As marketers, many of us have experienced the pain of trying to explain to management exactly how valuable our marketing efforts are to the company and its bottom line. It can be challenging providing tangible proof to C-suite that highlights how important it is to continue on with inbound marketing, backed by solid data.
However, it's definitely possible to showcase the value of marketing to your executive team, provided you arm yourself with the right metrics to reinforce your claims.
Top Metrics to Include When Proving the Value of Inbound Marketing
1. The Percentage of Customers Originating from Marketing
This is an almost self-explanatory metric to trot out when proving the value of your marketing to management, and when trying to justify a greater marketing budget. It basically boils down to knowing how much of your new business is driven by inbound marketing. You can calculate this by taking all the new customers signed up over a specific period, and determine how many of them originated as a lead generated by marketing activities. This is a calculation made significantly easier to determine if you have a closed loop marketing analytics tool in place, which will track the necessary information for you and make it less time-consuming to gather.
Incidentally, if management wants a more financial overview, you could perform this calculation using the revenue generated over a specific period instead of customers as a variable – this means you'd be able to give a financial revenue number to them resulting from marketing's efforts.
2. The Cost to Acquire a Customer (CAC)
As the name implies, this metric is based in the cost to the company for marketing and sales to acquire a customer. It's a product of a fairly straight-forward calculation – you simply add up your advertising spend, salaries, commissions, bonuses and overheads for sales and marketing within a defined time period, and then divide this figure by the number of new customers generated during the same time period.
3. The Ratio Between Your Customer Lifetime Value Against Your Cost of Customer Acquisition (CAC)
Once you have determined your CAC, based on the previous point, you can perform this calculation to determine the ratio between the lifetime value of a customer versus what it cost to acquire them in the first place.
You can calculate your customer lifetime value (CLV) by taking the revenue you earn from a particular customer during a specific period, subtract out the gross margin, and then divide by the estimated cancellation rate for that customer. Once you've got this number, compare it to your customer acquisition cost.
4. The Time It Takes to Payback Your CAC
While your CAC, or customer acquisition cost, relates to how much it costs your business to acquire a client, there's another metric closely related to your CAC that you should be paying attention to – the length of time it takes to pay back your CAC. Essentially this is the number of months it takes for you to earn back whatever you spent on gaining a client. For companies that operate on generating recurring monthly revenue from their clients, this payback time should ideally be below 12 months.
5. Your Site's Traffic to Lead Ratio
Your website is a valuable business asset, and it's important that your management team understand its value and impact on the business. To indicate this, there are several metrics you should capture and enlighten them on.
These include:
- Unique visits to your website
- Marketing qualified leads obtained through your website
- Conversions per visit to your website
- Conversions via source
Convincing your C-suite of the value of marketing can be challenging, but in reality it can be much easier than you might think – and it all starts with plenty of reporting, data gathering, data analysis and a willingness to transform that data into relevant metrics your management team can understand and empower them to make informed decisions. So start measuring and reporting on your metrics today!
