The performance of your business is a key part of your business dashboard. It is paramount that you know how well (or poorly) your business is performing. Without this knowledge you are simply guessing your way through the complexities of running a business.
In this first part of the series, we will look at metrics related to lead generation.
One of the important factors in measuring performance is to not measure irrelevant areas. For that reason this article present three key metrics. In the end, it’s up to you what you measure. Just be sure those metrics actually give you the information that you need to make better business decisions.
The number of leads that you generate in a given period is a key measure of how well your marketing activities are performing. The basic measure tallies every lead that you generate in a given period of time. To get a statistically significant measure a monthly tally works well.
This metric can be broken down further depending on the level of specificity that you require. You might differentiate between leads from different campaign, or different sources. It is recommended that a total is recorded so you can always check the end result of all of your efforts.
Cost per lead
Make no mistake, you buy each and every lead that you generate. Even the referrals cost you money. It is important, therefore, to track what these leads actually cost you. With this information you can better plan how much you are willing to spend on marketing and advertising. You can also make better decisions because you can make better estimates around what it will take to reach the leads goals that you set yourself.
The simplest way to calculate your cost per lead is to divide your marketing spend for a specific period by the number of leads generated in that period. So, a monthly marketing spend of $250 that generates 30 leads equates to a cost per lead of $8.34.
You may also drill down by calculating cost per lead for specific campaigns and sources.
Return on investment (ROI) is a calculation that tells you how much money you made – or lost – relative to the money you outlaid. You can use this calculation to determine the performance of your entire marketing activities over a certain period, or for specific campaigns.
To calculate ROI subtract the cost of the investment from the gain, then divide the total by the cost.
ROI = ( Gain – Cost ) / Cost
Let’s say in a specific ad campaign you made a total of $1230 in sales with a $124 ad spend.
That would look like:
1230 – 124 = 1106
1106 / 124 = 8.919 = 891.9%
That would mean you make almost 9x ROI.
Calculating your ROI can give you a method of estimating what certain ad spends might return in future. It also provides a way to compare campaigns.
Remember what Mark Twain said, “There are three kinds of lies: lies, damned lies and statistics.” These metrics can give you the info you need but if used out of context they can misinform you. Be certain of the context of these metrics and use them wisely.