How do you know your digital marketing strategy is working? How do you find out which aspects must be emphasized and which ones need to be modified or even removed entirely? To understand all these, you need to monitor various key performance indicator (KPIs). These KPIs will give you definitive figures that can help you realize whether your marketing efforts are actually working online.

So which are the KPIs you must monitor? Here are some that you need to watch:

CTR

This stands for the “click through rate” and it’s the percentage of times people click on your ad. So let’s say you have 100 impressions, which means you have 100 people seeing your ad on a certain site. If 3 of them clicked on your online ad so they’re led to your website, then your ad has a 3% CTR.

Obviously, what you want is a higher CTR than what you have right now. If you have a very low CTR, then this tells you that your ad isn’t actually working as it ought to be.

CPC

This refers to the cost per click that involves having an ad for a certain keyword or keyword phrase. You compete for that keyword with a bid, but then you can keep the CPC down with a high CTR.

Let’s say you pay $1,000 for a keyword. You then attract 10 clicks. So your CPC is $100 for each click. If your ad didn’t attract too many clicks and only enticed a single click, then you have a CPC of $1,000. But if your ad enticed 100 clicks instead, then your COC goes down to only $10, which makes it a much more efficient use of your marketing budget.

CAC

This means Customer Acquisition Cost, and it refers to getting new customers. Let’s say you spend $1,000 on a marketing campaign for your business. As a result, you get 10 new customers. This means your CAC is $100. You basically spent $100 to attract each customer.

This is good news if each customer gets you $100,000 in profits. But if each customer only increases your revenues by less than $100, then you’ve lost out.

So it’s in your best interest to keep your CAC low. You can do that by either decreasing your expenses while still maintaining your target number of acquisitions, or you maintain your level of marketing expenses but you find ways to acquire more customers. So to reduce your CAC to $50, you can either reduce your expenses to $500 and still get 10 new customers, or maintain your $1,000 budget and somehow get 20 new customers instead.

CLV

This means Customer Lifetime Value, because customers can be repeat customers. They can buy from you again and again, and this determines their CLV. Let’s say you have a coffee shop, and it’s conveniently close to this customer’s home who likes your coffee. So this guy gets his coffee from you every day.

Your coffee costs $3 a cup, and so that $21 a week. In a year, that’s $1,095 worth of coffee sold to this customer.

This means that when you calculate your CAC (customer acquisition cost), you can then compare it to your customer’s lifetime value or CLV. So even with a CAC of $100, if the average CLV is close to $1,000 then you got a great deal.

Leads

A lead is a potential customer who has shown a level of interest to what you have to offer. This is a person who may have demonstrated your products, called your shop, or filled out a form on your website. Depending on their level of interest, they can be “hot” leads (extremely interested) or cold leads (barely interested).

Your marketing strategy should therefore lead to more leads, and hopefully you get more hot leads that are much more interested in what you have to offer.

Conversion Rate

When you launch any sort of marketing tactic, you often have a “call to action”. This can be anything, such as enticing your audience to fill out a form or subscribe to your newsletter. They can call your shop’s number or even just directly order from your website.

This rate depends on the number of people who have seen your “Call to Action”, and the number of people who did what you asked. So let’s say you have a web page asking people to sign up for your newsletter. You get 100 views of your webpage, and this gets 10 people to sign up. This gives you a conversion rate of 10%.

If you redesign the page and now you get a conversion rate of 20%, then you know your redesign is actually an improvement.

CPA

This refers to cost per action. Let’s say you want to increase the number of people to sign up for your newsletter. You then get 100 new subscribers, and you spent $1,000 for the marketing campaign to obtain them. This means that your CPA is $10—that’s what you paid for each new subscriber to your newsletter.

Churn Rate

How many of your regular customers do you lose? Let’s say that you have about 200 customers per month. When you don’t have any sort of marketing campaign or strategy, you may lose 10 people per month. That means in 20 months, you don’t have any customers at all.

You need to track your churn rate and it’s in your best interest to minimize it. So you need to find ways to keep your churn rate down or you need to entice new customers to make up for the loss.

ROI

This, as any business owner should know, refers to Return of Investment. You invest in money with your expenses, plus you also invest your time and energy. To make everything worthwhile, you better get more than what you put in.

You can track this in several ways. One basic method is to keep track of your marketing expenses while you also monitor your profits. So if you spent an extra $5,000 on marketing and afterwards you enjoyed an increase of $5,000 then your ROI is zero—you wasted your time and energy for nothing.

So make sure you monitor all these KPIs—that way, you can maximize your ROI!