Digital marketing formulas can seem like an endless black hole of complicated metrics you’ll never understand. However, with just the basic online advertising formulas, you can begin to measure the success of your agency’s campaigns. Better campaigns lead to better customer acquisition and, ultimately, better results. Keep reading for your one stop guide to digital marketing formulas!
Wait, what’s customer acquisition?
Simply put, customer acquisition is the process of bringing new customers to your business to buy your product or service. Converting leads to customers is important for all businesses to make money and meet costs. It can help attract investors and influencers as evidence of a successful and systematic approach for business growth.
You might be thinking, isn’t that just marketing? While marketing builds brand awareness, customer acquisition targets consumers already in the consideration stage of your brand. By capturing this pool of customers, you drive revenue and increase business sustainability.
With the right digital marketing formulas, you’ll be able to optimize your approach to finding and tap into these eager audiences. Let’s dive in!
The most effective marketing formulas to attract customers
Formulas for performance campaigns
1. Cost Per Mille (CPM)
Cost per mille calculates the cost per 1000 impressions. Impressions refer to any person who views your ad on an online platform. CPM is a popular metric to build brand awareness. It allows you to compare the effectiveness of different media channels.
Formula: CPM = (amount of money spent on the campaign ($) x 1000) / number of impressions
2. Cost Per Click (CPC)
CPC refers to the amount you pay a search engine (like Google) for each click on your ad. It allows you to track the effectiveness of your pay-per-click (PPC) advertising. As you only pay when a user clicks on the link and reaches your website, CPC is an easy way to evaluate the value of paid advertising.
Formula: CPC = total money spent ($) / total clicks
3. Cost Per Action/Acquisition (CPA)
CPA lets you measure the revenue generated by a campaign against the amount of money you invest in the campaign. It focuses on the conversions created by the campaign, rather than the clicks or views. Hence, CPA shows you the cost of getting customers from the initial interaction to purchasing your product or service.
Formula: CPA = invested amount / conversions created
Formulas for inbound marketing
4. Email Bounce Rate
When it comes to email marketing, bounce rate is the percentage of emails sent that failed to be delivered. Automated emails are a great way to free up time for bigger business issues. But, if they’re not landing, they’re not hitting. Bounce rate is an important digital marketing formula to understand the effectiveness of your email marketing.
Formula: Email bounce rate = (bounced emails / total emails sent) x 100
5. Open Rate
Wondering how effective your email campaign is? Open rate looks at the number of subscribers that open your email comparative to the number of emails sent. Email marketing is proven to be successful by targeting people who are already considered a potential lead. To improve your open rate, consider the following:
- Are people interested in the content you’re sending?
- Are you spamming your subscribers with automated emails?
- Have you included call-to-actions to encourage further engagement with your brand?
Formula: Open rate = (total emails sent / total emails opened) x 100
6. Click to Open Rate (CTOR)
CTOR calculates how many times the links in your email were clicked versus how many times the email was opened. This metric measures the success of marketing efforts and gives insight into how to generate interest within your target audience.
Formula: (total number of clicks / total number of email opens) x 100
Formulas for outbound marketing
7. Average Revenue Per Unit (ARPU)
If you want a macro-measurement to give you an overarching figure for your sales performance, ARPU is your go to. It indicates profitability of a product or service by comparing revenue generated against units sold. ARPU is useful when comparing against competitors and analyzing the strengths and weaknesses of your business.
Formula: ARPU = MRR (monthly recurring revenue) / number of active users
8. Customer Acquisition Cost (CAC)
The CAC formula lets you calculate the amount of money your business has to spend to get a client over the buying line. It’s helpful to compare the success of different campaigns and marketing strategies. A lower CAC is suggestive of an efficient and properly scaled sales and marketing team.
Formula: CAC = MC (marketing costs) / CA (new customers acquired)
9. Lifetime Value (LTV)
Lifetime value helps you estimate the revenue a customer will generate over their time with your business. Calculating the ‘worth’ of each customer allows you to better make economic decisions when looking at budgets, profitability and forecasting. The LTV of a customer should always be higher than the CAC. Increasing the LTV of new customers will increase the sustainability and long-term profitability of your business.
Formula: average monthly revenue from each customer ($)/ churn rate*
*The rate you lose customers each month
Formulas for social media
10. Reach Rate
Out of all of the digital marketing formulas in our social media realm, reach rate is easily one of the most important indicators. It’s simple, reach measures the number of people who view your content. It varies from impressions by counting each viewer once, rather than the number of times they view the content. This subtle difference makes it a more reliable figure of how many people have actually seen your content. Through calculating reach rate, you can see the percentage of followers who have viewed your post.
Formula: Reach rate = (total reach / total number of followers) x 100
Now that you know your reach, you can calculate frequency. Frequency is the average number of times your content is seen by the reached population. Increasing frequency gives customers multiple touchpoints with your brand and heightens the chance of a high-quality engagement.
Formula: Frequency = impressions / reach
12. Engagement Rate (ER)
Engagement refers to all the interactions your social media content gets - including likes, comments, shares, reactions and more. In an online world, it’s an important metric to keep track of. It will give you insight into what your audience prefers to see and assists in curating your content for a more engaged following.
Formula: ER = total engagement / total number of followers
There you have it! 12 digital marketing formulas that will begin to transform the way you approach campaigns and content. By analyzing just a few possible metrics, you can improve your customer acquisition, marketing success and drive business results.