First things first. What do we understand by data?
Many marketers (maybe the majority) are convinced that being “data-driven” means using the metrics of a website to justify every decision, something which couldn’t be further from the truth.
One thing is to be data-driven and another is to be Google Analytics-driven. What’s the difference? Being data-driven means not dismissing any type of information.
It’s worth asking ourselves: can we understand our audiences and optimise our efforts to the max if we ignore qualitative data?
This qualitative data, also known as unstructured, can reveal a lot about people’s opinions and emotions about a product or service. This isn’t as simple to achieve through structured or quantitative data.
Even someone as experienced as Jeff Bezos, Amazon CEO, considers that “when anecdotes and data don’t coincide, anecdotes are normally right”. Think about it – making even one small error in the way you collect or interpret your quantitative data is enough for it to fail to make sense.
Of course, dismissing or altering the quantitative is not an option. A balanced mix of metrics and customer feedback is difficult to beat when it comes to evaluating the effectiveness and impact of your marketing efforts.
However, it’s true that there are fewer tools available to collect, organise, and interpret unstructured of qualitative data, as this is normally presented as an opinion or subjective judgement in text format.
To use this data, it is necessary to use tools such as Word or NoSQL databases, to have a certain level of expertise, and to invest a large number of hours of manual work, which involves greater costs.
Benefits of a data-driven strategy
- Personalised marketing: it’s essential that companies send out the right messages, but this alone is not enough. They also need to communicate with the right audience through the right medium, at the right time. Marketing based on data gives brands the opportunity to create personalised campaigns which convert potential customers through a deeper understanding of the customer profile.
- Clarity: with a greater quantity of information in their database, marketing professionals can analyse precise and processable information about current and potential customers. With a focus based on data, it is easier to separate and group the target audiences which are to be reached.
- Multi-channel experience: marketers can take advantage of data to extend reach much further than email. The distribution of adverts based on data through social media channels, through automated marketing campaigns, will ensure that your message is coherent and reaches each recipient in the perfect place, at the perfect time.
- Better experience for the user: many popular brands use marketing based on data to improve the experience of their customers. They often carry out customer satisfaction surveys to identify areas for improvement.
- Optimisation of products: marketing based on data greatly decreases product fail rates. How? Companies can build up a better understanding of their target audiences, which leads to developing products which are better adapted for this specific target.
What are KPIs and which are the most important?
The so-called acronym KPI means key performance indicators and are used to evaluate and analyze the metric performance of a company.
Of course, there are all kinds of KPIs. Next, we will talk about what we consider most important for marketing professionals:
1. Increase in sales:
Let’s be honest. At the end of the day, the best way to judge the success of a marketing strategy is to measure its impact on sales. Yes, prepare to receive bad news every so often, since it is normal that you need to make a series of adjustments to get really effective marketing.
Some advice? Extend this culture about sales, ROI (return on investment) to the majority of your team so that they can commit to strategies focused on results and measure long and medium-term growth.
Do not be shy about sharing your sales income with your employees as well. This often instills a level of ownership with their workforce and reinforces that everyone is on the same page, with the same ultimate goals in mind.
You do not have to be a genius to understand that the more leads (potential customers) you have, you will also have more opportunities to increase your sales. It’s as if the sales were the automobile and the marketing, the gasoline.
But the term “lead” is very broad. Make sure you can differentiate between MQLs or qualified leads for marketing and qualified SQLs or leads for sales. What distinguishes them? The stage where you are at a certain moment inside your conversion funnel.
3. Value of a customer’s life (LTV):
Also known as Lifetime Value of a Customer, this is the indicator that allows us to investigate how much a customer is worth to your company taking into account the duration of their relationship.
This indicator is not only intimately related to ROI, but it is very useful when considering commercial objectives, despite not being 100% accurate (we return to the value of unstructured data). Basically, it makes us wonder how many sales we will make to the same customer throughout that relationship.
Let’s do a brief exercise to understand this a little better:
Let’s say you work in a B2B company that sells packaging machines for food companies and that a machine costs $60,000. Let’s also say that you sell one of these machines and that the gross profit for your company – once the costs of the operation are replenished – is 30% of that $60,000.
Considering the nature of this transaction, it makes sense to think that this will be a single purchase and that it is possible that that customer does not buy another machine like this one ever.
In this case, the LTV of this client would be calculated as follows:
- Income ($60,000) x Gross Profit (30%) = $18,000.
Let’s now translate this calculation to a case in which sales are recurrent – let’s consider now that it is a tire distributor in the B2C sector, and that each customer buys a set of 4 tires of $3,500 in an average of 6 times in life of your business relationship.
In that case, the customer’s LTV would be calculated as follows:
- Income ($3,500) x Gross Profit (35%) = $1,225 x Sales number (6) = $7,350.
This can help to understand the value of each client beyond a specific transaction, don’t you think?
4. Cost of Acquisition of a Client (COCA):
This indicator allows us to know how much it costs to the company to convince a potential client to purchase a product or service.
You can calculate it in the following way:
If, for example, your company invested $300,000 between sales and marketing and generated 26 new clients, then the COCA would be $11,538.
In cases where a third party is responsible for managing your campaigns, you must add to your account the rates of the agency.
Knowing how much it costs you, on average, to close a new client and what the budget you have allocated for sales and marketing is, you can make more or less accurate projections of the new customers you will attract in a year.
There are many other KPIs that are fundamental to optimize your marketing efforts, and their hierarchy can vary according to the objectives and priorities of each company or sector. To investigate more on this topic, keep an eye on our next publications.