Common KPIs and What They Mean in Digital Marketing

Get Familiar with the Key Metrics Used to Measure the Success of a Digital Marketing Strategy

To the untrained eye, a digital marketing strategy may seem like throwing spaghetti at the wall and seeing what sticks. In any given week, your business may run display ads and social ads, post a few social media updates, publish a blog, and implement key website optimizations.

But how do you know what effect these actions have on your audience? Is your digital marketing responsible for your new customers? Is positive word of mouth responsible? Or did you just get lucky?

When businesses invest in digital marketing services or enlist the professional guidance of a digital marketing firm, they want to know which tactics are effective, and they want to see the proof. To illustrate that marketing isn’t a magic trick, digital marketing companies use key performance indicators (KPIs) to measure the success of their tactics and overall strategy as they align with business goals.

What Are the Most Commonly Used KPIs by Digital Marketing Firms?

In the data-driven world of digital marketing, KPIs are like a compass, guiding marketers toward informed decisions and optimizations. In other words, they tell you which strands of spaghetti will stick to the wall. More importantly, they identify the weaknesses in your campaign so that you can adjust your approach or redirect those funds elsewhere.

KPIs are used to measure:

• Brand awareness: how many people see your brand due to marketing.
• Customer conversions: how many desired actions your marketing generates; for most businesses, a conversion is a sale.
• Customer acquisition costs: the amount you spend to acquire a customer.

Read on to learn about which KPIs are used to evaluate digital marketing campaigns and tactics.

Brand Awareness KPIs

Brand awareness is the level of familiarity consumers have with your brand and your goods and services. Coca-Cola and McDonald’s, for example, have global brand awareness. That iconic red soda can and those golden arches are recognized throughout the world.

On the other hand, companies that are new or limited in reach must focus on digital marketing efforts that generate brand awareness to establish familiarity with potential customers.

These KPIs measure brand awareness and exposure:

• Social media metrics such as impressions, reach, and engagement
• Web traffic metrics such as direct traffic, new and returning unique visitors, page views, and session time
• Search engine visibility metrics such as keyword visibility, branded and non-branded keywords, and branded organic traffic

Collectively, these metrics illustrate where people are seeing your brand, how they feel about it, and the overall size of your audience. When metrics like social media engagement and web traffic steadily increase, it means more people are becoming familiar with your brand. The greater familiarity they have with your brand, the more likely they are to do business with you.

Customer Conversion Key KPIs

In the digital marketing world, a conversion describes the intended action you want customers to take. Common examples include filling out a form, making a purchase, hitting a click-to-call button, or requesting a quote.

When a customer clicks on a 20%-off display ad for shoes and completes a purchase, that conversion is attributed to digital marketing efforts.

Conversions tell the story of which digital marketing services are turning general audience members into customers.

These KPIs measure conversions:

Conversion rate: Calculate conversion rate by comparing the number of people who completed the intended goal versus the ones who did not. For example, if you get five form fills out of 100 visitors, that equals a 5% conversion rate.

Leads generated: A lead is an individual who isn’t a customer yet, but they’re on the path to becoming one. For example, when a person schedules a test drive or requests more information about a specific vehicle, that is a lead a car dealership can potentially convert to a sale.

Cost per click (CPC): Clicks that are attributed to marketing efforts are an important KPI. When digital marketing firms run display ad campaigns, they work within the parameters of their campaign budget. For example, if the campaign cost is $1,000 and it yields 10 clicks, that equates to a $100 cost-per-click rate.

Time to conversion rate: Some customers convert upon their first interaction with a brand, but more typically, others may take months. Time to conversion is the average time it takes for a customer to complete the desired action, which helps businesses gain a better understanding of their sales cycle and which marketing touchpoints require adjustment.

Churn rate: Businesses tend to focus on acquiring customers, but lost customers warrant attention, too. Churn measures the rate at which customers are abandoning the brand. For example, if a subscription dog treat business starts with 1,000 subscribers for the month, and 100 of them cancel, that equates to 10% churn. High churn rates are an indicator that the business must refocus on customer retention efforts.

Customer Acquisition and Value KPIs

When a business or a digital marketing company runs a campaign, the number of customers acquired and their value justifies their marketing budget.

The following KPIs measure customer acquisition and value metrics.

Cost per acquisition (CPA): CPA measures the average cost of acquiring a customer through a specific marketing channel. For example, if your company spent $1,000 on a social media display ad campaign and got 10 new customers out of it, your CPA for that campaign is $100.

Customer lifetime value (CLV): After the initial acquisition, naturally, companies want to know how much revenue they can expect over the life of the relationship. Businesses can calculate this by figuring out the average dollar amount per transaction multiplied by annual purchase frequency, then extrapolate that figure over the estimated length of the relationship.

Return on ad spend (ROAS): ROAS is the metric that evaluates digital marketing at a macro level. It’s calculated by dividing the revenue that’s attributed to marketing by the cost of the marketing campaigns. For example, if your company made $500 in revenue off $100 digital marketing spend, that equates to a 5:1 ratio or 500%.

Are Your KPIs Any Good?

To understand whether your digital marketing efforts are achieving spectacular results, you may be tempted to assume whether they are or aren’t by looking at your own KPIs.

But to understand whether your campaign is working for you to help you surpass your competition, you actually need to compare yourself to industry average KPIs. For example, a 5% conversion rate on your PPC ad may seem paltry, but if the industry average is just 2%, your ad is actually performing better than you think.

You also want to consider whether the results of your digital marketing efforts are serving your business and helping you reach your goals. By choosing the right KPIs to track and aligning your objectives with tactics that support them, you’re well on your way to successful campaigns.

Work With a Data-Driven Digital Marketing Firm

An effective digital marketing strategy generates brand awareness, creates conversions, and nurtures leads into loyal customers. Admittedly, some of your digital marketing efforts will prove more successful than others.

By understanding what KPIs measure, you will be more empowered to make decisions based on data rather than guesswork.

Each metric provides a unique perspective on campaign performance, helping refine the digital marketing strategy and make meaningful campaign optimizations. Organizations that want to learn how to make the most out of their ad spend should contact a full-service digital marketing firm that offers a comprehensive list of solutions, including:

• Paid media
• Social media management
• Search engine optimization (SEO)
• Graphic design and creative
• Digital audio and video advertising
• Website design

Effective marketing strategies utilize a combination of tactics working in concert, helping organizations connect with their customers at the different phases of their journey. Moreover, digital marketing companies can justify the value of their marketing efforts using KPIs, providing business owners with confidence that their ad campaigns are yielding results and worth the investment.