Traffic sources, backlinks, time on page, bounce rates, and more – small business owners and professionals are often drowning in a sea of available metrics.
In our personal experience working with small business owners and professionals across multiple industries, we’ve found that while most small business owners know that metrics tracking is important to their business, less than a quarter actually understand which metrics to track and how to do so effectively.
We’ve put together this three-part blog series to cut through the noise and help you get to the information that matters for your business website. Our first post discusses inbound metrics – the cost of acquiring customers. We’ll follow up with mid-funnel metrics and wrap up with a discussion on key retention metrics to help you hone your online marketing strategy.
Along the way we’ll also highlight some basic terms that are important to understand as you work on optimizing your business website.
Before we begin, it’s important to note that this type of data tracking involves some offline work – generally in the form of an Excel spreadsheet to calculate metrics. You may also want to look at paid analytics services which can perform a more detailed analysis of your metrics and let you skip the spreadsheet altogether.
Essential Top Funnel Metrics for SMBs
The top of the funnel is where all visitors start, before they become leads, clients or customers. While having high traffic numbers to your website can make it seem as though the top of your funnel is doing fine, you need to dig deeper in order to gain an accurate picture of how your business is performing.
The two key metrics you need to track here are the Cost per Customer Acquisition, and the Cost per Lead.
Cost per Customer Acquisition (CPA/CPCA)
If your company sells products, you can figure out how much it costs to acquire each sale with a simple formula. The cost per customer acquisition is simply the cost of any inbound channel, divided by the number of customers acquired.
For example, let’s assume that you use pay-per-click (PPC) advertising for your business website. Your average cost-per-click (CPC) is $1.00, and your average inbound conversion rate is 20%. So, for every $100.00 you spend, you get 20 new customers. This means your cost to acquire each customer $5.00 ($100 ÷ 20 customers).
If the sales price of your product is greater than $5.00 then your cost per acquisition is turning a profit. If the sales price of your product is less than $5.00 then it’s costing you money to get customers.
Of course, you’ll also need to factor in any additional costs such as labor and shipping to get a true idea of the profit or loss, but this is a good gauge of how well your inbound channels are performing.
If your company sells services, then you have a few more steps.
Cost Per Lead
Let’s change the scenario above and assume that you aren’t selling a product, but are acquiring leads to sell your service. Your inbound conversion rate of 20% is tied to the number of users who fill out a form to have your sales team get in touch. Let’s further assume that you have a very good sales team in place, and 80% of leads who contact you end up making a purchase.
So, out of the 20 leads you receive for your $100 investment, you are able to convert 16 people to sign up for your service. Your cost per lead (CPL) is $5.00. However, your cost per customer acquisition (CPCA) is $6.25.
We calculate this by taking the $100 in marketing spend and dividing by 16 – i.e. the number of people who signed up for services. As you can see, the CPCA for a services-based business is highly dependent on the effectiveness of the sales team – take the closing rate down to 45% in this scenario and the CPCA goes up to $11.11.
Putting Inbound Metrics into Perspective
If your CPCA is higher than expected, you may find that that your website traffic numbers are costing you money – particularly if your PPC campaigns are not performing well. If that is the case, follow these four steps to reduce costs and eliminate unprofitable ad spend:
- Review all paid campaign performance and adjust your spend to favor ads that perform well in terms ofconversions versus clicks.
- Reallocate funds to your top-performing platforms. For example, if you find you get greater conversions via LinkedIn or Bing, try increasing spend on these platforms to see if conversions continue to increase.
- Look at paid keyword performance to optimize for SEO. Try to rank higher in organic search for terms that are driving paid conversions.
- Minimize spend in areas that are not performing well. This may mean eliminating poorly performing ads, or it may mean reducing spend on certain types of campaigns such as mobile until you can optimize the user experience.
Understanding inbound metrics can seem daunting at first. However, if you narrow your focus to the metrics that matter to your bottom line, you’ll have actionable insights that will help your business to grow.
If you need help getting a handle on important metrics for your business website, get in touch. Our team of experts is always ready to assist, and we’ll help you to understand how your business is performing and what you can do to improve.