How to calculate your digital marketing effort even as a small business
Digital marketing gives huge opportunities to businesses in Ghana. Many small businesses interact and engage their customer more than ever before. Yet, it is also giving small business owners headaches calculating digital marketing efforts.
Step One: Establish Digital Marketing Goals
Before calculating your digital marketing effort be strategic, not tactical in your thinking. How do your digital marketing activities connect to your business goals? Are you trying to increase online sales to existing customers? Grow your brand equity? Recruit talent? Are your goals long-term or short-term?
Step Two: Determine the Key Performance Indicators (KPIs)
number of website traffic
number or value of sales
Customer Acquisition Cost (CAC)
Number of leads (Potential Customers)
How do you know which ones are most likely to drive macro activities? which ones can you influence, and what are the best ways to prompt them? You need to track these micro activities that lead to macro events with a passion. This requires sophisticated tracking systems like Google Analytics.
Let’s consider four major analyses:
- Attribution analysis helps in understanding what the critical micro events are. Where are traffic and conversion coming from? direct search, social, mobile, e-mail, display, online chat?
- Search analysis helps you understand what customers are looking for when they reach your business and their intent. What words are customers using to find you and at what stage in the buying cycle? Which ones lead to higher conversions? What new opportunities or customer segments can you identify?
- User behavior analysis helps you see where your customers are getting stuck in the customer journey. What are the behaviors of site visitors? What are their navigation paths through the site, how long are their sessions, and where exactly do they abandon?
- Sentiment analysis helps you understand how your customers see you in the marketplace. What are customers saying about the brand? Are what they are saying positive or negative? What influence is that sentiment having on potential customers?
Step Four: Calculate Your Marketing Efforts
Lifetime value (LTV)
Lifetime value (LTV) is how long the average customer stays with you before they stop doing business with you. The longer a customer stays with you, the more valuable they are.
To do this, look at your churn rate. The church rate is the number of people who stop doing business with you in any given period. Let’s say you are DSTV and you have 1,000 customers. And every month 20 of them cancel their subscription, which works out to two percent monthly churn. By this value ( 1 / Monthly Churn ), you can calculate how many months your customers will stay with you. At a 2% monthly churn, that works out to 50 months (4 years, 1 month)
You will also need to know your Gross Margin % (the percentage of profit that remains after you have paid your costs for the product or service), and then how much money the average customer brings in each month.
Lifetime Value = Gross Margin % X ( 1 / Monthly Churn ) X Avg. Monthly Subscription Revenue per Customer
So, for example, if you had a gross margin of 75% and monthly customer churn of 2% and each customer spent an average of Ghc 40 with you every month, the calculation would look like this: 75% X ( 1 / 2% ) X Ghc 40 = Ghc 1,500 LTV
Customer Acquisition Cost (CAC)
Now you know the lifetime value of your customers. Let now turn attention to calculating how much you spend acquiring a customer.
The customer acquisition cost is your entire marketing budget divided by the number of new customers acquired in a given period.
Customer Acquisition Cost = Sales and Marketing Costs / New Customers Won
If your total marketing expenses are Ghc 20,000. Then acquired 50 new customers in a given month, the calculation would look like this: Ghc 20,000 / 50 = Ghc 400 CAC
Ideally, the value of a customer should be three times more than the cost of acquiring them.
It sounds straightforward and it is. But the fact remains, you need to know these numbers. When you understand what drives your business the better chance of business growth.
Average daily sales
You may also be interested in daily performance. Your average daily sales are the number of sales your business generated in a given period.
To calculate your average daily sales. Let’s assume your business generated Ghc 40,000 in annual sales last year. Now divide your annual sales of Ghc 40,000 by 365 to get Ghc 109.59 in average daily sales.
Average daily sales = Annual sales /number of periods
The conversion rate is the average number of conversions per ad click, shown as a percentage.
Conversion rates are calculated by taking the number of conversions and dividing that by the number of total ad clicks that can be tracked to a conversion during the same period. For example, if you had 50 conversions from 1,000 clicks, your conversion rate would be 5%, since 50 ÷ 1,000 = 5%.
If you’re tracking more than one conversion action, or you choose to count “Every” conversion, your conversion rate might be over 100% because more than one conversion can be counted for each click.
Use conversion tracking in your Google AdWords account to measure your conversion rates and use them to help guide your advertising decisions.
Website Traffic Lead Ratio
The Website Traffic Lead Ratio tells you how many of your website visitors convert to leads. This KPI is useful because it tells you the quality of your website traffic. It is especially important for businesses in which the website serves as a major business tool such as e-commerce.
This is the formula;
Website Visitors: leads = website lead ratio
The following is an example of how to calculate your Website Traffic Lead Ratio:
100,000 Website Visitors: 5,000 leads = 5% conversion
Step five: Make decisions based on your analysis, then adjust
In conclusion, figure out what you want to calculate and where you can track it. Think about both current customers and new customers and go do it.