Metrics That Matter for Growth And Revenue
When I first started out in marketing, one of the tasks I was appointed by my manager was to be ‘the report keeper’. I was responsible for painstakingly updating each of company’s monthly reports on our website, campaign and product performance.
This was also my first introduction to ‘Google Analytics’ – a must-have reporting tool for any web master or marketer. Upon first opening up the Google Analytics reporting dashboard, I was met with hundreds of reports, thousands of numbers and strange metrics I’d never even heard of! I was absolutely mortified to say the least…
“What the hell is a bounce rate?” I thought to myself.
It became even more complicated when I started dealing with pricing formulas and attribution – CPC, CPM, CPA, ROI… What the?!
More and more metrics were flooding my mind – click through rate, exits, sessions, new sessions, users, time on page, time on site… It seemed endless.
As I was putting together these incredibly lengthy and detailed reports for my superiors, I kept thinking to myself “But why does all of this matter?”
If me, a marketer, couldn’t see the value in passing on such fluffy metrics, why would the CEO and Managing Director care?
The truth is, they didn’t care. Their only concern – the bottom line.
- How effective is expenditure?
- How much money are we making from our efforts?
- How can we get more bang for our buck?
- Are we growing?
When I realised this, I decided to go off on my own and produce a new report – one that cut out all of the fluff and focused only on the big picture. I made this report the front page of our old reports and ran it by my manager.
“I’m impressed….” he commented.
The report’s new front page became the only page we distributed. The old fluffy reports became a sight for the marketing team’s eyes only.
Now, I’m not saying those fluffy metrics don’t matter – they do.
A marketer knows that if a bounce rate (percentage of people that exit the site after viewing only this page) on a certain page is too high, then there must be a problem with the page. It’s not keeping the attention of the visitor and we need to do something about that.
A marketer knows that if time spent on homepage is only 15 seconds, there’s no use having 5 sliding banners with different messaging that display for 5 seconds each.
A marketer knows that a click rate of 0.5% on a particular call to action button is a bad result if the site average is around 3%, and perhaps the button needs to be more prominent and better designed.
Each of these fluffy metrics is like a little hint for marketers – a byte of data that can help us to incrementally improve every aspect and component of our websites. But this information is not entirely relevant or necessary to a managing director, a CEO or – a client. What matters most is that we’re making more money, and more business using the budget and advertising methods we have employed.
It’s a marketer’s job to use the fluffy stuff to make the money metrics BETTER.
So, with all that I’ve learned – here are the metrics that matter for business owners:
1. Website Traffic
The total number of visitors to your website speaks for itself. What worth does a website have if no one is visiting it? You can have the most powerful sales funnel in the world, but it won’t mean a thing without traffic.
Traffic is fundamentally important for any successful website. By tracking your month to month traffic, you are able to monitor your site’s overall growth.
You’ll also be able to see when your traffic plateaus or declines – whether that be on particular days of the week or months of the year. You may come to realise that February is your slowest month, or that Monday’s don’t bring you a lot of traffic. This information can help you to better craft campaigns and not be shocked when traffic experiences an unexpected turn.
But traffic alone will not give you all the answers when it comes to how your website is performing. For example, a website may be showing steady month on month growth. It may even show some serious spikes in traffic – but if that traffic is dropping off without taking any action then it really holds no value. So traffic figures should only be read into with the support of other important metrics.
2. Traffic Sources
Having traffic is one thing, but where it comes from is another. Understanding exactly where your traffic originates is a very useful metric to measure when it comes to determining where to spend time and money.
Google outlines 4 major sources of traffic:
Organic: This refers to your SEO traffic – people that found you by using search such as Google, Yahoo or Bing. SEO is one of your most powerful sources of traffic as it is a long term strategy that will continue producing results for you (if done correctly) long after the initial work is done. Most businesses will want the majority of their traffic coming from organic search.
Paid: This refers to traffic you have paid for via Google AdWords. Every visitor you receive via this channel has been paid for. The name of this cost is CPC or ‘cost per click’. The moment you stop paying for AdWords, this traffic will decline. This metric is a good indicator of the performance of your AdWords campaigns.
Direct: This is the most desired traffic channel. Why? Because it represents the visitors who have typed your website URL directly into their web browser. They’re familiar with your brand. Perhaps they found your URL in a TV or print ad. Perhaps they are a return customer. Keep in mind this metric typically includes friends, family and yourself – depending on how often you all hit your own website. Filter any traffic from yourself if you fear this may skew your direct traffic results.
Referral: This represents traffic that has come to your from another website or advertiser not on the google network. It could be a listing in the online White Pages directory, or perhaps it is a referral from a local business who lists your services on their index page. If another website has a link to you – it will show up here if someone has clicked on it. A great metric if you’re wanting to measure the performance of a link you paid to have placed on another website, or a partnership you have negotiated.
3. Conversion Rate
Your conversion rate represents the percentage of site visitors who eventually converted into a customer by making a purchase (if you have an ecommerce site) or completing a goal you have setup – such as submitting an enquiry. This is one of the most important revenue metrics to be measuring as it indicates just how much of your traffic was actively engaged with your website and became a lead, prospect of customer.
If you want more information on converting site traffic into a lead, read our post about building a sales funnel that converts. Whether you sell products or services from your website, you need to setup the appropriate goal and conversion tracking so you can measure the success of your website and marketing efforts. Without this, it will be very difficult for you to make improvements to your website.
Google Analytics allows you to see the conversion rate for not only your entire website, but any given page, campaign or traffic source.
4. Value Per Customer
This is literally the average value of each of your customers. To calculate this, the total order value (for ecommerce sites) or purchase value (for service based websites) for all of your sales, is divided by the number of sales. This gives you an average value per customer. This metric is important as it gives you an indication of how much each customer is worth to your business. You may choose to represent this figure as a gross value, or a net value. The net value is calculated by deducting the cost per conversion (covered in the next paragraph) from the gross value.
5. Cost per Conversion
Now we’re getting to the juicy stuff. Cost per conversion is pretty self explanatory – on average, how much was spent to acquire a conversion. This is calculated by dividing the total spend on that particular campaign or channel divided by the number of conversions. I find it useful to have this value shown for each channel, campaign and the entire site.
6. Return on Investment Ratio
This metric and can be enormously insightful when determining how successful a particular campaign or channel is. It’s very similar to the cost per conversion, except instead of a dollar value it is expressed as a ratio. For example, your ROI would be calculated using this formula:
(Total Revenue) / (Total Cost) : 1
So for a $2,000 AdWords campaign, that produced 47 conversions at an average value of $180 would be:
($180 x 47) / ($2000) : 1
Provided the value is above 1:1 then you’re in the clear and making money. But the higher your first digit – the better!
7. Customer Retention Rate
Many marketers and business owners focus all of their attention of new business, and fail to recognise the value of returning customers – the very people who help us to build and maintain profits.
A Study revealed that 25 – 40% of revenue for some of the world’s biggest businesses come from return customers. To neglect your most loyal could be a huge missed opportunity. So measuring the rate at which your customers return is a very important metric to keep an eye on.
This metric is calculated by the following formula:
Number of Return Customers / Total Number of Customers x 100
e.g: (397) / (1264) x 100 = 31.4%
The value is represented as a percentage. The higher, the better.
8.Value Per Return Customer
Similar to the value per customer, this is the average value per return customer. It represents the total value of each return customer divided by the number of return customers. It’s typically much higher than the value of a new customer, and reveals just how valuable return business is. If this value is low or very similar to your value per customer, then you’ll know you need to work on customer retention, upsell and possible improve your sales cycle. You should ideally have a seperate sales cycle for customer retention – one that focuses on repeat purchase.
9. Average Days to Close
A metric many marketers miss, but a valuable one for sure. This metric represents the average window of time it takes for a visitor to travel through the sales funnel, and convert into a customer. Many retail ecommerce site have quite a short closing metric, however some service based sites have much longer windows. Hotel’s and restaurants also experience longer windows as visitors are prone to research in advance before committing to a booking.
Having this metric can help massively with AdWords and other PPC campaigns. For example, if it takes 30 days to close a sale, then your PPC specialist will know how long a campaign needs to run to acquire meaningful results.
So there you have it. My top 9 metrics to track for any business owner, CEO or MD. These metrics represent the bottom low, the overall performance of your digital activities and the metrics that truly matter. Ensure your reports are tracking month on month, and year on year changes so you can accurately measure growth and improvement.