B2B Articles - March 31, 2022

Marketing Math for Beginners: How to Calculate and Improve Key Marketing Metrics

By Chantel Hall, Marketing Content Specialist

Successful marketing requires data-driven insights built around the metrics that matter. “Vanity” metrics such as social media likes, views, and website visits can be exciting to see climb, but they don’t provide insight into whether your campaigns are driving the outcomes you want — qualified lead generation and closed deals. Because these kinds of interactions don’t necessarily demonstrate interest or intent, focusing on those metrics won’t give you insight into your buyer’s journey that can be used to improve your marketing strategies.

Here, we’ll get into the formulas behind some of the most important marketing metrics to track and discuss how to improve on their current performance.

Download Ironpaper's "How to Set Conversion Goals" e-book to learn how to  evaluate and improve your conversion rates. 

Lead conversions

Lead conversions is a basic, top-of-the-funnel metric that tells you how many people coming to your website are converting to leads.

Number of leads divided by total number of visitors times 100 equals lead conversions

Why is it important?

At a high level, this metric tells you whether your marketing campaigns are attracting the right audience. Understanding your lead conversion rate also helps you fine-tune your audience targeting. When lead conversions are low, you’re not attracting the right people with your messaging. Even with research, discovery work, and understanding your target audience and their pain points, it takes time to hone in on messaging that encourages website visitors to become leads.

Your lead conversion rate can also be calculated for individual channels so you can address or eliminate low-performing channels and direct your attention to high-performing ones. 

How to improve lead conversions

  • Look at the audience you’re targeting: Is your target audience too broad? Are you targeting the right decision-makers at the proper levels? Adjusting the audience you’re targeting can help you attract viewers more likely to convert.
  • Refine and test your messaging: When lead conversions are low, messaging can be adjusted in a variety of places. Ads and emails should be buyer-focused and enticing. Your landing pages could also be an issue: are they delivering on the promises you make with your inbound marketing campaigns? Are the offers you’re making enticing to your target audience? It’s especially important to address this if you’ve adjusted your target audience. When refining your messaging, focus on small, impactful changes and continually revise and test.
  • Utilize strong calls to action: Ensure your landing pages and conversion points have strong calls to action (CTAs) that explicitly describe the value leads will get from taking the action you want them to.

Qualified leads

The qualified leads metric tells you what percentage of leads you’re bringing in are qualified as defined by your team’s profile of a qualified lead.

Number of qualified leads divided by total number of leads times 100 equals qualified leads

Why is it important? 

This metric builds on your lead conversion rate by calculating what percentage of leads generated are likely to become customers. If this metric is too low, it could be a sign that your points of conversion are attracting and converting people who don’t fit your ideal customer profile (ICP). Additionally, if your lead conversion rate is climbing, but your qualified leads are staying the same, there is a disconnect leading to an increase in leads who aren’t interested in your products.

How to improve qualified leads

  • Analyze your lead targeting at a deeper level: If your lead conversions are strong, but your qualified leads aren’t where you want them to be, look at your target audience beyond just industry and pain points. Are you targeting the wrong seniority? Is your messaging appealing to leads who are interested but don’t have the authority to pursue a solution?
  • Revise your messaging: Messaging that is too broad or unfocused at any stage of the sales cycle won’t engage qualified leads. Test different messaging on lead generation campaigns, landing pages, and longform content to find what messages engage and convert qualified leads.

Cost per lead 

Cost per lead (CPL) shows you how much marketing spend it costs to generate each lead. 

Total marketing spend divided by number of leads equals cost per lead

Why is it important?

This metric tells you how efficient and effective any given marketing campaign is. It’s especially useful for evaluating the targeting and messaging of individual campaigns. As you fine-tune your target audience and the messages you’re reaching out to them with, your CPL should ideally decrease; if it doesn’t, you can use that data to continue improving.

How to improve CPL

  • Look at the goals and structure of your campaign: Evaluate the mechanics and strategies of your campaign. Are you targeting the right keywords? Buying ads on the right platforms? This is another area where you can iterate on top performers and remove bottom performers to strengthen your campaign.
  • Test new audiences and refine your messaging: Since CPL is a lead generation metric, testing new target audiences and messaging in your campaigns will help you improve it.

Customer acquisition cost 

Customer acquisition cost (CAC) measures how much each customer costs to acquire and takes into account both marketing and sales spend.

Sales and marketing costs divided by total number of new customers equals customer acquisition cost

Why is it important? 

CAC gives you a complete picture of how efficient your marketing and sales efforts are in achieving goals like successfully nurturing leads and closing deals. While other metrics help with specific campaigns, this one can help you evaluate the performance and relationship between your marketing and sales teams.

How to improve CAC

  • Evaluate your messaging and marketing assets: You should be providing some kind of value to leads at every stage of the marketing and sales process, so evaluate whether the messaging and content you’re offering demonstrate that value. Is it too product-focused? Too technical? Or is it speaking directly to your buyers’ pain points and aspirations.
  • Shorten your sales cycle if possible: While B2B sales cycles are often long by necessity, shortening your sales cycle can help lower your CAC.
  • Improve nurturing campaigns: Evaluate your lead nurturing campaigns to find weak spots where leads are disengaging. Ensure the messaging and offers you’re utilizing are getting leads’ attention and incentivizing them to take action. 

Overall marketing return on investment 

Your marketing return on investment (ROI) might be the most important metric you measure. It’s used to evaluate your growth compared to your investment.

Sales growth minus marketing cost divided by marketing cost equals Marketing ROI

Why is it important?

Your marketing ROI gets to the heart of your marketing efforts’ success. It’s not affected by impressions, views, or clicks — it’s determined by how many leads want an initial offer and then move through the process to a closed deal. It’s a key marketing metric you need to consistently monitor.

How to improve marketing ROI 

  • Determine what metrics lead to success and hone in on them: We chose the metrics in this list because they are all common indicators of growth. Determine what metrics make the biggest impact on your ROI and focus on improving them.
  • Evaluate your marketing mix: Test different channels and use data to determine whether each one is effective. Focus on the channels bringing in the most qualified leads.
  • Make sure sales has the tools to close deals: Marketing and sales collaboration is important to a successful marketing ROI — if salespeople can’t effectively engage leads and support them through the funnel, your ROI will suffer.

Churn rate

Your churn rate measures the percentage of customers you are losing over a given period of time (e.g., month, quarter, year, etc.). 

Lost customers divided by total number of customers at the start of time period times 100 equals churn rate

Why is it important?

For businesses that rely on monthly recurring revenue (MRR), it’s critical to understand how many customers you’re losing each month and where in their lifecycle customers are dropping off. Your churn rate helps you understand how many customers are turning over and, over time, whether your customer retention efforts are working.

At its core, customer churn is really about customer satisfaction: how happy are customers with your product? How long are they staying with you? Where in their lifecycle are they dropping off, and, critically, why are they dropping off?

How to improve churn rate

  • Ensure you’re delivering on promises made in your marketing and sales process: If you make promises in your marketing materials or during meetings with prospects that you don’t deliver on when they become a customer, it will be difficult to improve your churn rate. Make sure you’re realistic about what you can deliver and clear about the benefits your customers experience.
  • Continually provide support and resources for your customers: You can reduce churn rate by continually educating customers on all of the features and benefits of your product, regularly checking in with them on any issues or challenges they’re encountering, and adding value through new features.
  • Understand the signals that your customers are about to churn: Analyze where your previous customers dropped off and what they experienced in the weeks and months before they decided to end their relationship with you. You should also keep communication with them open so that you can see if current customers are starting to exhibit signs that they’re considering moving on.

Customer lifetime value/CAC Ratio

The ratio between your customer lifetime value (CLV) and CAC shows you how the cost of acquiring a customer compares to how much they spend with your business during their time as a client. This is especially important for subscription models, but it can be useful for one-time purchase clients as well.

Customer lifetime value divided by customer acquisition cost equals CLV/CAC ration

Why is it important? 

Your CLV/CAC ratio calculates how much continuing revenue you’re bringing in and whether your CAC balances out with the value of deals you’re closing. This metric is closely tied to your churn rate; if you are only closing deals with customers who are expensive to acquire and churn quickly, you need to address it.

How to improve CLV/CAC ratio 

  • Educate and upsell your current clients: Make sure that your customers are educated on your product and utilizing it fully. Continue engaging and delighting them with new features and benefits. 
  • Get feedback from clients on their concerns and issues: Ask customers (before they churn) if they have concerns, issues, or challenges with using your product. Make sure they’re getting interaction from the team responsible for customer satisfaction and have a chance to tell you what would make their experience better.

Start using these metrics to improve your marketing efforts today

While the old management adage, “You can’t improve what you don’t measure” has stuck around for a reason, it’s missing a critical piece: measuring and improving the wrong metrics won’t help you achieve the goals that matter.                                                                             

The key marketing metrics discussed here will help you evaluate your marketing campaigns’ effectiveness at different stages of the funnel and help you address the parts of your campaigns and strategies that aren’t performing as well as you’d like them to.

Tel 212-993-7809  

Ironpaper ®
10 East 33rd Street 
6th Floor
New York, NY 10016

Ironpaper - B2B Agency

B2B Marketing and Growth Agency.

Grow your B2B business boldly. Ironpaper is a B2B marketing agency. We build growth engines for marketing and sales success. We drive demand generation campaigns, ABM programs, B2B content, sales enablement, qualified leads, and B2B marketing efforts. 

Ironpaper Twitter Ironpaper Linkedin