For the investment industry, which thrives on quantitative measurement to demonstrate its effectiveness for its investors, you would think advisors would prefer digital marketing over traditional methods to reach new clients and grow their business. Why? You can literally watch in real time, for example, as e-mails in a campaign are sent out, opened, clicked on and shared with your prospects’ family and friends.  It’s like watching stocks trade on the stock market.

But while the marketing world has become more analytical in recent years, most advisors don’t know which key performance indicators (KPIs) to study to better understand if their marketing is working.  A recent study by MIT Sloan Management Review and Capgemini Consulting revealed only 26 percent of respondents said their company had set KPIs to measure return on investment, 57 percent had not, and 17 percent simply did not know.

Simply stated, most non-marketing professionals don’t know which KPIs would be useful to them and their business, and as a result, either do not depend on marketing to grow their business or do it without knowing if it works.  To help de-mystify digital marketing, I have outlined the KPIs which matter most so you can begin understanding what’s working and fix what isn’t.

Return On Investment

The Return on Investment (ROI) KPI measures how much revenue a marketing campaign is generating compared to the cost of running that campaign. In other words, ROI answers the questions, "Are we recouping what we spend on marketing in new business?" ROI is the single most important KPI for any business to monitor and is the first KPI to understand when assessing your marketing performance.

To calculate ROI, you will need to track the number of leads generated through each of your marketing campaigns, such as a request for meetings through your website or AdWords campaign. Next, you will need to determine the opportunity value of each lead. To calculate this, take the fees you earn on your average new client and divide that value by your average lead-to-win ratio. For example, if you know that the average value of a win is $5,000 per year in fees, and your lead to win ratio is 10:1, then you can say that the average value of a lead is $500. This number will provide an approximate value to help you assess the performance of your campaign as you bring in each new lead.

Despite ROI being the quintessential marketing KPI, it can be quite difficult to come up with a definitive ROI figure. One of the main difficulties facing advisors is that lead conversion is typically attributed to the last interaction or click associated with completing a goal, such as downloading a PDF on a website. The problem is that someone may have read your online newsletter but didn't click on any of the links that would have taken them to your website, instead returning to your site weeks later to convert. That conversion may be attributed to another channel like social media or organic search, while the newsletter played a key role in that conversion process. Despite this problem, you will need to have a firm grasp of the value of leads and wins that can be directly attributed to each marketing campaign.