A SIMPLE STRATEGIC DIGITAL MARKETING METRICS FRAMEWORK
Business owners often view digital marketing as a complicated problem that is easier to outsource than figure out. However, growing a business in the digital age will mean understanding digital marketing strategy, tactics, and metrics to measure success. This post provides guidance on implementing a simple, practical strategic digital marketing metric framework.
First, let’s get clear on the difference between perspective levels. Strategy and execution have very different perspectives, and the metrics you use to measure them need to align with the elevation and timeframe. There are three perspective levels, each having a different height. The three perspective levels are; strategy (40,000 feet), alignment (mid-level), and execution or ground level. Strategic plans provide the view from 40,000 feet, and you make progress on the ground level.
STRATEGY (Long-term Planning)
The strategy is a high elevation level and a 40,000-foot view with a long-term perspective (time frame of more than 12 months). The minimum time frame perspective would be your annual business plan. The perspective for measuring progress would be quarterly or annually. The strategic view is your high-level, long-term plan and roadmap to success.
ALIGNMENT (Goals & Commitments)
Alignment is the layer that connects strategy to execution. Long-term strategic plans lay out achievable goals and objectives. Organizational leaders make commitments and take accountability for achieving results. Alignment is where progress toward achieving goals and objectives is measured. The timeframe for alignment is monthly and quarterly increments.
EXECUTION (Ground Level)
On the other hand, execution is at the ground level of daily issues and actions. This tactical level is all about performance and doing the work to move your business forward. It isn’t easy to see progress at the ground level because you cannot see the forest for all the trees. The timeframe for the execution level is days and weeks.
Strategic digital marketing metrics
Begin with the end in mind: Business owners need a simple, effective metrics framework for measuring strategic digital marketing results. To implement a strategic digital marketing metrics framework starts with a high-level perspective and ends with simple, measurable key performance indicators. This post makes a case for the CLV: CAC ratio as the “one metric to rule them all.”
Figure 1 – Strategic Digital Marketing Metrics – Framework
Customer Lifetime Value (CLV)
If you say, “Hey, CLV isn’t a marketing metric. It is more of a Customer Success metric” I would agree with you. However, if you are going to grow a business sustainably, CLV is the most critical metric. CLV is a good indicator of; renewal rates, churn, absorption, and revenue growth (loss). Furthermore, CLV is a relatively simple metric to track in your accounting system.
Customer Acquisition Costs (CAC)
CAC is a valid marketing metric and indicates that you have an excellent handle on your digital marketing efforts. This metric is key to being able to scale a startup PROFITABLY. However, CAC is very challenging to calculate and depends a great deal on the discipline & process for entering data in your Customer Relationship Management (CRM) system.
CLV: CAC RATIO – one metric to rule them all
If there were “one metric to rule them all, and in the dashboard bind them,” it would be the CLV: CAC ratio. CLV: CAC provides a good indication of; overall business health, margins, profitability, revenue growth, and customer retention. In simple terms, the CLV: CAC ratio needs to be greater than one (CLC: CAC greater than 1). I am a huge fan of CLV: CAC’s strategic importance because it has so many KPIs rolled into one and provides an excellent indicator of overall business health.
How do you measure CLV & CAC
Customer lifetime value measures the total gross revenue earned from a specific customer. CLV is a relatively straightforward calculation, and your accounting system should have all the data you need. On the other hand, customer acquisitions cost measures the marketing expense required to acquire a new customer. Finally, CAC is complicated to calculate. The data for CAC resides in your customer relationship management (CRM) system and requires a great deal of discipline to track. Calculating CAC is beyond the scope of this post.
If you have a contrarian point of view or different metrics for tracking digital marketing, I would love to hear your opinion. Please feel free to leave a comment or send me a note.
Ian Paul Graham
“I help business owners build digital demand teams.”