Using analytics can help you track marketing efforts and optimize future marketing campaigns, enabling you to ultimately make the best possible decisions. The following eight analytics will help you to track and manage data in order to strengthen your future marketing efforts. You no longer have to guess which approach affected ROI, sales, or redemption rates. With real, quantitative results you can develop your future marketing campaigns with confidence and assurance.
Ad ratio is an analytics tool used to test the effectiveness of an advertising campaign, calculated by dividing total advertising expenses by sales revenue. This number helps ad agencies determine whether advertising expenditures helped generate new sales. A high advertising-to-sales ratio means that high advertising expenditures led to low sales revenue, indicating a possibly less successful campaign. A low ratio may indicate higher sales.
Advertising-to-sales measurements track whether advertising spending was effective, instead of just guessing which medium brought more or less success. The lower the ratio means less advertising money was needed to generate high sales. Close tracking of expenditures is necessary for determining how higher sales were generated. When multiple media is used for advertising it is important to closely monitor each medium’s results relative to dollars spent. Ad ratio is crucial for tracking trends in specific market segments and for determining future ad spending budgets.
Response rates calculate the percentage of customer responses to direct mail or consumer actions, such as visiting a website (website engagement), calling a business, or printing/downloading a coupon. Response rates can be calculated by adding up the number of responses (conversions) and dividing that number by the amount of direct mailings that went out, calls received, or items downloaded from your website.
Measuring matters. By choosing a variable to measure (i.e., website engagement), you can better understand how well your marketing campaign literally measures up. Understanding the metrics being tracked will help you determine how to use analytics to improve future campaigns. In order to capture the correct information for proper marketing optimization, you will need to decide which metric to use or improve upon. Capturing and monitoring traffic sources, visitor conversions, interactions per visit, cost per conversion, bounce rates, and entrance and exit pages will help optimize your marketing. Tracking response rates helps you “predict future success or to determine that something isn’t working”, and helps you to use it as a constant measurement to make the customer experience a great one. Retaining and converting loyal customers are key to using analytics to optimize your marketing campaigns.
Pre/post analysis measures sales before a marketing campaign takes place (baseline measurement), during and after marketing to help determine the cause of the increase or decrease in sales. According to the Lenskold Group, it’s important to look for recurring patterns, rather than a single incident, when assessing a marketing campaign’s effectiveness. Pre/post analysis is important for detecting whether external factors played a role in increasing or decreasing sales, thus influencing marketing effectiveness, and can be a low cost, low risk marketing method. Pre/post analysis needs to capture emerging trends; actual sales not affected by external factors (i.e., external factors can include: competition, economic conditions, weather, product life cycles); and an accurate baseline measurement. Pre/post analysis measurements help provide historical data on past sales performance to help set future goals for marketing campaigns and adjust, if necessary, current methodologies in sales strategies.
Lift analysis measures the increase (lift) in sales during a specified sales period compared to historical or forecasted data, to determine if a marketing campaign increased profits compared to a previous quarter, year, or month. For example, if 500 sales is the baseline number in an average month-long period (with no campaign), then during a month-long campaign there is an increase of 50 sales per week, then there would be a lift of 200 sales. During the lift analysis, pre-campaign numbers would be compared to the previous month’s sales without a campaign to gauge the marketing effectiveness, while adjusting for external factors as they can give positive lift results that have nothing to do with your marketing campaign.
While many factors can impact your lift analysis, it is still important to measure lift to determine what truly is increasing or decreasing your sales. According to Lenskold Group, establishing a standard pre/post analysis will help to establish the best estimate of baseline sales to minimize the margin of error in the sales data. This will help guide future campaigns using true quantitative data, rather than relying on educated guesses based on superficial lifts created by external factors.
Custom PRIZM Analysis
A custom PRIZM analysis is based on demographic data collected by Nielsen to assist marketers in better understanding their customers to ensure they are being catered to with the most appropriate messages and products suited to their lifestyles. PRIZM Premier Social Groups utilizes 68 segments which are numbered according to socioeconomic rank based on income, education, occupation, and home value. They are then divided into Lifestage and Social Groups.
PRIZM analysis helps marketers understand customers’ purchasing and media behaviors, providing complete information about consumer groups. PRIZM helps capture information about who your best customers are; what they are like; where they can be found; and how they can be reached. A PRIZM analysis cuts down the work you have to do and enables you to focus on the marketing campaign and channels that will best reach your target consumers. When you understand who your customers are and their purchasing behaviors, you can optimize future marketing to hit the target each and every time. No wasted time or money as PRIZM provides accurate snapshots of your actual customer.
Redemption rates refer to the percentage of actions taken using digital coupons or offers through direct mail, calculating how many offers have been redeemed — or used in actual transactions. The explosive increase in mobile device usage has benefited businesses’ redemption rates as mobile coupons are convenient, always with the customer, are trackable for marketers, and they are mobile. You have the ability to target customers with deals whenever they are nearby or in your place of business.
In a recent study, 52 million people in the U.S. reported they use a smartphone or other mobile device to access mobile coupons, and at least 90 million Americans will have redeemed one mobile coupon per year by 2016. Redemption rates give a clear view into how an offer was redeemed (i.e., mobile, in-store, direct mail). This will help marketers plan future campaigns by determining where customers are coming from and which channels are offering the highest ROI. Marketing dollars can then be poured into the channels delivering the highest return.
Return on Investment/Redemption Value
Return on Investment (ROI) is a highly used metric to measure the profit from each investment. There are several different variables to consider when calculating marketing ROI, and marketers vary in their definition of profit (return) and true investment. Return may be considered as total revenue, gross profit, or net profit. There are also various investment costs that need to be considered, aside from media costs, and include: creative and printing costs; technical costs; cost of sales; and management time. It’s best to measure and track the ROI of all marketing investments, which will enable the campaign to provide the highest return possible, allowing you to make needed improvements in the future.
Cost Per New Customer
The cost of customer acquisition is a very important metric for determining future marketing campaigns because, without customers, you won’t make money. It is customer acquisition that can give you the most return on investment from your marketing campaigns. According to Ometria, the ratio to focus on is how much you are making from your customers relative to how much it cost you to acquire them. So if your cost of customer acquisition (CAC) is higher than the lifetime value (LTV), something isn’t working.
You should be bringing in more from your customers than it costs you to acquire them. Cost of customer acquisition can help you optimize future marketing campaigns by helping you determine where the bulk of your customers are coming from and what channels and campaigns have the best ratio for success (LTV:CAC). And when you recognize that you have stopped getting a return on investment then stop the investment.
Using substantiated baselines, standard measurements, and understanding what, if any, external factors impacted results, you will come away with data that moves your marketing campaign forward — with successful results. Understanding how to use analytics to optimize your marketing will save you time and money and ensure you will make better decisions in the future.