculation

Answer 25

Customer Acquisition Cost (CAC) = (Total marketing expenses + total sales expenses and salaries)/ # of customers acquired* Paid Customers

Question 26

Optimizing Marketing Funnel

Answer 26

Identifying at what level of the funnel your customer loss is the greatest. The business team needs to figure out the leakage points.

The goal with optimizing the funnel is to reduce the drop at each level. For example, if you find only 5% of the people seeing the ad click on the ad, it could be an indication that your ad needs more work and that you need to think about its relevance. Are you losing them at the Awareness, Interest, Desire or Conversion stage?

Further down the funnel, the goal of the marketing team is that once the leads or visitors are on the company website, the website design should cause no confusion to the visitor. There should be plenty of options available to stay engaged and the website, and there should be no confusion about what steps the visitor needs to take to make the purchase.

At each level of the funnel you’re calculating the Conversion Rate. - You’re calculating conversions or your success rate at getting a potential customer to do what you want them to do at each level of the marketing funnel and you compare this number against your impressions.

Calculation for Conversion Rates at Captured steps in funnel: Awareness, Interest, Desire, Conversion

Awareness: Arrived on Site - 1000
Interest - Downloaded Brochure
Desire - Added items to cart
Conversion - Purchased item

Question 27

Cost Per Acquisition (CPA)

Answer 27

CPA refers to a non-paying customer. CPA focuses on the sales and marketing costs including supplies, labor and marketing, overhead and sales that it took to convert a non paying customer (a customer that may turn into a lead) into a paying customer.

Question 28

Calculation CPA

Answer 28

Cost Per Acquisition (CPA) = (Marketing and Sales Cost)/ number of new leads customers. CPA is referring to marketing + sales costs (overhead, salaries) in the numerator and includes only leads (non-paying customer) in the denominator.
Here “acquisition” refers to a non-paying customer.

Question 29

Interpretation of CPA

Answer 29

Interpretation of CPA - Cost Per Acquisition provides insight into whether or not the marketing campaigns are successful from a business perspective. For the purposes of calculating the CPA, the cost of the marketing campaigns should not be restricted to the cost of developing the ad, but also other costs of labor and overhead. In other words, CPA allows a business to gauge whether the marketing campaign is generating enough potential leads to cover a broader range of costs other than just direct advertisement costs.

Question 30

Life Time Value

Answer 30

You want to stay with customers who stay for the long term. You want to identify your high value customer and focus on bringing in more of these customers. Your goal is for every dollar you spend on your marketing efforts to give you a higher rate of return and generate revenue multiple times over.

LTV - We want to estimate how much revenue we can expect to earn per customer as far into the future as we can.

LTV Terminology - Purchase Cycle - depicts the general frequency with which your products are purchased.