Startups are in a uniquely difficult position with regards to marketing. We all know startups may operate on lack of sufficient funds, but what might not be apparent is that they also operate on a lack of information. In the beginning, marketing is almost 100% trial and error as historical data, experimental learnings, and benchmarking KPIs (key performance indicators) simply do not exist yet.
“Startups may operate on lack of sufficient funds, but what might not be apparent is that they also operate on a lack of information.”
As a startup begins to do marketing, it may be a bit overwhelming for the marketing manager or business owner to keep track of all the data points and metrics given the sheer quality of them. Most likely marketing accounting is not something they plan spending a lot of time on especially early on. However, in order to build a solid foundation of data to evaluate and drive future performance it is necessary to be aware of at least these 5 key performance indicators.
I recommend keeping a monthly or weekly journal / spreadsheet tracking these key metrics overtime. You will gain much better insight into early marketing performance and be able to make confident decisions about how to put your limited marketing budget to work so as to get real results.
Looking at individual page bounce rates will give you direct insight into how visitors respond to your content. The bounce rate percentage is a measure of those visitors who landed on a given web page that left without interacting with the page or visiting additional pages. The lower the value the better. It is important to know first how well your product and presentation are received before potentially wasting budget on marketing that in turn will have a small probability of bearing fruit.
Bounce Rate % can be easily obtained by almost any website analytics good such as Google Analytics (Free).
Setting and reaching for sales volume goals are critical to covering your fixed, variable, marketing and other costs. No doubt you have real expenses that are a part of each order your sell. In many situations you have a set of fixed costs that have to be covered just to keep the lights which is of the utmost importance to startups. Fixed costs need to be spread among your orders for a given period. It will be a big motivator if you know how many orders you need to sell to achieve this goal, hence your break even volume KPI.
1) Calculate your Contribution per Unit
$CPU = $Selling Price Per Unit – $Variable Cost Per Unit
2) Calculate your Break Even Volume
#BEV = $Total Fixed Costs / $Contribution Per Unit
Similar to break even volume, this is an important metric because it allows you to understand how much revenue to generate to meet your fixed business costs. Armed with the break even volume and break even revenue KPIs, you can quickly keep tabs on where you’re at with regards to how many units you have sold and how much revenue you need to break even on your fixed costs.
$BER = # Break Even Volume * $ Price Per Unit
The average order value is very important to keep tabs on especially for those websites that sell multiple products and or at multiple price points. Most of the time this metric will be critical for e-commerce and SAAS websites but applies elsewhere too. By taking an average of all order values over a given period, the marketer will gain insight into buying behavior as well a gain an opportunity to do marketing at a higher efficiency.
Without using the AOV (not including fixed or variable costs), marketers may be limited by trying to break even using the individual product price per unit as a guide. – See BEV and BER examples above.
Applying the AOV may come in useful when calculating your break even volume and revenue by replacing product price per unit. By using the AOV, the marketer could potentially spend more funds to generate each additional sale or require less orders to cover fixed costs thereby increasing efficiency and the probability of success.
Your overall website conversion rate can give valuable insight into the overall ability of your site to generate orders. Knowing this rate allows you to work backwards to find out how many visitors you need to attract to get 1 additional order. This is especially important if you are looking to hit a specific target like 320 orders in our last example.
%WCR = Unique Visitors / Orders * 100
As you can see from just these 5 metrics, you will gain a wealth of truly actionable information that will help you make smart decisions about how much to spend on your marketing activities, how to set goals for meeting fixed costs, and some quick ways to understand website and website page performance. These 5 KPIs form a foundation on which to build comprehensive marketing strategies using real numbers. By adding a few more pieces of data like click through rates and advertising costs you can back into budgets and set benchmarks that give you a much higher probability for actually hitting your goals and keeping your startup afloat.