Has your company launched its first marketing campaigns, and do you want to measure their effectiveness? Inevitably, you’ll come across the concept of key performance indicators ( KPIs).
In keeping with our commitment to making marketing accessible to everyone, today we’ll explain the KPIs you need to know, understand, and use to ensure the success of your small business’s marketing efforts.
We have grouped them into five categories, each corresponding to one of the modules that Maia Consulting develops in collaboration with its clients: Market, Business, Acquisition, Conversion, and Retention. The modules follow one another in chronological order to cover not only the entire customer journey but also the market environment to which the company adapts in order to ensure its growth.
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Table of Contents
General Indicators
Return on Investment (ROI)
Of all performance metrics, return on investment ( ROI) is by far the best known. And for good reason: it is universal and applicable to any business project, across all departments.
The concept is simple: ROI is used to measure the profitability of an action relative to the costs and effort invested.
To calculate it, divide the revenue generated by the costs incurred.
ROI = revenue / investment costs
Let's take the example of an advertising campaign run on Google Ads.
With an investment of €500, you managed to generate €2,000 in sales.
Your ROI is 2,000/500 = 4.
In other words, every euro invested yielded a return of four euros.
Market
Market Share (Total Revenue / Revenue for the Sector)
Market share refers to the percentage of business opportunities your company has secured in a given market.
There are several ways to calculate market share. The most common method is to divide your company's revenue by the total revenue generated in the industry.
Check out official statistical agencies such as Eurostat (Europe), Statbel (the Belgian federal government), or IWEPS (the Walloon Region) to find economic information related to your industry.
To find out or estimate your competitors’ market shares, try checking the National Bank of Belgium’s website. The most recent corporate financial statements may contain the information you’re looking for. Unfortunately, there’s no guarantee it will be there: reporting revenue is, in most cases, optional. In addition to the NBB, paid business databases such as Trends Top or OpenTheBox sometimes provide revenue estimates. Give it a try!
Business
Revenue
Does it even need an introduction? Revenue is the total amount of money a company collects over a given period (usually the fiscal year).
Number of customers
It is always helpful to track the number of clients you serve, both in absolute terms (= the total number of clients in your portfolio) and in relative terms (= the number of clients in a given market segment, for example).
Medium Basket
The average order value is the average amount your customers spend to purchase one of your solutions (or even your entire catalog, depending on what you need to analyze).
Like other performance indicators, the average basket size reveals its full value when combined with other metrics or dimensions of analysis, such as revenue, company size, industry sector, and so on…
Example:
The average order value in my customer portfolio is €17,578.
It might be useful for me to calculate the average basket size of my portfolio by industry sector:
- My clients in the heavy industry sector spend an average of €38,475, for an average order value of €38,475
- My retail clients spend an average of €7,474, which represents an average shopping cart value of €7,474.
Given comparable parameters, the projected average basket size by industry sector suggests that heavy industry should be prioritized, as it is more likely to invest more in my solution.
Acquisition
Leads (number of)
A lead is a prospect who has shown interest in your solution, whether by filling out a contact form, downloading a white paper, replying to a sales email, or starting a conversation in a chat window.
You’ll naturally want (and need!) to count the number of leads generated as part of a marketing campaign to gauge its effectiveness.
Number of prospecting meetings
In addition to the contracts signed, sales teams are often evaluated based on the number of appointments they are able to schedule with their prospects.
Compare the number of appointments scheduled:
• By number of leads identified;
• By number of contracts signed.
The challenge for marketing and sales is to align their efforts in order to:
• To filter out low-quality leads, that is, leads whose processing negatively impacts the company’s profitability;
• To improve the conversion of leads into sales meetings and, ultimately, into customers.
Scoring: Account Profitability Potential
Not all accounts are equally profitable. Some will yield significant returns with minimal effort. Others, on the other hand, will require a great deal of effort yet produce results that fall short of expectations—or even fail to break even.
That’s the whole point of scoring: to evaluate and clearly (or even in a fun way) highlight the profitability potential of accounts so you can focus your resources on the most profitable ones.
Scoring is most often presented as a scale ranging from the least to the most profitable level. In most cases, each level is associated with an image, a word, or a symbol, such as the well-known star used in rating systems.
Examples:
- No symbol: loss-making account (must be excluded);
- ⭐ account with low potential;
- ⭐⭐ account with average potential;
- ⭐⭐⭐ Account with high potential.
Although this isn't always the case, it's often through experience that we're able to identify which accounts are the most profitable.
Once you’ve identified these customers in your client portfolio, take a closer look at their common characteristics. Ask yourself the following question: What characteristics make them more valuable? Is it their size, their geographic location, or their industry? Compile this data to establish your own rating scale.
Next, enrich your lists and/or CRM with this information, which is essential for effectively qualifying accounts. There are many sources you can use for this, such as the Cross-Reference Database of Enterprises, the National Bank of Belgium, and LinkedIn—a veritable goldmine of B2B data.
Conversion
Conversion Rate
The conversion rate calculates the percentage of leads or visitors who have completed a key action, such as clicking a call-to-action button or submitting a form.
Customer Acquisition Cost
Customer acquisition cost refers to the total costs incurred to convert a prospect or visitor into a customer, ranging from advertising expenses to agency fees and the cost of internal human resources.
Retention
Your main goal once you’ve acquired a customer is to build customer loyalty and, if possible, increase profitability through cross-selling and/or up-selling.
We can't stress this enough: it's far more cost-effective to retain an existing customer than to acquire new ones.
The metrics presented below are all designed to help you better understand your customer relationships so that you can make them as profitable as possible.
NPS (or Net Promoter Score)
In just a few years, the Net Promoter Score (NPS) has become one of the leading metrics for measuring customer satisfaction.
In practical terms, the NPS allows you to measure satisfaction, loyalty, and brand attachment at a given moment. Before calculating it, you must first ask your customers the following question: “How likely are you to recommend us to a friend or family member? ”
Respondents are asked to rate their response on a scale from 0 (not at all likely) to 10 (very likely).
Three categories are then identified:
1) Detractors, with a score between 0 and 6;
2) Passives, with a score between 7 and 8;
3) Promoters, with a score between 9 and 10.
To calculate your Net Promoter Score, simply subtract the percentage of detractors from the percentage of promoters. Passive respondents are excluded from the calculation.
Example: Out of 100 respondents, 20 are detractors (20%) and 50 are promoters (50%). Your NPS is 30 (that is, 50 – 20).
How should we interpret this result?
- An NPS score greater than 0 is considered satisfactory. However, efforts should be made to improve overall satisfaction and increase the number of promoters.
- An NPS of 50 or higher indicates strong brand loyalty and, therefore, a high likelihood that your brand will be recommended. Congratulations!
- An NPS below 0 indicates customer dissatisfaction. This is a red flag: you need to take action.
Retention Rate (or Loyalty Rate)
The retention rate indicates the percentage of customers who have remained loyal to you over a given period.
Before calculating the retention rate:
1. Define the relevant period based on your analysis needs;
2. Count the number of existing customers at the beginning of the period under analysis (E);
3. Count the total number of customers at the end of the period (T);
4. Count the number of customers acquired during the period (N).
To calculate the retention rate, use the following formula: Retention rate = [(T - N) / E] × 100
Example:
1. Period considered: I transformed my product at the beginning of the year, which radically changed the habits of my long-time customers. I’d like to know the impact of this;
2. Existing customers at the start of the period (E): I had 38;
3. Customers at the end of the period (T): I have 59;
4. Customers acquired during the period (N): We signed up 27 new customers.
Retention rate = [(59-27) / 38] x 100 = 84.2%
Churn rate
In addition to the retention rate, the attrition rate (or churn rate) measures the percentage of customers who have stopped using your services over a given period.
Repurchase Rate
The repurchase rate tells you the percentage of customers who have made a repeat purchase over a given period.
Service Life
Lifetime refers to the period during which a customer remains with your company. It can be calculated as an average.
Conclusion
And that wraps up our brief overview of the performance metrics you need to get to know.
As you can see, it’s not enough to track just one KPI to assess the success of a marketing campaign. It’s importantto use the ones that make sense in relation to your growth goals. What’s more, you’ll get the most out of your KPIs by combining them and comparing them against one another. This will help you put things into perspective and gain a clear understanding of what’s working—and what isn’t—in your operations.
One last piece of advice: don't get bogged down trying to track too many metrics. Choose only the few that are most relevant to accurately measure your business.
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