Measuring your online marketing efforts is vital to understanding the effectiveness and viability of your value-based messaging and business model.
For business owners and small teams, we recommend monitoring your performance on a monthly basis. In this article, we distinguish between marketing key performance metrics and business-relevant formulas and their unique purposes.
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Small business formulas are used to monitor overall success and growth in areas of marketing and advertising, sales, operations, finance, and more. Marketing key performance indicators are top-level measures of performance across marketing and advertising distribution efforts as they relate to overall business goals.
It’s critical to measure both, however, the frequency with which business owners measure and analyze performance across their strategic business and marketing efforts will vary based on their online campaign timelines and acquisition goals.
Small Business Formulas
Below are some of the most common and essential small business formulas.
It’s recommended that business owners and team leads measure these on a monthly basis, however startups and new micro businesses may require more frequency in their performance monitoring due to unstable sales and higher acquisition costs typical among businesses within their first two operational years.
Cost Per Acquisition = Total cost / number of new customers acquired
Cost Per Lead = Total cost / number of leads generated
Churn Rate = Customers lost / total customers at beginning of time frame x 100
Conversion Rate = Number of desired actions taken / number of visitors x 100
Customer Lifetime Value (CLV) = Annual revenue per customer – customer acquisition costs x number of years as a customer. This could also be written as CLV = average revenue per account x gross margin / churn rate.
Demand Curve (linear) = Qd = a – b(P). This formula showcases the relationship between price b(P) and quantity demanded (Qd). This is used when demand follows a straight-line relationship. Here, elasticity is constantly changing.
Demand Curve (power curve) = y=b, b < 0. This is used when demand follows a typical power curve and assumes elasticity is constant.
Gross Profit Margin = (Total sales – cost of goods sold) / total sales x 100. This is a measure of how much money you will have leftover from your sales minus expenses to cover debt, operating costs, and interest.
Price Elasticity of Demand = % change in quantity / % change in price. This calculates the % change in demand when there is a 1% change in price, assuming all other factors are constant. This is important to know when conducting exact pricing for products or services.
Profit = Sales – cost of goods sold – expenses. This could alternatively be written as profit = sales volume x unit margin – expenditures.
Return on Advertising Spend (ROAS) = Campaign revenue / campaign cost
Return on Investment (ROI) = (Revenue of investment – cost of investment) / cost of investment x 100. This could also be written as ROI = profit from investment / cost of investment x 100.
Sales Forecast = Market size (in units) x purchase intention (in %)
Sales Volume = Target market size x share of target market
Unit Margin = Price – unit costs
Marketing Key Performance Indicators (KPIs)
Below are some of the most common performance indicators for typical distribution channels. It’s advised to pay close attention to these on a recurring basis.
Email Marketing
Bounce Rate = Number of emails not delivered / number of emails sent. These include soft bounces and hard bounces. Hard bounces typically mean the email address is no longer active or an invalid email. Soft bounces can be resent.
Click-Through Rate = Number of clicks / number of impressions x 100
Delivery Rate = Number of emails delivered / number of emails sent x 100
Open Rate = Number of email opens / number of emails delivered x 100
Reply Rate = Number of email replies / Number of email opens x 100
Subscribers / Sign-Up Rate = Number of email newsletter sign-ups / number of visitors x 100
Social Media
Impressions-to-Click Rate (or Click-Through Rate) = Number of post link or description link clicks / number of impressions
Page Click-Through Rate = Total number of page views / total number of impressions during the time frame x 100
Organic Search
Click-Through Rate = Number of site clicks / number of search appearances
Podcasts
Engagement Rate = The number of listens / number of appearances
Episode Download Rate = The number of downloads / number of listens x 100
Website Conversions
Engaged Site Visitors = Number of site visitors who met engagement criteria / total number of site visitors x 100
Traffic Volume % Change = Traffic volume 2 – traffic volume 1 / traffic volume 1. For example, month 1 saw 200 site visitors and month 2 saw 500. The percentage change would be 500-200 / 200 x 100 = 150% increase from month 1 to month 2.
Lead Conversion Rate = Number of sign-ups / number of page views x 100
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