The number one problem I hear with entrepreneurs is that they are monitoring too many numbers, but not the right ones. They have a lot of impressions, likes, and “engagement scores” on their dashboard, but when I ask them what the cost to acquire a new customer is, or what the average order value was last quarter, the room goes silent.
That’s the problem with marketing measurement today. The amount of information is huge. There’s a shortage of clarity about which data actually predicts revenue.
This guide takes you through the marketing KPIs that are really meaningful, their meaning in context and where business owners go wrong. At the end of the day, for both small ecommerce and B2B pipelines, it’s all about spending less time looking at vanity metrics, and more time making decisions you can defend.
What Are Marketing KPIs?
A KPI, or key performance indicator, is a value that is directly connected to a business objective that can be measured. The secret is “tied directly”. Easily measurable isn’t necessarily a KPI. There is no problem keeping track of page views. They’re not usually considered a KPI, as a single page view isn’t enough to determine if the business made money, retained a customer, or moved toward their objective.
So when people ask what metrics in marketing are, the answer is: It’s the small number of numbers that would impact how you run the business if they changed in a negative direction.
This is important because most marketing dashboards are created by default, not design. The metrics that ad platforms will tell you are those that are easy to measure on their end, not yours.
Why Marketing KPIs Matter
If there’s no KPI, marketing decisions are made on instinct or on whatever metric has been on the rise that week. I’ve seen teams spend a lot of money on a campaign because the CTR seemed to be impressive, but the campaign was nevertheless underperforming by missing out on revenue on each and every conversion.
Good KPIs do three things:
- They link marketing efforts with business results. Spend, revenues, and retention – not just attention.
- They provide an early warning system. When the cost of acquisition keeps on increasing, you are ahead of the curve before your wallet.
- They create accountability. If everybody is on the same page about what “good” is, the discussion about budget and strategy becomes a bit less political.
Core Marketing KPIs Worth Tracking
Not all of the metrics below apply to all businesses. However, all of them should be known to any business, since they all play a part in the workings of the business.
1. Customer Acquisition Cost (CAC)
This is the cost to you, total, to gain one paying customer. It also covers ad spend, but where applicable it should also cover costs of tools, salaries and agency fees – otherwise only half the picture.
Years ago, I had a retailer believe that their Facebook ads were profitable due to the low cost per click. After adding in the complete funnel -ad spend, email follow-up, and discount codes required to close the sale – their true CAC was nearly three times the amount that they thought. The recalculation caused them to quickly change their entire budget plan for the next quarter.
For a quick sanity check on this number without having to create a spreadsheet from scratch, a CAC calculator can come in handy when presenting this internally.
2. Customer Lifetime Value (LTV)
CAC has no meaning by itself. It’s only when it’s compared to the value of a customer over time that it becomes useful. If the customers purchase and then never come back, the $50 acquisition cost is a problem. If they persist for three years, it’s a good deal!
The general rule is that a healthy LTV: CAC ratio is 3:1 or better (that is, a customer is at least three times the value of being acquired). Down there, the growth is costly and delicate..
3. Return on Ad Spend (ROAS) and Return on Investment (ROI)
ROAS is a figure that will inform you of how much money you made for every dollar invested in a particular marketing campaign. ROI is a more holistic approach, considering all costs and all profit – not just ad spend and revenue.
It is a frequent mistake for these 2 to get mixed up. A campaign that has a 5x ROAS may not be a good investment after factoring in product costs, shipping, and returns. Always compare the two; don’t choose one because it’s a “better story”.
4. Conversion Rate
This is the percentage of visitors or leads that perform the desired action – buy, sign up, request demo, etc.; it depends on the action that matters for your funnel. It’s one of the most diagnostic metrics that you can get, as it filters out one particular part of your funnel rather than taking everything with it.
When the traffic is high, and conversions are low, it’s typically not the marketing channel’s fault. It could be your landing page, your offer, or your checkout flow.
5. Customer Churn Rate
Churn is arguably more significant than acquisition for subscription and/or recurring-revenue businesses. It’s much easier and cheaper to retain a customer than it is to acquire a new one, and a large customer churn rate slowly chips away at all your acquisition dollars.
6. Cost Per Click (CPC) and Cost Per Mille (CPM)
These are indicators that are upstream – not about profitability, but whether your ad costs are moving in a healthy direction, according to your industry and your audience. Generally, an increasing CPC over time, particularly with a failure to see a corresponding increase in conversion rate, is the first indicator of ad fatigue or more competition in your auction.
7. Average Order Value (AOV)
On average, what is the cost to a customer for each transaction? For ecommerce operations that are not particularly profitable, converting more traffic into sales can be a more lengthy process than increasing AOV, whether it’s by offering a discount on the final sale total, a free shipping option, or a bundle.
More Reading – Marketing Budget Hacks: Save on Essential Antivirus Software
What KPIs Matter Most in B2B Marketing?
The priorities for KPIs change in B2B marketing as it takes place over longer cycles, and fewer, but higher-value, transactions. Here are some of the metrics that have the most significance:
- Marketing Qualified Leads (MQLs) and Sales Qualified Leads (SQLs): Quality is more important than quantity – in the sense that the number of MQLs turning to SQLs. If sales rejects are coming in at a rate that exceeds your MQLs, you are targeting in the wrong direction, not marketing.
- Cost Per Lead (CPL): Particularly relevant if your sales process takes months, as you need a strong indicator much sooner than revenue arrives.
- Sales Cycle Length: When marketing campaigns are impacting the time from touch to closed deal, that’s a measurable, defensible victory.
- Customer Lifetime Value relative to contract size: For B2B, deals can include renewals, upsells, and expansion, so C.L.V. should take the entire lifetime of the account into consideration and not just the original contract.
- Pipeline Velocity: A combined measure of the number of qualified opportunities in the pipeline, the speed at which they move through the pipeline, and the average dollar value of deals that move through the pipeline. This is a more accurate indicator of revenue for a quarter than lead volume.
The B2B common thread is that marketing’s goal is NOT simply to create interest; it is to create revenue-ready interest. That reframing alters which KPIs are worthy of being put on the dashboard.
Common Mistakes Business Owners Make With KPIs
Tracking too many metrics. Collecting too much data. 30 numbers on a dashboard don’t lead to better decisions – they create noise. Select the most relevant 5 to 6 and assess these regularly.
Confusing activity with outcomes. The number of posts, number of impressions, and number of followers are indicators of effort, not results. They can be used as secondary indicators but should not be the basis for a strategy.
Ignoring channel-specific context. A 2% conversion rate can be good for cold traffic and bad for retargeted traffic. Benchmarks are only meaningful when compared to the appropriate context.
Not recalculating CAC and LTV regularly. These numbers will vary depending on your business growth, ad price increase/decrease, and your retention rate increases or decreases. A figure computed a year ago is likely to be outdated.
Optimizing for the wrong metric in isolation. Pursuing lower CPCs can subtly drive up CAC when it’s traffic from lower quality. For each KPI, there should be another metric that holds it to account.
Best Practices for Tracking Marketing KPIs
- Review monthly, not daily. Daily fluctuations are mostly noise. Monthly trends tell you something real.
- Build a simple, shared dashboard. Everyone on the team -marketing, sales, finance -should be looking at the same numbers, defined the same way.
- Pair leading and lagging indicators. Conversion rate and CPC are leading indicators; revenue and LTV are lagging. You need both to see the full picture in time to act on it.
- Use lightweight calculators for quick checks. You don’t always need a full BI setup to validate a number. Tools like a ROAS calculator or conversion rate calculator are useful for a fast gut-check before committing to a deeper analysis.
- Document your formulas. If CAC is calculated differently by different team members, your numbers will never agree. Write the formula down once and stick to it.
Expert Tips
- Use your KPI list as a “living document”. Check in on it every 3 months and ask if all the metrics are still connecting to a real business decision.
- Whenever possible, break down the metrics by channel and customer cohort. The blended average can mask the money-losing channel.
- Avoid blindly trying to meet industry averages. There are many variable factors that influence a good conversion rate, including industry, price, and traffic source; your own historical trend is a much better place to start than a generic conversion rate from a blog post.
Conclusion
The right marketing KPIs are not the ones that get you Excel prizes for them in a slideshow – they are the KPIs that answer the honest truth question: “Is your spend working or not? First, consider acquisition cost, lifetime value, and conversion rate. Add in channel-specific metrics as necessary. Don’t fall for the temptation to monitor everything that is possible.
When it comes to music, clarity is always more important than volume. A business owner who knows six numbers well will out-decide one who knows 60 numbers at a very general level.
FAQs
Q1- What are marketing KPIs?
Marketing KPIs are the measurable metrics that directly relate to a business’s marketing goals, like cost to acquire a customer, conversion rates, or return on ad spend, and measure how successful marketing programs are.
Q2- What are KPIs in marketing versus general business KPIs?
Marketing KPIs tend to focus on the results of marketing activities (campaigns, channels, content) such as leads, conversions, revenue, whereas business KPIs may be operational or financial and unrelated to marketing.
Q3- How many KPIs should a small business track?
A long list of KPIs measured inconsistently is not the ideal approach for most small businesses: a smaller number of core KPI metrics measured on a consistent basis is a better method.
Q4- What KPIs matter most in B2B marketing?
There are specific metrics that are most relevant – such as the percentage of MQLs that convert to SQL, cost per lead, the length of the sales cycle, and the velocity of the sales pipeline. B2B sales is not about quantity but about the quality of leads and the progress of deals.
