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The concept of hurdle rates seems to be quite widely used within finance and investment circles, but I rarely hear it discussed in blogs about measuring and improving digital marketing. Perhaps that's because they're most useful when related to customer retention, or the 'Engage' part of the Smart Insights RACE Planning framework.
It's surprising since they offer an excellent way to set goals and track performance against them when you are looking at your effectiveness in communicating with an audience. You can use them to review email marketing, ECRM, customer engagement with social media or repeat purchases. Here's a brief introduction to hurdle rates and some ideas on where you can apply them.
The hurdle rate for engagement is simply the percentage of customers who perform an activity, they have jumped over the hurdle target you set.
"The proportion of customers that fall within a particular level of activity or engagement with a brand typically within a time period. This is usually expressed as a target percentage and the number who have achieved it".
For example, the percentage of members of an email list that click on the email within a 90 day period, or the number of customers that have made a second purchase.
Hurdle rates enable you to assess how many of your audience are engaged with your marketing activities so are useful for benchmarking. You can then set targets to use communications to encourage more customers to "jump the hurdle" or engage with you.
Here are some examples I've used in different areas of digital marketing:
Email marketing - the level of emotionally unsubscribed - the % who never open or never click in a 6 month period - see this analysis.
Recommended link: Hurdle rate definition in retail - Jim Novo's post about hurdle rates from 2000 which introduced me to the concept of hurdle rates.
By Dave Chaffey
Dave is CEO and co-founder of Smart Insights. He is editor of the 100 templates, ebooks and courses in the digital marketing resource library created by our team of 25+ Digital Marketing experts. Our resources used by our Expert members in more than 80 countries to Map, Plan and Manage their digital marketing. For my full profile, or to connect on LinkedIn or other social networks, see the About Dave Chaffey profile page on Smart Insights. Dave is author of 5 bestselling books on digital marketing including Emarketing Excellence and Digital Marketing: Strategy, Implementation and Practice. In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing.
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