Marketing Metrics That Matter

If you are reading this article you probably came from part one of the series — “Stop Measuring the Wrong Things in Your Startup.” If not, go check it out. Part two of the series focuses strictly on measuring the most effective marketing metrics in your startup.

Marketing is one of the easiest areas in a company to chase red herrings. Social media is a classic example. Everybody wants followers, but is that the best thing to be measuring? If you say I have 100,000 followers does that affect the bottom line, top line, or any line at all? Another classic red herring is the trade show. For my entire career, I have heard people say it’s impossible to measure return on investment (ROI) for trade shows. This statement is not true anymore. We’ll discuss this more in depth in a future article. Advertising is another area that people have traditionally taken a lazy marketing approach and not measured effectively. Marketing is one area that people have chalked-up to brand recognition and awareness instead of hard metrics that move the company’s and the Entrepreneur’s overall goals forward.

So how do you know what to measure? How do you know if you are hitting the mark? Here are four questions that will guide you in making marketing decisions. If you ask yourself these four questions sequentially every time you have a critical decision, your startup will begin to grow at faster rates and you won’t have to wonder if you are doing the most important marketing activities for your new businesses growth.

1. Does this marketing activity increase the revenue of my startup?
2. Does this marketing activity increase the profitability of my startup?
3. Does this have the highest ROI of any activity I can do?
4. How do I measure the three items above?

Let’s apply these questions to one of the marketing channels we discussed above — Social Media

Does getting Instagram followers affect revenues positively?
-No, not directly

Does getting Instagram followers increase profitability?
- No, not directly

Does getting Instagram followers have the highest ROI of any activity I can do?
- I don’t know. I haven’t associated it with revenue.

How do I measure the revenue, profitability, and ROI of getting more followers?
- With just followers, you can’t, but asking this question will lead you to a deeper level of understanding where your marketing time and dollars are going and how effective you are as an Entrepreneur and marketer.

I think you can see the pattern. The top of the funnel is not enough. This is where we go from being a lazy marketer to being an Entrepreneur with true vision. Stop measuring the top of the funnel alone (followers). Once you are measuring all the way to the end of the row (revenue), profit and ROI will flow naturally.

Measuring social media followers is only the first step. I’ve seen Entrepreneurs proudly boast with head held high that they have a large Instagram following. If that is where the measuring stops then the Entrepreneur missed the mark entirely. An effective Entrepreneur /marketer will connect followers through every step in the funnel and end up with a revenue number.

The important number to be touting is the number of dollars made from social media. Several years ago I was able to visit the DELL Computers — Social Media Command Center. I saw how effective they were with conversions through Twitter, Facebook, etc… It was amazing. Sure they knew how many followers they had, and how many likes they were getting for their posts but they didn’t focus on those numbers. I don’t think I even heard the “Follower” stat more than once the entire time I toured the facilities. Instead, they talked about how much revenue they were making from each of the channels. The one that really stood out to me was Twitter. They were accurately attributing over $50MM to effective conversion through Twitter. Instead of boasting about how a lot of people thought they were cool and wanted to follow them, they were singularly focused on how that related to dollars in the bank.

The point of getting followers on any social media platform is to advance them to the next step. Don’t get me wrong I’m not saying to stop all social media activity. The opposite is true. Social media is a great channel to create exposure and engagement. What I am saying is that getting followers is just the top of the funnel (TOFu). The follower needs to turn into a buyer. Following is nice, engagement is closer, conversion is the goal. Here is an example of a funnel for social media.

The top of the funnel (TOFu) is Awareness. The middle (MOFu) is interest, engagement, and consideration. The bottom of the funnel (BOFu) is decision and conversion.

An effective Entrepreneur/Marketer will measure each of these segments including the individual steps as a whole. Once the complete process is understood, that Entrepreneur will start pulling levers on each individual step. For example, if you know that out of 10,000 followers 500 will engage at any given time and out of the 500 engaging 25 will show some sign of interest or inquiry and out of the 25, two will make it to the purchase stage then you can look at each of these levels in the funnel and start fine-tuning. One tweak such as increasing the conversion rate from 500 engaged followers to 600 will then flow down the pipe and result in higher revenue overall.

Using this formula, the next time you go into a meeting to report on marketing activity you will be able to say, “Marketing produced $500k in revenue.” Instead of, “Marketing got 100,000 new followers.”

After revenue comes profitability and ROI. Profitability is a simple formula of removing the cost of marketing activities from the revenue those activities produced. ROI is making profitability a percentage or multiple instead of a dollar value. Another way of putting it is how many dollars did you stick in the top of the marketing machine and how many additional dollars came out the bottom. So, if you spent $1 and made $5 then your ROI is 4x or 400% and you made $4 profit.

Finally, the last step in becoming the most valuable Entrepreneur Marketer is to compare all of your activities and look at which activity has the highest ROI and invest more dollars into that activity. Another important factor is to evaluate all the funnels and see if you can create higher ROI for other activities,

Let’s ask those same four questions again but with the entire social media funnel considered

1. Does the social media funnel affect revenues positively?
   - Yes, we now have an additional $500,000 in sales directly attributed to social media
2. Does getting social media increase profitability?
   - Yes, we had a profit of $400,000 in profit from $100,000 in expenses.
3. Does flowing customers through the social media funnel have the highest ROI of any activity I can do?
   - Currently, it is the #2 highest ROI producing activity for my startup. I’ll continue these activities and do even more.
4. How do I measure the revenue, profitability, and ROI of getting my complete social media funnel?
   - 100,000 followers in the TOFu equals 10,000 engaged followers in the MOFu and produces 500 buyers per month in the BOFu equaling $500,000 in revenue, $400,000 in profit and a 4x(400%) ROI.

With these numbers, you can now confidently say that you are measuring the marketing metrics that matter in your startup.