Having a strong plan for launching products or services online is more important than ever. A key part of improving this plan involves using certain key measures, known as key performance indicators (KPIs), to see how well you’re doing. These include:
- Customer Acquisition Cost (CAC): This tells you how much it costs, on average, to gain a new customer.
- Lifetime Value (LTV): This estimates the total amount of money a customer will bring to your business over time.
- Return on Investment (ROI): This shows the profit made from your investments in comparison to their cost.
- Conversion Ratios: These figures help you understand how well you’re turning potential customers into actual customers.
- Other efficiency metrics: These are various measures that help you see how effectively your business is operating.
These measures are crucial for checking the success of your online marketing and sales strategy. They also give you clear ways to make improvements. We’ll look into how each of these measures works, what they help you keep an eye on, and why sometimes the numbers might not add up as expected. Plus, we’ll go through how you can keep track of these important numbers using two well-liked customer management tools: HubSpot and Salesforce.
Customer Acquisition Cost (CAC)
Understanding CAC
CAC measures the total cost of acquiring a new customer, including all marketing and sales expenses. It is a crucial metric for understanding the efficiency of your acquisition strategies and ensuring sustainable growth. The formula for CAC is:
CAC=Total Marketing and Sales Expenses / Number of New Customers Acquired
Discrepancies can arise due to inconsistent definitions of what constitutes marketing and sales expenses or variations in the time frame considered for these expenses and customer acquisition.
In HubSpot
To track CAC in HubSpot:
- Utilize HubSpot’s Analytics Tools: Collect data on all marketing and sales expenses.
- Integrate Sales Data: Ensure that expenses are fully accounted for, including personnel costs.
- Custom Reports: Combine data to calculate CAC using the formula above.
In Salesforce
To track CAC in Salesforce:
- Salesforce Reports and Dashboards: Aggregate all relevant expenses.
- Custom Object for Expenses: Specifically track acquisition-related costs.
- Formula Fields: Implement the CAC formula directly within Salesforce for real-time calculations.
Lifetime Value (LTV)
Understanding LTV
LTV estimates the total revenue a business can reasonably expect from a single customer account throughout their relationship with the company. It helps in assessing the long-term value of acquiring new customers. The formula for LTV often varies but generally involves multiplying the average purchase value by the purchase frequency rate and then by the customer lifespan.
Discrepancies in LTV calculations can occur due to differences in estimating purchase frequency, lifespan, or the average purchase value.
In HubSpot
To calculate LTV in HubSpot:
- Customer Segmentation: Use segmentation tools to forecast LTV more accurately.
- Analytics: Leverage revenue data and customer behavior analytics to refine LTV estimations.
In Salesforce
To calculate LTV in Salesforce:
- Einstein Analytics: Use advanced analytics for predicting LTV.
- Customizable Dashboards: Monitor and predict LTV using tailored reports.
Return on Investment (ROI)
Understanding ROI
ROI is a measure of the profitability of an investment. It compares the gain from an investment to its cost. The basic formula for ROI is:
ROI=(Net ProfitCost of Investment)×100
Discrepancies in ROI calculations can stem from different interpretations of what constitutes “net profit” and “cost of investment,” especially when indirect costs are considered.
In HubSpot
To track ROI in HubSpot:
- Marketing ROI Dashboard: Directly compare campaign costs against generated revenue.
- Content Optimization: Adjust strategies based on content performance metrics.
In Salesforce
To track ROI in Salesforce:
- Campaign Management: Link campaign performance directly to sales revenue.
- Einstein Analytics: Forecast and enhance marketing strategies for better ROI.
Conversion Ratios and Other Efficiency Metrics
Understanding Conversion Ratios
Conversion ratios measure the effectiveness of turning prospects into actual customers. Common conversion metrics include lead-to-opportunity ratio, opportunity-to-customer ratio, and others. Discrepancies can occur due to differing definitions of what constitutes a “lead,” “opportunity,” or “conversion” across organizations or platforms.
In HubSpot
To optimize conversion ratios in HubSpot:
- Conversion Paths: Analyze how customers move through the sales funnel.
- A/B Testing: Test different elements to improve conversion rates.
In Salesforce
To optimize conversion ratios in Salesforce:
- Lead Conversion Reports: Track and improve lead conversion rates.
- Sales Performance: Use tools to monitor and enhance sales team efficiency.