Top 2 Ways to Define Business Success
This post is the first in a 2 part series
One of the most important things to do when building a business is set yourself up for success, but sometimes success is hard to define. Let’s talk about the two most important things you need in order to help you to define your achievements.
1. Determine Your KPIs
Most of the time retargeting is used as a performance media tactic. Two of the most commonly used KPIs to measure performance are Cost Per Acquisition (CPA) and Return On Investment (ROI). Normally a business that sells goods will use a ROI model and a business that sells services will use a CPA model. This can change under certain circumstances.
However, companies don’t always solely focus on ROI or CPA. Businesses that are more heavily focused on upper-funnel marketing will mainly have goals such as driving awareness, promoting in-store purchases, or increasing site traffic. These businesses may focus on KPIs such as increasing reach by maximizing the number of impressions or clicks, while minimizing their CPM (cost per 1,000 impressions) or CPCs (cost per click).
Sometimes it is difficult to choose only one KPI. Some businesses may want to drive a specific CPA, but also want to increase their reach by maximizing their impressions. In order to achieve this, you should create separate campaigns with specified budgets and a single KPI for each.
2. Establish Benchmarks
Now that you have chosen a KPI, we need to set the benchmark or goal. What number do you need to hit to be profitable?
If your KPI is CPA, then you will need to look into your books and find out how much you are willing to pay for a new customer. Start by asking yourself these questions:
- What is the lifetime value of a new customer?
- Or, start small and ask yourself, what is the value of a customer if they only use your service once?
Then determine what the retention rate is for customers that have engaged once and have become returning customers. These answers will help you determine your customer lifetime value. It is okay if your numbers are a little fuzzy here since you are using this number as a starting point.
If your KPI is ROI, things are simpler. You can usually start at $1.00 ROI, meaning when you spend a dollar, you also make a dollar in revenue. Anything above $1.00 ROI will be viewed as profit. If you have specific margins on the cost of your product then you may want to take that into account as well.
Now that you have defined a KPI for your business and a benchmark you want to hit, there are a few ways you can utilize Perfect Audience to see how we are hitting those KPIs and benchmarks.
