How do you know if your digital marketing efforts are paying off? You can determine that with the right KPIs or key performance indicators. The right KPIs can help you determine much more objectively if you’re doing things right, and it will help you know what’s working and not working.

This naturally leads to the question of which KPIs to monitor, so here are our suggestions:

CTR

This acronym stands for the click-through-rate, and it measures what your potential customer does whenever they do see your ads. More specifically, it checks whether your ads are enticing people to click on them. This click can then send the potential customer to your website.

While ads offer greater visibility for your brand, obviously you’ll want them to directly entice people to your website, where they can buy your products or pay for your services. Each new click of your advertisement boosts its CTR, while if people see it but don’t click it, the CTR goes down.

CPC

This stands for cost-per-click, and it assesses the cost every time someone clicks your advertisement. Depending on the level of competition, the CPC can be a few hundred dollars or just a few cents. Of course, you’ll want to lower your CPC as much as possible, while at the same time you want the ad to send as many qualified leads as possible to your site.

You need to realize, however, that the CPC may be low only because the keyword has a low search volume. If there are plenty of other advertisers willing to pay more money to have their ads shown when a particular keyword is used in a search engine, then certainly the CPC can rise.

You do need to weigh the cost of the CPC with your potential windfall. For example, the cost per click of your ad may be $200. But that may be a small price to pay if you’re a real estate agent who charges a 6% commission. If you specialize in selling luxury mansions, you can earn a lot more with the client who clicks the ad for million-dollar homes.

CPA

This time, CPA means cost-per-action and again you want to minimize it. The CPA refers to the cost of getting to do what you want them to do. Let’s say your advertising plan was to increase the number of people who sign up to receive your newsletter through their email. If you spent $300 on your campaign and you got 100 people to sign up for your newsletter, then the cost per action is $3 per subscriber.

Leads

In sales and marketing, leads refer to anyone who has shown any interest in the products or services you offer. Perhaps they’ve called up your business to inquire, or participated in a demo of your product. They may have sent you an email or perhaps subscribed to your newsletter.

Their level of interest can also vary, so they can be a very hot lead merely a warm lead. In some cases, they can be labeled as a “cold” lead as well. The cold lead is generally one who fits your customer demographics and has many similar qualities as your previous customers. However, these cold leads may not have yet shown any interest in buying or even just learning more about what you offer.

A warmer lead is also known as a marketing-qualified lead or MQL. They’ve shown greater interest in what you have to offer because they’re actively looking for such products. These are the ones that will be more amenable to receiving your marketing info materials like your brochures, ebooks, and testimonials.

The hot lead is also known as the sales-qualified lead or SQL. Most of the time, they’re the MQLs which you’ve properly wooed and nurtured with the right info that has made them ready to buy what you offer. If you’re selling handheld vacuum cleaners, for example, then these are the people who are now convinced that they want to buy a handheld vacuum cleaner. Obviously, your job is to find and engage with these SQLs so you can convince them to buy your handheld vacuum cleaners.

Conversion Rate

Let’s say you have a hundred people who have seen your popup ad asking them to sign up for your newsletter, 45 of them did sign up. That gives you a conversion rate of 45%. The conversion rate indicates how persuasive your ad was, so you can perhaps employ a new way to ask people to subscribe to your newsletter and see if you get more people to sign up.

CAC

This is the shorthand for customer acquisition rate. Basically, it’s what you spend in marketing to acquire a new customer. This is your investment, and your ROI is the value of the new customer for you. You’ll want to make sure that your CAC is therefore lower than the value of that customer.

Computing your CAC is simple enough. Let’s say you spent $3,000 for advertising your dental office, and it nets you 50 new patients. Your CAC is therefore $60 per customer. That’s not bad, considering that dental patients tend to stay with the same dentist unless they move to another area. The value of that customer is more likely to be higher than your CAC. However, if your CAC is lower than the potential value of that customer for your business, your advertising wasn’t particularly cost-effective.

CLV

This is the customer lifetime value of your customer. Let’s continue with the dental clinic example. If you have a baby for a patient in a nice residential neighborhood, then it’s very possible that the baby will be your patient for the next decade or so until he or she way from home. That makes for a very large CLV, with the costs of dental visits and services during their childhood and teenage years.

Churn Rate

This is the rate at which you lose your current customers. Again with the dental clinic, if you lost about 12 patients a year out of your current 100 regular patients, your churn rate is 12%. As a business owner, part of your job is to minimize the churn rate by keeping your current customers happy and loyal.

ROI

This is the familiar acronym for return of investment. You take into account how much you spend in terms of advertising and marketing, and you find out how much it results in terms of profits. If you spend $3,000 a month on advertising, then you better make sure than your profits increase by that same amount during that month.

All these KPIs will tell you if your advertising and marketing initiatives are working for you or not. Keep track of them so that you will know when to make changes and improvements for your digital marketing.