I am a regular contributor in the Growth Hackers Community; I help likeminded growth hackers and entrepreneurs with questions they have about marketing. Here is a sample of my answer to the question, “How do you measure the effectiveness of your marketing efforts?”
Every campaign usually begins with an experiment and a hypothesis. For example, an online t-shirt company that is starting a paid social advertising campaign is trying a new acquisition channel and wants to increase their t-shirt sales by 10% at 33% of the cost of the lifetime value of a customer. The key performance indicator and measurement of the effectiveness of this campaign is the cost of each conversion. I can easily get conversions through paid advertising, but the real measure of efficiency is making sure that I am getting a positive return on my investment.
There are dozens of SaaS platforms out there that help track paid and non-paid conversion, but you can generally get all the data you need from the ads platform or Google Analytics.
My goals are determined by the length of the sales funnel. In my experience, low-priced products like consumer goods have shorter sales funnels and require fewer steps to make a sale (bottom-funnel goals): ad click > view product > add to cart > checkout. In that scenario, the goal of the marketing campaign is to drive sales. Mid-to-high priced products like B2B services and luxury goods may require additional steps such as demos or lead nurturing to make a sale (top-funnel goals). Whenever I start a new campaign, I generally start at the top of the funnel and work my way down to ensure that what I am doing is the most efficient, which I measure using KPIs for that specific funnel step.
By default, my main indicator of success is Cost/Goal. Cost can be monetary, time, or energy. The goal could be a sale, lead generation, or just brand awareness. The important thing to keep in mind is establishing what the main conversion is prior to starting the campaign or you will look for anything to justify the investment and results (i.e. “Yeah…we lost $5000, but we have 200 likes now!”).
Read the whole answer and other responses at GrowthHackers.com.