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Ratios matter in marketing

There are many ways to segment marketing data to measure success. To truly understand its impact on your business, you should rely on ratios to bring context to the data.

It is all too easy for inexperienced entrepreneurs to be mislead by "vanity metrics." These are the data points that don't relate specifically to how well your business is performing, but make you feel that you're executing the right tactics.

There is however a much bigger threat we rarely discuss. It is looking at the correct data, but not understanding its context. Which is why you should use ratios when analyzing your marketing data.

Let's consider Marketing Qualified Leads (MQLs). Ask any marketer and they'll agree that the number should increase over time. I argue that it's directionally interesting only. Would it be a failure if MQL growth flatlined, but you reduced ad spend 90%? What if you grew MQLs 50% YoY, but increased ad spend 200% to achieve it? Clearly, in this case, the cost of acquiring a lead matters.

Then there is the impact of other events on our data. Let's say your site experiences a dramatic decline in pageviews. Bad, right? Implementing new search in technical docs could reduce the number of pages a visitor needs to view before finding their answer. It would be hard to argue this is not a much better user experience. In fact, it's a perfect example of a situation where a declining metric is good news.

What about placing a free trial button in the top navigation of every page on your site? It would very likely lead to a short-term decline in pricing page views, but you'd see an increase in marketing leads.

So consider events that impact your data, and wherever possible measure using ratios. Search "marketing analytics ratios" and you'll find a lot of information. Just make sure it's relevant to your present circumstances.

See this follow-up post for some of the ratios I measure.

RobC

RobC

Marketing. Tech. Tunes. Words. Don't believe everything you think.

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