Key Marketing Metrics

Why This Matters

Marketing metrics aren't just numbers—they're the language you'll use to evaluate strategy, justify budgets, and diagnose problems throughout your marketing career. You're being tested on your ability to understand what each metric measures, how it's calculated, and when to use it. Exams love asking you to compare metrics, identify which one applies to a specific scenario, or explain why a company should prioritize one over another.

The metrics in this guide fall into distinct categories: profitability metrics that measure financial returns, customer metrics that track acquisition and retention, engagement metrics that evaluate campaign performance, and market position metrics that assess competitive standing. Don't just memorize formulas—know what business question each metric answers and how they relate to each other. A question about improving profitability might require you to connect CAC, CLV, and retention rate in a single response.

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Profitability & Investment Metrics

These metrics answer the fundamental business question: is our marketing spending actually generating returns? They help marketers justify budgets and compare the effectiveness of different strategies.

Return on Investment (ROI)

• Measures profitability relative to cost—the ultimate test of whether a marketing investment was worth it
• Formula: $\text{ROI} = \frac{\text{Net Profit}}{\text{Cost of Investment}} \times 100$—expressed as a percentage for easy comparison across campaigns
• Higher ROI = more efficient spending—but remember that ROI alone doesn't tell you about scale or long-term brand effects

Sales Growth Rate

• Tracks revenue increase over time—typically expressed as a percentage comparing current period to previous period
• Formula: $\text{Sales Growth Rate} = \frac{\text{Current Sales} - \text{Previous Sales}}{\text{Previous Sales}} \times 100$—negative values indicate declining performance
• Signals strategy effectiveness—consistent growth attracts investors and indicates sustainable competitive advantage

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Customer Value Metrics

These metrics focus on the economics of customer relationships—how much it costs to acquire customers and how much value they generate over time. The relationship between these metrics determines long-term profitability.

Customer Acquisition Cost (CAC)

• Total cost to gain one new customer—includes all marketing, advertising, and sales expenses
• Formula: $\text{CAC} = \frac{\text{Total Acquisition Costs}}{\text{Number of New Customers}}$—lower is generally better, but not at the expense of customer quality
• Critical for budgeting decisions—sustainable businesses need CAC significantly lower than the value each customer generates

Customer Lifetime Value (CLV)

• Predicts total revenue from one customer relationship—looks at the entire span of the customer-brand connection
• Formula: $\text{CLV} = \text{Average Purchase Value} \times \text{Purchase Frequency} \times \text{Customer Lifespan}$—higher CLV justifies higher acquisition spending
• Guides investment decisions—tells you the maximum you should spend to acquire or retain a customer

Customer Retention Rate

• Percentage of customers kept over a period—measures loyalty and satisfaction through actual behavior
• Formula: $\text{Retention Rate} = \frac{\text{Customers at End} - \text{New Customers}}{\text{Customers at Start}} \times 100$—high rates indicate strong customer relationships
• Retention beats acquisition on cost—acquiring new customers typically costs 5-7x more than keeping existing ones

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Engagement & Conversion Metrics

These metrics evaluate how effectively marketing messages drive action. They sit in the middle of the funnel, connecting awareness efforts to actual customer behavior.

Click-Through Rate (CTR)

• Percentage of viewers who click—measures how compelling your ad or content is to your target audience
• Formula: $\text{CTR} = \frac{\text{Clicks}}{\text{Impressions}} \times 100$—benchmarks vary widely by platform and industry
• Indicates message-audience fit—low CTR suggests targeting problems or weak creative; essential for digital and email campaigns

Conversion Rate

• Percentage of visitors completing desired actions—could be purchases, sign-ups, downloads, or any defined goal
• Formula: $\text{Conversion Rate} = \frac{\text{Conversions}}{\text{Total Visitors}} \times 100$—small improvements can dramatically impact revenue
• Measures funnel efficiency—improving conversion rate increases revenue without requiring more traffic or ad spend

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Customer Sentiment Metrics

These metrics capture how customers feel about your brand—qualitative insights that predict future behavior and word-of-mouth potential.

Net Promoter Score (NPS)

• Measures likelihood to recommend—asks customers to rate recommendation likelihood on a 0-10 scale
• Formula: $\text{NPS} = \%\text{ Promoters (9-10)} - \%\text{ Detractors (0-6)}$—scores range from $-100$ to $+100$; above $0$ is acceptable, above $50$ is excellent
• Predicts organic growth—high NPS correlates with word-of-mouth marketing and customer loyalty

Brand Awareness

• Extent to which consumers recognize your brand—measured through surveys, social mentions, and search volume
• Two types matter: aided vs. unaided recall—unaided (name brands in category) is stronger than aided (do you recognize this brand?)
• Foundation for all other metrics—customers can't buy from you if they don't know you exist; essential for new market entry

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Market Position Metrics

These metrics evaluate competitive standing—how your brand performs relative to the entire market landscape.

Market Share

• Percentage of industry sales you control—the ultimate measure of competitive position
• Formula: $\text{Market Share} = \frac{\text{Company Sales}}{\text{Total Industry Sales}} \times 100$—can be measured by revenue or units sold
• Indicates competitive strength—higher share brings economies of scale, bargaining power, and market influence

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Quick Reference Table

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Self-Check Questions

1. A company has high CTR on its ads but low Conversion Rate on its website. What does this indicate, and what should they investigate?

2. Which two metrics would you compare to determine if a company is spending appropriately on customer acquisition? Explain the ideal relationship between them.

3. Compare and contrast NPS and Customer Retention Rate. How do they each measure customer loyalty differently, and when would you prioritize one over the other?

4. A marketing manager reports strong Sales Growth Rate, but the CEO is concerned about declining Market Share. Explain how both statements can be true simultaneously and why this matters.

5. If an FRQ asks you to evaluate the overall health of a company's marketing strategy, which 3-4 metrics would you analyze together, and what story would they tell?