Marketing metrics, budgeting, KPI

Colleagues, hello everyone!

Continuing our course, we will discuss key marketing metrics that intersect with business metrics. I’ll start with what can be quantified and should be quantified for every advertising campaign, marketing funnel, and overall business process. It’s crucial to have data to analyze and forecast your business’s profitability and identify areas for improvement.

Let’s start with basic metrics to understand where to begin and which numbers you need to track in marketing and digital marketing. This will help you gauge purchase prices, cost per lead, and other essential metrics for your business. Today, we will cover goal setting, working with marketing contractors, decomposing advertising campaigns, and budgeting based on your desired outcomes.

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Now, let’s discuss the metrics on the screen. The first metric to understand is the average order value. This is the amount spent per order. If someone buys for 500 UAH, 1000 UAH, or 4000 UAH on your site, you need to know the norm for your industry. Consult with marketers who have experience in your niche to understand what the average order value should be.

Next is the margin per order. This is the net profit from each order, calculated as the price minus cost and other expenses. It’s crucial to calculate margin without advertising costs first to determine how much you can spend on ads while remaining profitable.

Conversion rate is also essential. This measures the percentage of visitors who complete a desired action, such as filling out a form or making a purchase. For e-commerce, it’s the conversion from visit to purchase. This helps gauge how much traffic you need to achieve sales goals.

Cost per lead is another key metric. A lead is someone who shows interest and provides contact details but hasn’t purchased yet. The cost of a lead varies by market, so consulting with industry experts can help determine an acceptable range.

Conversion from lead to sale shows how many leads actually make a purchase. This percentage can vary widely depending on your business model. Understanding this helps in calculating how much you can spend on acquiring leads.

Lastly, price per purchase should be calculated based on margin and conversion rates. If your margin allows for certain spending, calculate how much you can spend on ads while staying profitable. A high cost per purchase may indicate a need to improve conversion or reduce expenses.

Return on Ad Spend (ROAS) is also vital. It’s the gross profit divided by ad spend. Understanding your ROAS helps in budgeting and ensuring your advertising efforts are profitable.

Once you understand these metrics, you can set better goals, plan budgets, and decompose your advertising campaigns. For example, if the cost per lead is $5 and you need 100 leads per month, your budget will be $500. Adjust your strategy based on market conditions and your business model.

I hope this information is helpful. Next, we’ll dive into practical examples and Excel sheets to clarify these metrics and their application.