Entrepreneurs are famously time and resource poor. The business leaders of tomorrow have big ideas and even bigger goals, but often do not have the marketing firepower or funding to get there. These are the three key performance indicators startup marketers must get right in 2019, writes, Kazu Takiguchi, CEO and founder of Creadits.
It should come as no surprise that startups and entrepreneurs want – and need – to stretch every dollar as far as possible. It is no different when it comes to digital marketing. Smaller businesses typically have a limited advertising budget and, as such, need to make sure every dollar is spent wisely and effectively. Therefore, key performance indicators (KPIs) are integral markers for businesses to oversee their budget and effectively spread the word of their offerings.
Coming into 2019 there are three major KPIs that every entrepreneur and small business should be keeping a close eye on: the lifetime value of customers, the return on advertising spend and cost per acquisition. These results offer a true overview of any marketing campaign’s success or failure – allowing business leaders to change their strategy to make every advertising dollar count.
Think about lifetime value
Monitoring the lifetime value (LTV) of customers is integral to any advertising success – after all, this process is about estimating the average monthly amount a customer will spend, how long they will stay with your business, and hence their value over the long-term. This marker helps businesses project their profitability and whether or not they are on track to meet their marketing goals.
Alongside the LTV of any given customer, looking at how the business managed to attract the said customer is also vital. Perhaps it was through Facebook? Or Linkedin? And, are there value differences between customers derived through different streams? Are some staying longer than others?
This information lets any marketer discover where their most valuable customers are coming from and where it’s worth investing their advertising dollars. Further, identifying what is the right combination of messaging, ad creative, format and platform to acquire customers with the highest LTV will lead to long-term marketing and business health. The truth is it costs much more to acquire a new customer than to retain them. Therefore, marketers should be spending their money on acquiring the right type of customers and keeping them – especially in the contemporary landscape where digital advertising is getting more expensive.
For instance, last year’s Cambridge Analytica scandal and resulting user disengagement prompted changes to Facebook’s advertising algorithm. As a result, advertising spending rebounded but researchers found the return on investment (ROI) had dropped significantly. Simply put: users aren’t seeing or clicking adverts like they used to. This makes life tough for advertisers when the online big players remain to be Facebook and Google.
Secure revenue on that ad spend
Return on Ad Spend (ROAS) is still important to advertisers, but this year we should go beyond simply measuring the costs of placing ads and – instead – look at the overall cost. Advertisers must consider all costs and where the return on that expenditure comes from. For example, running ads on Facebook can come with hidden costs like using a media buyer or social media manager to post on the platform. Creative and content generation can be another cost. Companies often don’t take into account the costs that are incurred to produce static, animated, video, and playable ad creatives – which are vital expenditures for small-scale marketing teams.
In the current advertising climate, the effectiveness of ads runs out quickly. If a company is using $10,000 to produce one advert and the results don’t justify that cost, they would be advised to find ways to lower their production costs and perhaps cut down spending elsewhere. In turn, those savings can go toward future and more targeted ad spend.
If a company does want to spend a lot on a big production, there needs to be value for money. For example, different cuts and reworked edits of an expensive advert can provide a more varied ad campaign – which is important on social media platforms where users can become tired from repeated ads. The headline here is that marketing needs to be economical.
From potential to purchase
Lastly, it is vital to consider the total cost over different channels. Almost in tandem with the ROAS, cost per acquisition (CPA) is integral for any marketing team to monitor. The former takes a more narrow view to measure the success of ads based on the number of leads generated while CPA goes one step further to include all costs incurred up to the point a prospect becomes a paying customer.
Objectively CPA is still the most crucial performance indicator because it affects the bottomline directly. Calculating the CPA also requires marketing teams to dive into every sales and marketing activity, how much they cost, and each of their roles in converting someone into a customer. This is simply good marketing information to know – and especially important today with the sheer amount of different platforms that are out there.
The online world is full of numerous touchpoints over many websites, and considering the total cost of advertising gives a holistic overview of advertising spend versus conversion. Perhaps the business paid for an advertorial, or native advertisement, or Google Adwords which did not immediately result in a sale. However, months later a customer may remember this advert and join the business. This success is much harder to gauge. Nonetheless, the cost and effectiveness of these advertising types should not be discounted from the marketing campaign. Advert attribution and tracking are very important to the holistic and ultimate cost of the marketing campaign.
Keeping an eye on any campaign’s success rate is important, as is the channel or platform from which the paying customer has come from. The concept is to monitor these elements in conjunction to attain an overview of any marketing team’s spend and success. This is important, especially when the marketing campaign does not work. Entrepreneurs and startups want to be self-sustaining as soon as possible, so keeping the CPA low is crucial. Furthermore, it will set the startup on a fast-track to success within six to twelve months and ensure that mistakes are not made over and over again.
Armed with these tools, marketing teams and entrepreneurs will be ready to prepare their startups for success in 2019 and beyond.