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5 Mission-critical KPIs Every Marketing Leader Should Know

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As a marketing executive, you have a lot on your plate. You won’t always have time to go through a bunch of decks and reports. However, keeping a close eye on these five metrics and taking swift action to course correct whenever they deteriorate will prevent issues from turning into utter disasters. 

Based on my experience working with Fortune 500s as well as hyper-growth startups, here’s 5 metrics that I believe every senior executive should closely monitor in order to effectively deliver better outcomes for his/her organization.

  1. Contribution Margin
  2. Customer Lifetime Value
  3. Customer Acquisition Cost 
  4. Customer Churn Rate 
  5. Net Promoter Score

 

1. Contribution Margin

Why is this important: The formula for Contribution Margin is (Revenue – Variable Costs) Revenue. Needless to say, this metric directly ties into the health of your business. A low/declining Contribution Margin often means raw materials, commission, or advertising costs are too high, and something needs to be adjusted immediately for your organization to stay on the right trajectory.

Helpful ways to segment this data: Depending on the size of your organization, Contribution Margin should be monitored either by business unit or product line.

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2. Customer Lifetime Value

Why is this important: Customer Lifetime Value, often known as LTV or CLV, tells you how much a customer brings in for your company. At a high-level, this helps with understanding how much you can pay for a new customer (customer acquisition cost) and helps with revenue forecasting. 

Helpful ways to segment this data: Depending on your business model and how quickly you expect to turn a profit on new customers, you can monitor 30-day, 90-day, or 365-day LTVs. In addition, looking at LTV by customer cohort or product line will help you quickly identify any changes that need to be implemented within the business.

3. Customer Acquisition Cost

Why is this important: Customer Acquisition Cost (CAC) is just how much it costs you to acquire a new customer. This is often the part of your business’ variable costs that you have the most control over. Knowing & closely monitoring this metric helps you ensure your business is profitable.

 

Helpful ways to segment this data: CAC often varies quite a bit across marketing channels. As a result, it is important to monitor CAC by marketing channel to help with allocating marketing budgets efficiently. In addition, CAC trends over time can reveal underlying changes in your business and possible shift in your customers’ preferences.

4. Customer Churn Rate

Why is this important: Customer Churn Rate tells you how many customers are still customers after x months/years. Looking at this metric at different points in time will help you identify why some customers decide to terminate their relationship with you and deploy responses that could improve LTV and revenue sustainability for your organization.

 

Helpful ways to segment this data: Looking at Customer Churn Rate at different points in time (1 month, 6 months, 12 months) will reveal interesting insights about your customers. Someone who stops interacting with your business in the 1st month might not have been a good fit to benign with, versus customers who churn around the 12-month mark might have experienced product/service issues that prompted them to terminate the relationship. Understanding why and addressing the issue could drastically improve your organization’s revenue sustainability.

5. Net Promoter Score

Why is this important: Net Promoter Score (NPS) is a KPI that allows you to track promoters and detractors. In plain English terms, it’s the ‘street cred’ that your company has among customers. NPS data is generally collected from existing customers through a survey format with responses being on a scale from 0-10, with 0 to 6 being detractors, 7 to 8 being neutral, and 9 to 10 being promoters. 

 

Helpful ways to segment this data: At a high level, looking at NPS by business unit, product line, and customer cohort can all yield valuable insights about your business. It also helps to understand why detractors & promoters feel the way that they do. In order to do so, your NPS survey needs to include multiple-choice as well as open ended questions to collect additional information needed for customer sentiment analysis and text mining analytics.

 

To sum up, above are the five KPIs that all marketing executives should create a measurement strategy around and monitor closely to gauge the health of their business.

 

If you have any questions or would like to learn more about how to more effectively leverage these metrics to drive change within your organization, feel free reach out to me and I will be more than happy to help.

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