A few weeks ago we discussed marketing metrics that impress your boss: customer acquisition costs, the marketing percentage of customer acquisition costs, length of time to recoup those costs, customer lifetime value, number of customers marketing has acquired, and the number of customers nurtured by marketing. While presenting these metrics to your boss is sure to impress, what happens if the actual numbers are disappointing? Once you have benchmarks in place, give your marketing metrics a makeover by improving them. Here’s how to fix disappointing metrics.
- Customer Acquisition Costs – Does it cost too much to acquire a new customer? Look at the sales cycle to see if you can shorten or streamline it. Work with the sales team to define the criteria for qualified leads, examine marketing campaigns to identify those that have the highest return on investment, and focus on using higher ROI campaigns to reach the most targeted, qualified prospects.
- The Marketing Percentage of Customer Acquisition Costs – If the percentage of your marketing budget that goes toward customer acquisition costs has gone up, that’s a signal that it’s time to reevaluate your strategy. Again work with sales to ensure a cohesive approach. Examine conversion rates, look for areas of underperformance, and find ways to qualify leads more efficiently.
- Length of Time Required to Recoup Customer Acquisition Costs – Does it take an excessive amount of time before customers become profitable? A three-pronged approach can shorten this timeframe. Start by revisiting your pricing structure, possibly requiring higher payments upfront in order to become profitable sooner. Next, maximize the value of each customer by identifying upselling and cross-selling opportunities. Finally, evaluate the nurturing and sales process to find ways to shorten it which reduces acquisition costs in the first place.
- Customer Lifetime Value (CLV) – This is related to the above, but it also stands alone. Again, you will need to evaluate your sales cycle and acquisition costs in an effort to reduce those. Finding additional opportunities can also increase CLV. In addition, reducing “churn” should also be prioritized. Churn refers to customers who are dissatisfied and leave your business. Evaluate product quality, customer service, renewal processes, and other areas that affect churn and address areas that need improvement. By reducing turnover, you can increase the number of profitable customers and increase CLV as a whole for each segment of customers.
- Number of Customers Directly Acquired by Marketing – If the number of customers directly acquired by marketing has gone down significantly, reevaluate your lead management process. Are leads being nurtured properly? Are they being given the right information at the right time in the sales and nurturing cycle? While it’s tempting to buy more leads, it’s not helpful if your lead management system isn’t working to move them through the funnel toward a favorable buying decision.
- Number of Customers Nurtured by Marketing – This metric involves the number of customers that the marketing department has assisted. If this metric goes down, it means that marketing is becoming less involved in the process once a lead has been turned over to sales. It’s smart for sales and marketing to work together to nurture leads, not as separate entities. It may be time to realign sales and marketing to ensure that leads are both generated and nurtured efficiently.
As with most performance measures, these marketing metrics will fluctuate. When the metrics above change suddenly or dramatically, it could be a red flag that needs your attention. Even without dramatic changes, you may want to work on improving each of these metrics to ensure a shorter customer acquisition cycle and a faster time to become profitable.