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Is your Marketing Investment showing a Return - Key Performance Indicators for Small Business

Updated: Dec 27, 2021


The importance of key performance indictors for small business

The day to day grind of running a small business can feel endless and some days leave you questioning your decision. Goals seem so far away and achieving them feels like climbing a mountain. What I personally love about key performance indicators is that they can give you short term win, that jolt of electricity to keep going. As you see weekly reports, you can either celebrate a success or realise you need to make some small change to bring business back on track. Business reports tracking your key performance indicators (KPIs) are valuable and essential tools for any business regardless of size or industry. They provide a means to track and analyse the performance and overall health of your business while identifying areas for improvement and opportunities for growth.


The purpose of business reporting

The aim of KPIs is to provide critical analysis of how the business is tracking in all areas. They should guide decision-making and allow you the opportunity to investigate and solve any identified issues. KPIs are done through gathering and reviewing of information from all areas of the business eg. Online metrics, financial results, operations, inventory control or any area of the business where performance is monitored and measured. If you're not already doing this, think about incorporating the suggestions below to begin to understand your marketing performance. I recommend having different report frequency, weekly reports allow you to tweak campaigns and also keep you motivated while monthly reports will allow you to start seeing trends. Yearly reports will provide you a view of the past to plan for the future and help with annual planning

Here are some marketing KPIs you should be tracking

I like to create a funnel and measure each step of the funnel to assess opportunites for further growth in my business. Each step in the funnel will help me understand where my marketing campaigns is going right or wrong. A marketing funnel shows how potential customers start their purchase journey from awareness to purchasing and if all goes to plan, repeat purchase. The funnel can be specific to your business or marketing campaign and is measuring customer engagement at each phase. Below is a guide

Marketing funnel - shows how the customer starts their purchase journey from awareness to purchase or loyalty

BOUNCE RATES

At the top of the funnel you'll review potential customers that walk into your shop or click to visit your site but aren't interested in purchasing. You've done all this work to create awareness but they don't seem to be interested. There are so many reasons for high bounce rates and the average digital KPI is approx 70%. It could mean what you're advertising seems interesting to the audience but when they hit your shop or site, it's not what they were expected. Is your advert wrong , is your site landing page set up poorly or does the site load slowly. Here is a link to some further information on this problem. This is an easy measure for digital platforms but harder for brick and mortar businesses but why not start counting people who enquire or walk into your business and never talk to an assistant etc. Let dive into the calculation

There are two ways you can measure this:

  1. Online, it's those that bounce straight off your site and google will give you this information easily but the rate is measured by below. it's basically, the percentage of people that come to the site that bounce straight off vs those that stick around

  2. The number of people that consider my business by spending time with a sales assistant or show intent by adding items to their cart/ Number of people that walk in or hit my site and they walk back out


1,000 visitors spoke to a sales representative or looked at 2 or more pages on our site/ 50,000 visitors to our business or impression on our site. Your business bounce rate is 98%. This is really high and action is required. Here are some further resources to help

LEAD TO CONVERSION RATE

Lead to conversion rate KPI is the rate at which customers move from consideration to purchase. How many people do we actually know are interested in the product and then actually purchase.


This could mean customers have added something to their cart and then actually move through to a purchase or the number of people that sign up for a newsletter and purchase based on the newsletter content. This KPI will show you if your customer is interested but not enough to purchase. Customers often drop out due to high shipping costs or poor digital shopping experience. Please see more reasons here If you see a really poor KPI here then it's an opportunity to look further into the measure and understand what's happening. These calculations should be done per campaign eg. Newsletter campaign, social campaign or your website. You need to also calculate this for organic traffic to your site. Let's look at the calculation



100 people added the sale item to their cart but only 20 completed the purchase. This is a conversion of 20% which I could consider low. The average cart abandonment rate is approx 70% so you would hope you conversion rate is approximately 30% or higher.


If you're a Real Estate agent and you're trying to attract people to sell their houses with you. How many people talk to a sales agent and enquire / those that actually sign with your agent



RETURN ON INVESTMENT

Understanding the benefits of your investment in marketing is vital - return on investment

How much did you spend on the campaign vs how much money did you make. This can sound simple but there are often hidden costs that go into the calculation.

1. Calculate how much money you spent - include all cost not just the campaign. eg. Agency costs, advertising costs and any cost attributed to that campaign eg, total cost of campaign cost $1,000


2. Revenue or how much money did you make from the campaign - total value for that period eg. campaign revenue $5,000Calculate (Revenue from campaign - Cost of campaign)/Cost of


3. Campaign or (5,000-1,000)/1,000 = 4,000/1,000 or ROI of $4. For every $1 you spent you made $4.

What is a good ROI? There is no precise answer as this is your business and ROI can be a good way to show which campaigns are working better for you. It can be used as a decision tool.


The above calculation looks really simple but attributing sales to one individual campaign isn't always simple eg. Your site may get great organic traffic but is this traffic due to a a billboard or some social media posts you've been running all year. It shows me that people are aware of your business but attributing it to one campaign can be difficult if you're running a number of campaigns at the same time.


You need to be aware that for highly competitive markets your ROI maybe lower as you need to compete more aggressively to create awareness. Measuring ROI requires patience, you may not see the results of a campaign for months. As a marketer, I'd be extremely happy with an ROI of $5 but I would want to put it in perspective of my historic marketing campaigns.


MEASURING LOYLATY OR CUSTOMER LIFETIME VALUE (CLV)

Customer Lifetime Value is the profitable value of a customer throughout a given period or lifetime of your business relationship. The cost of maintaining the customer maybe rather low compared to generating new leads and you may take a different approaches for this customer, spending funds differently eg. adding free tailored services or specific customer service manager. These costs are required to maintain the relationship with this customer. Let's do the calculation

Cost of acquiring and maintaining this customer/earned revenue from this customer. You can use this calculation of a 12month period to determine the CLV



FURTHER RESOURCES

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