What Are KPIs in Marketing, and Which Ones Matter?

What Are the Most Important KPIs in Digital Marketing?

The most important KPIs in digital marketing are the same as in any marketing: cost per customer and gross profit per customer, each split by channel and by type of customer, because together they say whether the money spent came back as profit. Beneath them sit the conversion rates between the stages a buyer passes through, which explain why those two numbers moved. The Channel Selection step covers the setup that makes these numbers trustworthy.

For a business that sells through leads, the stage rates usually look like this:

1. Visitor to lead: the share of visitors who ask for something, such as a quote, a consultation or a free assessment.
2. Lead to qualified opportunity: the share of leads sales accepts as real buyers, marked by a step such as a booked meeting or a site visit.
3. Opportunity to customer: the share of those opportunities that sign.

Each rate points to a different fix: a drop in visitor to lead points at the page and the offer, a drop in lead to opportunity at targeting or follow-up, and a drop in opportunity to customer at sales or price.

We'll use one running example: a commercial HVAC contractor with annual revenue of about forty million dollars, which sells maintenance agreements to property management firms and spends part of its budget on Google search.

Cost per agreement shows Google search paying back, and the stage rates show most of the gain came at the first stage, once the ads led to a page built around a free replacement forecast, with the same-day call adding a slightly larger share of site visits, a story told in full on Why Is My Website Not Converting?.

What Is the Difference Between a Marketing KPI and a Metric?

A marketing KPI is a metric leadership uses to judge whether marketing is producing profitable customers, while every other metric is a diagnostic that helps the people running a channel find out why a KPI moved. Clicks, impressions, followers and open rates are useful diagnostics, but each can rise while profit falls, so none of them is a KPI on its own.

Marketing KPIs and the diagnostic metrics behind them

Customer acquisition cost is a KPI when it is measured per signed customer, by channel, from your CRM, and it's a diagnostic when it stops at the lead, because a cheap lead that never signs costs more than it appears to. How Do You Calculate Customer Acquisition Cost? covers which costs to include.

Definitions matter for the ads too, because in our own campaigns and client accounts we've seen that counting every form fill as a conversion teaches a platform to find more people who fill in forms, while optimizing on a qualified-lead event changes who it finds.

How Do You Choose Marketing KPIs?

To choose marketing KPIs, start from the business goal in profit terms and work backwards to the few numbers that would show you're on track, then define each one in writing so marketing, sales and finance count it the same way. The list should be short enough for a leadership team to read in a minute.

1. Write down the business goal in profit terms, such as more gross profit from one type of customer.
2. Work out what you can afford to spend to win each customer. That depends on how much a customer is worth over their lifetime, how early that profit arrives, your cash flow and how fast you want to grow, and What Is a Good Customer Acquisition Cost? walks through it.
3. Map the stages your buyers pass through, from first visit to signed customer, and name the conversion rate at each one.
4. Keep only the KPIs that would change a decision: cost per customer and gross profit per customer by channel and customer type, and one rate per stage. Everything else goes in the channel managers' reports.
5. Define each KPI in writing: what counts as a qualified opportunity, when a customer counts as signed, which costs go into cost per customer, and which gross profit you report, first-year or lifetime.
6. Name where each number comes from: usually the CRM for leads and customers, the platforms for spend and finance for margin.
7. Give each KPI an owner and a review cycle that matches how long your buyers take to sign.

Where these KPIs sit on the screen leadership looks at is covered on What Is a Marketing Dashboard?.

How Do You Set Targets for Marketing KPIs?

Set targets for marketing KPIs from your own history and your own customer economics: the ceiling on cost per customer comes from what a customer is worth to you, how early that profit arrives and what your cash flow can carry, and the targets for each stage rate start from what your CRM shows over the last several quarters. Published averages make poor targets because they mix businesses with different buyers and definitions of a lead.

Working backwards from the ceiling turns it into targets the channel team can use day to day.

Those starting rates are the baseline any later change can be measured against, one stage at a time. To see how your rates compare with others, What Is a Good Lead Conversion Rate? and What Is a Good MQL to SQL Conversion Rate? explain what the published figures measure and why they rarely transfer.

When Should Your Marketing KPIs Be Different?

Your marketing KPIs should look different when your sales cycle is long, when buyers purchase online in one step, or when your volumes are too small or too large for one set of numbers to describe the business.

• A long sales cycle. A channel started this quarter may not produce signed customers for months, so read its stage rates until customers arrive, and review cost per customer on a cycle that matches how long buyers take to sign. How Do You Measure Marketing Effectiveness? covers which early signals to watch.
• Ecommerce and other one-step sales. The stages collapse to visitor to first order, and gross profit per customer has to include repeat purchases, or a channel that brings one-time bargain hunters looks as good as one that brings regulars.
• A smaller business with a few customers a month. Monthly rates swing too much to read, so count customers and cost per customer by channel each quarter, and ask every new customer how they heard about you.
• A larger company with several business units. Each unit or customer type needs its own KPIs, because a blended figure can look healthy while one unit loses money on every customer it wins.
• A change in what limits growth. When the constraint moves from finding buyers to delivering for them, the KPI that matters most can become how many new customers you can take on well, which the Marketing Action Plan step covers.