The beauty of online marketing is that you can track everything.  The problem with the ability to track everything is knowing what to track.

  CFO’s value certain metrics, while marketing executives value a different set of metrics.  There are substantive metrics and then there are those “sexy” measurements that are flashy and look good on paper, but don’t really tell a story.

To satisfy the demands of several departments, the right measurements need to account for all of the costs associated with a campaign.  CFO’s will want to track as much of the costs associated with a campaign as possible.  Things like overhead, salaries and campaign specific expenses help CFO’s determine a projects viability.  For the marketing department, analytics like cost-per-click, cost-per-customer and cost-per-follower provide insight into a campaigns performance.

Choosing between all of the available marketing metrics can be a daunting task, but armed with a better understanding of some of the common measurements will allow you to tell a better story.  Recognizing that different people need different information, here is an in-depth look at a measurement that is easy to understand yet tells a powerful story.

Customer Acquisition Cost

The Customer Acquisition Costs (CAC) is a number that satisfies the CFO’s needs while providing an effective measurement for the sales and marketing department.  In its simplest form you take all the costs associated with acquiring customers during a certain time period, then divide that by the number of new customers acquired during that period.  For example if you spent $1,000 on your sales and marketing department (including promotions, programs and salaries) during the month of June and you acquired ten new customers, the CAC cost would be $100.   You can include as many costs in this measurement as you want, but the main thing is to be consistent and track it over time.

If this cost goes up, you know right where to look to see what is driving it.  If the costs associated with your sales and marketing department are constant, then look at the campaigns you are running to determine the effectiveness of each.  On a smaller scale, you can apply the formula to each of the campaigns that you run—using pro-rated shares of expenses and specific campaign expenses—to determine which campaigns provide the biggest bang for the buck. 

Campaign Analysis

Some useful campaign analysis measurements to help you understand what is happening are:

1. Cost-Per-Click. According to Google, Cost-Per-Click (CPC) is the amount you earn each time a user clicks on your ad. The CPC for any ad is determined by the advertiser; some advertisers may be willing to pay more per click than others, depending on what they're advertising.  Each click is considered an interaction with a customer—like a customer walking in the front door—and is the beginning of the lead nurturing phase of the customer cycle. Your cost per click is determined a series of variables—competitiveness, quality score and ad rank—and averaged over the life of a campaign.
2. Cost-Per-Mille.  Cost-Per-Mille (CPM) is also referred to as the Cost-Per-Impression (CPI).  This metric measures the cost associated with a thousand advertising impressions.  This is useful because it allows you to compare costs across mediums.  For example a direct mail piece may cost $500 for 2,000 pieces, resulting in a CPM of $250, whereas a banner ad on a webpage may cost $500 for 200,000 impressions, resulting in a CPM of $2.50 (500/200,000)*1,000.
3. Cost-Per-Action.  Cost-Per-Action or Cost-Per-Acquisition (CPA) is how much you pay to convert a lead into a sale.  Similar to CPC, CPA requires the lead to take a specific action—fill out a form, buy a product—before a cost is incurred.  Like the CPM metric, you calculate the CPA by dividing the total cost of the campaign and divide it by the number of acquisitions.  For example a campaign that costs $200 and generated 50 acquisitions, results in a CPA of $4.

Marketing metrics are useful tools that allow you to understand what is going on in your marketing department.  Gone are the days when companies blindly spend dollars on expensive television ads and not expect to track and measure the results.  The internet has given us the ability to measure almost every aspect of our marketing efforts, the trick is to be consistent and respond to what the metrics are telling you.  Using the marketing metrics mentioned above will give you the insights you need to make the most of every marketing dollar.

When you work for yourself, you’ll find that the business world is filled with terms and jargon that you may not fully appreciate. Knowing these terms is essential to understanding business metrics so you can constantly improve upon what you offer, retain your customers and bring in new business.

Must-Know Business Terms for Your Professional Vocabulary

• Business metrics: Business metrics are quantifiable measurements that you compare to established goals or benchmarks and use to track and analyze the performance of an organization or a specific process. Unlike key performance indicators, or KPIs, business metrics track all the areas of an organization instead of critical target areas. An example of business metric includes comparing the number of sales to past performance.

• Key performance indicators (KPI): KPIs are quantifiable measurements that show the effectiveness of a process as you try to achieve a business goal. Common KPIs include analyzing the growth of the business’ sales revenue or determining the effectiveness of a marketing campaign.
   
• Cost to acquire customers (CAC): Also called a customer acquisition cost, CAC determines the cost of gaining a new customer. To determine your CAC, add the cost of marketing, sales and related salary and overhead expenses, and divide the total by the number of new customers in a specific period. In addition to learning how much it costs to gain a new customer, you’ll have a better understanding of how CAC fits into your operating budget and how much you can afford to spend.
   
• Long-term customer value (LTV): Also called the lifetime value of a customer, the LTV is the amount of repeat business you can expect from a customer. Business owners use this metric to determine how much to spend to on CAC. To gain a better understanding of LTV, you must determine how often the customer shops and how much she spends. When you know this, you can decide how to formulate customer retention programs and services.  
   
• Allowable acquisition cost: Relating to CAC and based on LTV, this is the amount of money you’re willing to spend on every new prospect per campaign. Business owners generally approve allowable acquisition costs as a short-term strategy or if there are cash flow concerns.
   
• Investment acquisition cost: Relating to CAC and based on LTV, this is the amount of money that you’re willing to spend per prospect even though it will lead to an initial loss. Business owners generally approve investment acquisition costs when they’re part of a long-term strategy and when other resources will absorb the losses.
   
• Churn rate: The rate in which a business loses customers. A higher church rate signals higher customer losses and lower retention rates, as well as a rising CAC and decline in LTV.
   
• Unique selling proposition (USP): The USP is what makes your product or service better and different from what the competition offers. You communicate the USP to prospects to encourage them to buy. For example, if you offer HVAC services, you may sell comfort, not necessarily air conditioners. Base your USP on customer behaviors, motivations and buying decisions.
   
• Buyer persona: A representation of your target consumer or the type of consumer you believe is most interested in your products or services. Create a buyer persona based on factors like the target's gender, age and socioeconomic status.
   
• Branding: The act of creating a symbol, name, design or slogan that identifies and differentiates your business and products from other businesses their products.
   
• Brand recognition: The extent to which your target market or the public identifies your brand by its attributes. Brand recognition is successful when target consumers identify a brand with visual cues like slogans, logos or colors.
   
• Competitive analysis: The process of identifying the competition and evaluating their strategies to learn their strengths and weaknesses as they relate to your own service or product. This analysis is vital to a successful marketing plan and USP. As you evaluate your competitors, learn about their past and current strategies, the platforms they use to market their goods or services, the potential threats they pose to your business and the opportunities they may create.
   
• Sustainable competitive advantage: A competitive advantage that’s long-term and difficult for competitors to surpass or duplicate.
   
• Platform: The manner in which your business delivers media content. Examples of platforms include radio and television advertisements, social media posts, websites, blog posts and press releases.
   
• Revenue percentages: Most businesses have different sources of revenue, unless they only sell one product. Revenue percentages refer to the revenue that each product or service generates for the business. Keeping track of this metric can help you see changes in consumer spending habits and/or market or industry trends.
   
• Stakeholders: Any group inside or outside of the business that has a stake in its performance. Such groups include employees, customers or clients, the surrounding community and shareholders.

If your business has a web presence, you were probably told by an over eager sales guy or an excited staff member that the Internet will provide you with the opportunity to offer products and services to a huge audience. It’s true  that there are billions of people who use the Internet on a daily basis. This tremendous online audience gives you many options regarding the marketing of your brand, products, services, and company message.

But even though there are billions of people who can be reached on the Internet, successful businesses on the Internet understand that the number of people on the Internet is impressive, but success on the Internet is not about trying to reach the everyone on the Internet.  The key to success on the Internet is defining, determining, and reaching your target market.

A target market is the market that is interested in your products, services, or overall message because what is offered has an appeal to the market based on one or more personal interest. In addition, a target market is where businesses can find people who tend to not only have an interest in what is offered, but the people in the target market actually use the products or services offered on a regular basis. The people in a target market have shown an interest in the past for the products or services offered, and the people are highly likely to make a purchase regarding the products or services.

Many businesses that offer products or services online make the mistake of defining the wrong target market for the products or services. This can be a fatal mistake because targeting the correct market is where the vast majority of sales leads, sales, referrals, and interest come from regarding most businesses. Most businesses make a mistake defining their target market is because the decision is made on assumptions rather than actual market research and study.

While products and services can be offered to a variety of markets, the target market should be the market that already has an interest in what is offered along with having a personal connection and deep desire to either purchase, learn more about, or use the products or services that are offered.

In simple terms: an online golf product business may be able to market to a variety of markets; however, the target market would be the people who either play golf or have an interest in learning how to play golf. Even though, people who watch golf on television maybe a market to consider, the people who have a personal interest in playing or learning how to play golf are much more likely to purchase golf products from an online golf store.

Research is vital to determining the target market for any online business because research helps to identify the target market. Some of the primary questions that you must consider during market research include:

1. Define the type of people who might be interested in the products or services offered.
2. Define the type of people who use the products or services offered.
3. Define the type of people who have actually purchased the products or services offered.
4. Define the type of people who can afford the products or services offered.
5. Define the various interests of the people who might purchase the products or services offered.

For any online business, defining the target market is crucial for online success. The target market should never be assumed. Sincere detailed research should be done to correctly identify and define the target market.