Change What You Measure To Improve Marketing Performance
Marketing-qualified leads (MQLs) have long been the measuring stick by which companies determine whether their marketing strategies and tactics are working. That’s because the traditional logic is that as more leads pour into the top of the funnel, the more opportunities there are for closing deals.
But when you take a step back and consider the MQL in the context of the modern buyer’s journey – which isn’t a funnel at all – that argument doesn’t hold.
People buy differently now. In our age of infinitely accessible digital information, buyers want to educate themselves at their own pace and in their own way for as long as possible before talking to a sales rep.
Measuring marketing success on an antiquated metric like the MQL does three dangerous things:
It encourages outdated marketing tactics.
When marketers are charged exclusively with hitting a certain number of MQLs per month, that number often becomes their primary focus. And when leads are really just contacts, it’s easy to do. Anyone can gate an e-book or a whitepaper, run ads to a landing page or capture email addresses and call the leads generated MQLs.
But that’s not good marketing. When the content itself has a selfish agenda – to capture contact information, not educate – it probably isn’t all that valuable.
It wastes the sales team’s time.
When 3,000 people with no buying intent fill out a form to download your e-book, and you pass those MQLs to your sales team, they now have to spend hours following up with leads that didn’t want to talk to them in the first place.
That wastes time, costs money and creates friction between sales and marketing – two teams that should be working in lockstep to increase revenue.
It skews the focus from revenue.
And speaking of revenue, that should be the true measuring stick of marketing success. But often, leadership teams assume that as the MQL number increases, so do closed deals, thereby improving revenue generation. But 3,000 leads with no intent to buy, closing at a rate of .02%, won’t move the needle for revenue generation.
Measuring marketing success on MQLs forces marketing teams to focus on capturing demand instead of creating it. And there’s a finite amount of available demand for any one product, service or solution – unless you can create more of it.
Creating demand means developing educational content, improving brand penetration and establishing thought leadership authority in your space. All of that requires time, resources and full commitment, meaning that if you’re currently running the tedious gated e-book download play quarter after quarter, your entire strategy will have to change.
It’s important to understand that when you shift your focus from capturing demand to creating it, your MQLs will drop.
But that’s a good thing. Remember, MQLs that are really just contacts with no buying intent only waste time and resources. Quality trumps quantity. Focusing on people who are actually interested in what you’re offering will improve sales team productivity and your brand’s reputation.
So if you stop using MQLs as your sole means of measuring marketing success, what should you be looking at instead?
1. Sales Opportunities Created
Once your sales and marketing teams are aligned on what constitutes a true opportunity, not just a name and email address, you can begin measuring opportunities created month over month and against a benchmark goal.
2. New Pipeline Value
Pipeline value itself is a simple calculation: Take the estimated deal size for everything in your pipeline regardless of stage and add it up, either for the entire company, rep by rep or region by region. The real power in measuring pipeline value, though, is studying how it trends over time.
3. Cost-Per-Lead vs. Customer Acquisition Cost
Most companies do measure cost-per-lead (CPL) and customer acquisition cost (CAC), but looking at them together will help you better understand pipeline and revenue outcomes relative to your marketing budget. CPL may increase as you adjust your strategy to create more valuable content and distribute it through the right channels, but as you do so, CAC should go down.
4. Revenue Growth
Obviously, revenue growth is the ultimate way to measure business success. Marketing teams should be keeping a close eye on revenue trends month over month and as compared to the company’s overall revenue goals.
5. Percent of Revenue From Inbound Opportunities
Dig deeper into what makes up your revenue to help determine how effective your marketing strategy is. When the percentage of revenue from inbound opportunities outpaces outbound revenue, your marketing efforts are probably working.
6. Length of Sales Cycle
When your inbound strategies are performing well, the length of your sales cycle should naturally decrease. That’s because prospects have educated themselves before getting to your sales team, using your educational content and branding efforts, and now they’re all but ready to buy.
7. Pipeline Velocity
Pipeline velocity is the speed by which leads – whether won or lost – move through your pipeline. Measuring the number itself matters less than measuring its change over time.
The formula for calculating pipeline velocity is: The number of sales-qualified leads (SQLs) in your pipeline times the overall win rate percentage of your sales team, times the average deal size (in dollars), divided by your current sales cycle in days. Use this formula to estimate the revenue you have coming through the pipeline every day. The higher that number, the better your pipeline velocity.
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