Data is a crucial part in marketing. Knowing how to calculate the most important KPI’s can help you improve your strategies, increase your sales, and better understand what is happening. Stop guessing and start knowing!
If math is not your strong point, do not worry, we got you covered. In fact, in this guide we will show you the quick math marketers needs to know. You do not need advanced math skills to master these formulas, and most of the time, these metrics will be calculated automatically for you by most analytics programs or software. Even though you probably will not have to calculate the metrics yourself, understanding them will get you a long way.
Let’s dive in!
Online advertising and digital marketing math
Cost per impression (CPM)
Formula: COST / 1000 IMPRESSIONS
CPM stands for Cost Per Mille or cost per 1000 impressions. An impression is how many times an advertisement is displayed on a web page or search engine. It does not include clicks. To illustrate, you might get a ton of impressions with few clicks. So, depending on where you are advertising, it might be more affordable to pay per click vs. by impression.
Cost per view (CPV) is like CPM but relates more to video ads (e.g., YouTube ads).
Cost per click (CPC)
Formula: COST / CLICK
The CPC is calculated by dividing your cost by the number of times people click on your advertisement. For example, in Google Ads you can choose for this strategy, optimising your cost (since you pay only when someone clicks through).
Click-through rate (CTR)
Formula: CLICKS / IMPRESSIONS * 100
This calculation tells you whether your online advertisement is working. The more clicks you have per impression, the better. To improve your ad CTR, improve your ad design and/or better target the delivery to the proper segments.
Conversions per impression
Formula: CONVERSIONS / IMPRESSIONS
In short, this metric tells you how many actual sales (conversions) you get per impression.
Conversion rate (CR)
Formula: CONVERSIONS / CLICKS * 100
The CR is a crucial metric telling you how many conversions you obtain per click.
Revenue per click (RPC)
Formula: REVENUE / CLICKS
Understanding how much revenue is generated per click can help you plan your ad spends accordingly.
Customer Acquistion Cost (CAC)
Formula: TOTAL MONTHLY EXPENSES (sales and marketing) / # CUSTOMERS ACQUIRED
For instance, let us say you spend € 300,000 on sales and € 200,000 on marketing every month and you gain 50 new customers every month. Your CAC would be: 500,000/50 = € 10,000.
Customer Lifetime Value (CLTV)
This one is a bit trickier, so we broke it down in smaller steps:
- In the first place, calculate average purchase value: Calculate this number by dividing your company’s total revenue over a period of time (usually one year) by the number of purchases over the course of that same time period.
- Second, calculate average purchase frequency rate: Calculate this number by dividing the number of purchases by the number of unique customers who made purchases during that time period.
- Then, calculate customer value: Calculate this number by multiplying the average purchase value by the average purchase frequency rate.
- Next, calculate average customer lifespan: Calculate this number by averaging the number of years a customer continues purchasing from your company.
- Finally, calculate CLTV: multiply customer value by the average customer lifespan. This will give you the revenue you can reasonably expect an average customer to generate for your company over the course of their relationship with you.
Customer lifetime value (CLTV) is one of the most important metrics to measure at any growing company. By measuring CLTV in relation to cost of customer acquisition (CAC), companies can measure how long it takes to recoup the investment required to earn a new customer — such as the cost of sales and marketing.
Formula: LTV / CAC * 100
Generally, you want this ratio to be greater than 3 to 1. The higher the ratio, the higher the ROI.
Quick marketing math for website analytics
Page views per session
Formula: # PAGE VIEWS / 1 SESSION
How engaged are people with your website? To explain, a session refers to a single time your customer or prospect spends looking at your website, browsing through different pages (or staying on a single one).
Percentage of new browsing sessions
Formula: # NEW BROWSING SESSIONS / # TOTAL BROWSING SESSIONS
You might want to calculate this metric if you want to know about your new customer growth. If your ads are bringing back the same people over and over again (and they are not converting), that is not a good thing.
Average time spent on a landing page
Formula: TOTAL TIME SPENT BY ALL VISITORS / TOTAL # VISITS
Are your landing pages actually engaging your customers? Or are they causing a high bounce rate?
By finding out how much time is spent on your landing page, you can get an idea of what is working. Of course, actual conversions count, too.
Bounce rate (per page)
Formula: VISITORS LEAVING AFTER VIEWING ONE PAGE / TOTAL VISITORS * 100
There are two main ways to calculate bounce rate. One is based on whether your visitor stays on your website (by clicking another internal link).
The other (which you need Google Analytics or some other software for) calculates how much time is spent on a page.
Formula: USERS LEAVING SITE / TOTAL # USERS VISITING PAGE * 100
This calculation is related to the bounce rate but is not quite the same. This metric informs which pages are more likely to encourage exits from the website.
Buy per detail rate
Formula: # PRODUCTS PURCHASED / TOTAL PRODUCT DESCRIPTION VIEWS FOR THAT PRODUCT * 100
Are your visitors spending a lot of time looking at product descriptions before purchasing? This metric can tell you whether your customers are looking for that specific information.
Cart per detail rate
Formula: # PRODUCTS ADDED TO CART / TOTAL PRODUCT DESCRIPTION VIEWS * 100
Similar to the above metric, this formula tells you about the time spent researching before an item is placed into the shopping cart.
Cart abandonment rate
Formula: 1 – (# PEOPLE WHO START CHECKOUT / # PEOPLE WHO ADDED TO CART)
Are people adding things to their shopping cart and then quitting? If this number is too high, two things might be happening: One, your shopping cart system is too complicated. Two, your pricing or shipping is not transparent enough.
Items per purchase
Formula: # ITEMS / # PURCHASES
Get a better idea of how to bundle and tailor purchases with the items per purchase metric.
Email analytics and digital marketing math
Email marketing metrics can help you craft and improve your drip marketing campaigns and email newsletters. Use some of the following email marketing metrics to get better results with your online marketing initiatives. Remember, Campaign Monitor does all this work for you:
Email metrics are multiplied by 100 to get a percentage.
Formula: BOUNCES / EMAILS SENT * 100
If your emails are bouncing too much, you need to clean up your list.
Email open rate
Formula: TRACKED OPENS / TOTAL DELIVERED (NON-BONCE) * 100
How many people are actually opening your emails? If they are not, you might want to work on your subject lines.
Email click-through rate
Formula: CLICKS / EMAILS SENT * 100
You want people to click on the links in your emails. Shoot for an email click-through rate of 4%, depending on your industry average.
Email CTOR (click-to-open) rate
Formula: CLICKS / OPENED EMAILS * 100
The CTOR rate is an even more important metric than the click-through rate. It tells you how effective your emails actually are once they’re read.
Email conversion rate
Formula: CONVERSIONS / EMAILS DELIVERED * 100
Ultimately, you want your email marketing messages to turn into sales. Find out how you are doing with by measuring your email conversion rates.
Customer engagement and social media analytics
With customer engagement and social media analytics, you may need to set up your own spreadsheets and keep track of things manually. If you really do not want to bother with the digital marketing math, you can use programs like Buffer, which calculate many social media metrics for you.
Formula: ENGAGED USERS / REACHED USERS * 100
Social media buzz market share
SOCIAL MEDIA USERS TALKING ABOUT YOUR BRAND / SOCIAL MEDIA USERS TALKING IN YOUR INDUSTRY
This might be a little challenging to calculate, but with some research, you might get an idea of what your company’s actual “buzz” is.
Average likes per social media post
ADD UP LIKES PER X POSTS / X POSTS
How many likes are you getting for each social media post? If you hear crickets, then you should investigate why your content is not connecting with your audience.
Average shares per social media post
ADD UP SHARES PER X POSTS / X POSTS
Likes are important, but shares are even better. Are your posts being shared?
# FOLLOWING / # FOLLOWERS
You can use this metric to inform how many people you are following vs. how many are following you.
Negative feedback rate
HIDDEN-DOWNVOTED-REPORTING AS SPAM / REACHED USERS
Lastly, if people are down-voting or reporting your posts as spam on a regular basis on social media platforms, you are in some serious trouble. Rethink your content marketing strategy.
To summarize, digital marketing math can help you see what you are doing right and doing wrong with your online advertising campaigns. You will want to track your metrics in four basic areas:
- online advertising
- website analytics
- email marketing
- customer engagement / social media buzz
The more you know, the more you can improve your digital outreach. Do you miss the talent in house to improve your marketing? Get in touch!
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About the author
Pieter-Jan is a trilingual T-shaped Marketer and a dynamic, enthusiastic digital native with a creative, strategic, and analytical approach to marketing. Currently he is working as a Marketing Consultant at 4P square, a leading sales & marketing consulting company.
Want to know more about Pieter-Jan? Feel free to start a conversation with him on LinkedIn.