Retail sales are estimated to reach over 4.95 trillion by the end of 2016, according to eMarketer. But without an effective use of retail marketing analytics, few businesses can prove how marketing campaigns contribute to their company’s slice of sales pie.
In fact, only 22 percent of marketers are confident that they have insight into the ROI of their marketing activities, according to a survey by the American Marketing Association. More than twice that number, or 48 percent, even admitted that they are not confident in their marketing ROI.
This lack of confidence in marketing ROI is the byproduct of an over complicated approach to marketing attribution. For retailers in particular, the key to overcoming this challenge is to use clear retail marketing marketing analytics to track and prove the impact marketing has on revenue and market share.
Here we’ll look at the best marketing KPIs and metrics for supporting retail marketing goals that are tied to revenue.
But before we proceed, let’s be clear about the industries we address with this retail marketing analytics approach.
Percentage of sales among 13 retail industries
Here are the 13 main retail sub-industries and business types by percentage of total sales generated annually, according to the U.S. Census Bureau:
20.0% — Motor vehicle and parts
13.0% — Food and beverage
12.5% — General merchandise (department stores, discount stores, etc.)
11.0% — Food and drinking services
10.0% — Gasoline (and convenience stores)
9.2% — Non-store retailers (online shopping, catalog, etc.)
6.0% — Building material and garden (home improvement)
6.0% — Health and personal care (pharmacy and drug stores)
5.0% — Clothing and accessories
2.3% — Miscellaneous store retailers (specialty retailers)
2.0% — Furniture
2.0% — Electronics and appliance
1.7% — Sporting goods, hobby, music, etc.
If you’re accountable for the marketing strategy in one of these retail industries, keep reading.
Choosing the right retail marketing analytics goals, KPIs, and metrics
The first step toward becoming a lean, mean, ROI-driving retail marketing machine, is to stop putting so much weight around top-of-funnel metrics.
Yes, driving more traffic to your website is a good thing. But will your CEO really care that you have more visitors if they don’t end up buying anything?
You have to focus on creating marketing goals that are closely linked to business outcomes. This can include things like increasing sales, decreasing customer acquisition costs, owning your product space (and beating competitors), increasing efficiency, and more.
Your key performance indicators will be customizable based on your company’s unique business needs. But in retail marketing analytics, there are a few KPIs you should pay attention to.
Goal: Increase marketing revenue and marketing-influenced sales
KPI: Marketing-influenced sales
The first indicator you’ll want to consider is the number of sales influenced by marketing campaigns and activities. Marketing attribution will help you to track which marketing campaigns or channels customers interacted with before choosing to purchase from your company.
To help you ascertain how well you are driving marketing-influenced sales, use retail marketing analytics to examine leading metrics, such as email subscribers, text subscribers, product page views, in-store check-ins, ad click-through rates, and other top-of-funnel metrics, to help guide you in the right direction.
KPI: Transaction value and quantity
As a retail marketer, you’re not just looking for more customers — you’re looking to have each customer purchase more items and spend more money. This is why tracking the average value and quantity of items purchased per transaction is important for measuring your marketing performance.
The best predictive analytics for this KPI would be based on past transaction data, but if you’re trying out a new marketing tactic or strategy there are other metrics that can help you forecast potential success.
For ecommerce marketers, keep an eye on the average number of product pages viewed per website visit, time spent in-store, number of items saved in carts, and value of items saved in carts for shoppers influenced by your new marketing campaign or channel to determine your impact.
You can track these goals using attribution, which also helps you keep all of your data in one place, or you can find them in Google Analytics:
Goal: Decrease customer acquisition cost (CAC)
For retail marketers, a company’s customer acquisition cost can depend on the competitiveness of the market, time of year, and brand equity.
Despite the large number of variables that can influence CAC, it’s very important for marketers to track their contribution to decreasing cost.
Why? Because marketing is so often seen as a huge center of cost rather than as a center of revenue. Not only do you have to prove that you’re increasing sales — you also need to prove that you’re decreasing costs for the business.
In order to decrease customer acquisition cost from a strategic perspective, you need to set KPIs that measure how efficiently you’re spending money on marketing programs, and how effective each of those programs is at driving customer conversions.
KPI: Spending efficiency
You’ll want to set goals and KPIs that measure spend efficiency for any director or manager on your team that manages a budget. Make sure to take into account their role in the marketing funnel, and adjust spending expectations based on their responsibilities and ROI.
For example, content marketing will likely spend less than advertising, but those functions have different roles in your overall marketing strategy, and their goal should be different from advertising’s goal. Both, however, will want to monitor their average spend per influenced transaction and sales amount.
Here’s an example of a dashboard to track social media ROI in the TrackMaven platform:
Leading metrics will be highly dependent upon the marketing activity. For advertising, CPC (cost per click) can help predict spend, while for content marketing, conversions like email or text subscriptions may be preferable.
KPI: Number of paid touchpoints
In addition to setting spending goals, tracking paid campaign efficiency will help you cut down on costs. The fewer paid touchpoints customers require before making a purchase, the less money you are likely to have to spend on each customer.
Basically, more impactful campaigns and a shorter path to purchase equals more money saved (something stakeholders always like to hear).
Use marketing attribution to track the average number of paid versus organic touches customers require in order to make a purchase. The more effective your paid marketing campaigns are at driving customer conversions, the fewer paid touchpoints will be required.
Don’t forget to track the value and quantity of purchases per transaction. Having an effective retail marketing campaign doesn’t just mean converting more customers — it means getting them to spend more money overall.
To help you get a head start, here’s a graph depicting the most effective retail marketing touchpoints and tactics, by one-touch and two-touch conversions, from Smart Insights:
Goal: Own your product space (and beat the competition)
Beating the competition is every marketer’s dream. Not only does it mean establishing brand equity, winning more customers, and increasing sales — it means knocking your CEO’s socks off.
But today’s retail market is tough. The internet has aided the globalization of consumer-driven business and a highly competitive industry landscape. And more marketers are left with lagging metrics, that only tell them whether or not they beat the other guys after the fight’s over.
Wouldn’t it be great if your retail marketing analytics provided you with competitive intelligence that allowed you to identify opportunities for a preemptive strike?
Tracking the right retail marketing metrics can get you there.
Performing a competitive analysis will help you identify the right tactics and campaigns you can use to beat the competition. Retail marketing analytics can help you track and prove how well they work.
KPI: Share of voice
Share of voice measures how much of the conversation with target consumers your brand owns versus your competitors. This conversation can be on social media, your blog, and any other place your target audience can hear from brands.
Keeping track of how much of this conversation — and the attention of consumers — your brand owns versus your competitors helps you to gauge brand awareness, brand equity, and target audience engagement.
Share of interactions (SOI) graphs show how your marketing performance on a particular channel changes over time. SOI graphs are excellent for competitive analysis as a tool for visualizing head-to-head comparisons of your industry ownership of specific channels.
Here’s an example of a share of interactions graph for Nordstrom, JCPenney, and Macy’s on Twitter:
You can break down share of voice even further by graphing share of interactions by topic. For example, around the holidays retail marketers may want to find out how well they are owning the attention of consumers on digital channels versus their competitors.
Marketers can track interactions for their brands and its competitors around topics such as “winter,” “gift,” and “christmas,” to find out if their holiday marketing campaigns are working.
Take a look at this example comparing social interactions on Twitter, Facebook, Pinterest, Instagram, and LinkedIn for Nordstrom, JCPenney, and Macy’s by topic:
Goal: Increase conversion efficiency
Only about 22 percent of businesses say they are satisfied with their conversion rates, according to Econsultancy. Increasing conversion efficiency means a shorter path to purchase, and faster business results.
So how can retail marketing analytics help you increase efficiency?
There are a couple of key KPIs and metrics that can help you improve the effectiveness of your marketing initiatives.
KPI: Conversion rate by number of touchpoints and time
The most important KPI for tracking increased conversion efficiency is the conversion rate, or the percentage of consumers who enter the marketing-sales funnel for your product who actually convert into customers.
Here’s a visualization of the marketing-sales funnel, which describes the buyer’s journey on the path to purchase:
However, in order to measure the efficiency of these conversions, you’ll have to get a bit more granular.
Use marketing attribution to analyze the most effective channels, campaigns, and combinations of tactics that get customers to convert and spend more money on your products.
In retail marketing analytics, there are two measurements of conversions that can guide you to greater efficiency.
- The first is the number of touchpoints required for conversions. The fewer marketing touches required to get a consumer to convert, the more efficient and effective your tactics are.
- The second measurement of efficiency is the time it takes a consumer to convert into a customer or to make a second purchase. The less time required, the more effective and efficient your marketing funnel is.
Again, use marketing attribution to figure out which channels, campaigns, and tactical combinations can help you and your team optimize the conversion funnel for faster results that require fewer touchpoints.
KPI: Shopping cart abandonment rate
Take your conversion analysis a step further by examining shopping cart (or in-store) abandonment rate. This is the percentage of shoppers who add a product to a cart but don’t end up purchasing anything.
Getting shoppers to not only pick out a product, but put down their money and purchase it is the last part of the conversion funnel, and one of the most critical steps.
To figure out how to optimize this bottom part of the conversion funnel, have your team examine the stages at which customers abandon carts. Your team can then implement A/B tests to figure out what tactics will improve conversions.
Another tactical approach to improving this KPI is examining product affinities — meaning, which products are purchased together — and product relationships, or which products are viewed consecutively. Using the presentation of products as a bundle can help increase the likelihood of conversion, and increase the total value of purchases.
Here’s an example of bundling using product affinity analysis from Amazon:
Goal: Increase customer loyalty
Brand loyalty leads to many benefits, including repeat purchases, word-of-mouth recommendations and reviews, and greater brand equity.
Here’s what the rest of the funnel looks like, from a customer experience perspective:
In terms of what stakeholders care about and what helps you to improve your strategy, there are a couple of important KPIs you should consider using in your retail marketing analytics.
KPI: Average customer lifetime value
Customer lifetime value is a prediction of the total net profit a company makes from a customer over the entire future of their relationship.
You can use past performance data to create marketing forecasts that predict average customer lifetime value.
Take the average value of total purchases made by customers in the past and use this information to predict future revenue from those customers, taking into account inflation and company growth rates.
You can also segment your customers to get average customer lifetime value for different target audiences. Set marketing strategy priorities using that information.
KPI: Repeat buyers
Having loyal customers is a huge benefit to retail marketers because when a customer purchases again, there are no new customer acquisition costs, the path the purchase is shorter, and the customer is less likely to need as many touch points before purchase.
Here’s how to track your effectiveness at gaining repeat buyers using retail marketing analytics.
Track the percentage of customers who return to purchase from your company again. This is the strongest metric for measuring customer loyalty in terms of willingness to purchase again.
To track the value of your repeat buyers, compare new customer sales versus returning customer sales. If your returning customers are buying again but spending less money, look at how you can better target them in the future.
Reporting retail marketing ROI to stakeholders
The KPIs outlined here will not only help you improve your marketing strategy — they will also help you prove that it works to stakeholders.
When reporting on your results, concentrate on the business results of your marketing goals. Use your retail marketing KPIs and metrics to demonstrate how you:
- Increased marketing revenue
- Decreased customer acquisition cost
- Beat your competitors
- Increased customer conversion efficiency
- Increased customer loyalty
Make sure to quantify your results so it’s easier to connect them to the company’s bottom line.
Want to get a head start on using retail marketing analytics in your strategy? Download this free marketing executive’s toolkit!