Here’s How To Simplify The Measurement Of Your Efforts Toward Scalable Revenue Generation
Since we published our latest book, Smash The Funnel, the response has been unexpected, to say the least. People are recognizing the challenges associated with the outdated traditional funnel and embracing today’s buyer journey metaphor, the cyclone.
But we always get similar questions from people who have read it, connected with it and want to start applying it. What should we be expecting in terms of business outcomes, and what should we be measuring if we’re using this methodology?
Great questions, and I love it when CEOs start asking their marketing and sales leaders to express their goals in terms of business outcomes, instead of campaign launches and the delivery of stuff like whitepapers and e-books.
Here are the 12 key metrics you should be considering, tracking and reviewing with your team on a monthly basis if you’re using the Cyclonic Buyer Journey™ as your map toward sustainable revenue growth.
1. Close Rate By Lead Source
First, I think we should address the elephant in the room. None of this is possible without tight alignment between marketing and sales. The metrics included in this section span across marketing, sales and customer service.
Today’s marketers have to take ownership of the entire customer experience or the entire buyer journey to see revenue increase month over month.
A recent Salesforce Research study found only 49% of the marketers surveyed believed their companies provide an experience completely aligned with customer expectations. We have to work to drive this number up.
Among the high-performing marketing teams, 54% report that they’re leading the customer experience initiatives across their companies.
While you could look at pure close rates as one of the most important indicators of revenue growth success, that’s actually not the full picture. When you align sales and marketing, you realize that you want to look at close rate in context to where that lead came from.
Our first revenue growth metric is close rate by lead source. In an instant, you see which lead sources are producing the best leads, not based on some random lead score or qualitative assessment from the sales team but based on closed revenue.
Which lead sources are driving revenue and by how much? It’s a metric that provides insight and focuses recommendations for improvement, action plans and additional revenue.
We like these action-oriented revenue growth metrics.
2. New Revenue Dollar Value By Lead Source (For An SLA)
SLA stands for service-level agreement, and it’s what most innovative marketing and sales teams are using to ensure both teams deliver at agreed-on levels. In short, marketing agrees to a certain level of lead generation, and sales agrees to a certain commitment to process, responsiveness and providing constructive feedback to marketing. Together, you get two teams working as one toward the agreed-on revenue goals.
Service-level agreements between marketing and sales can take a variety of formats and include a wider variety of performance metrics.
Our second key revenue growth metric is revenue dollar value by lead source. Again, we’re not looking at total value of the leads delivered by the marketing team, although you could stop there. I want to look at the value of those leads by source, too.
Here’s how you deliver on that metric. Every lead generated by marketing eventually closes or gets retired. Multiply the revenue generated from all the leads from a single source and divide that revenue by the number of leads.
Here’s an example.
You generated 400 leads from email marketing and that produced $20,000 in revenue. You generated 50 leads from webinar attendees and that produced $100,000 in revenue. You generated 1,000 leads from whitepaper downloads and that generated $34,000 in revenue.
Leads from email marketing have a revenue value of $50 per lead. Leads from webinars have a revenue value of $2,000 per lead. Leads from whitepaper downloads have a value of $34 per lead.
Now in the SLA, marketing will have a revenue value target each month (for example, $10,000 in revenue lead value). How they get there is up to them. They can do weekly webinars and get there with five leads or do email campaigns and get there with 2,000 leads. Sales shouldn’t care. Smart marketers would clearly focus on the high-value leads.
Back to our metrics conversation. Tracking all of the lead source types by revenue value month over month gives you an incredible insight into what leads are producing revenue and at what level.
3. Total Available Audience
Some companies approach us for help with no idea about their total market opportunity and thus how much they need to do to get to their goals, assuming those goals are even reasonable.
If you have a total market size of 100 companies and your average lifetime revenue per new customer is $10,000, you’ll never have a business bigger than $1,000,000 (and that assumes 100% market share). If that’s fine, great. But if you tell me you want to have a $10 million business, we have some explaining to do.
This metric illustrates how close you are to getting in conversation with your target audience. It includes all of the emails in your prospect database, all of your social followers, friends and connections, of all your blog subscribers, your customer database and the number of people visiting your website. In short, it’s the total number of people you currently have easy access to.
The higher the number, the easier it’s going to be to generate leads. Some might argue this is a vanity metric, but I’d counter that when we look at the formula for revenue growth, the bigger this number, the faster companies get to their goals.
Make this metric highly relevant if you’re looking to scale growth and exceed your revenue goals month over month.
4. Number Of Referrals
If you’re a student of the Cyclonic Buyer Journey or you read my article on customer marketing from last week, you already know that today’s companies are almost completely transparent when it comes to the experiences customers are having and their ability to share them with the world.
The experience your customers are having is directly related to the number of referrals you get each month. The better you do at Delivery (the eighth stage in the Cyclonic Buyer Journey), the more referrals you get.
You could also be looking at Net Promoter Score (NPS) or some other customer satisfaction metric, but if you want to start looking at customer experience metrics, the number of referrals you get is key.
That makes this our fourth most important revenue generation metric.
5. Sales-Qualified Lead To Sales Opportunity
In the constant battle between marketing and sales, sales says “marketing generates bad leads” and marketing says “sales never follows up or sucks at closing their leads.” This metric removes all of the guessing from the game.
Our fifth key revenue growth metric is the percentage of sales-qualified leads that become sales opportunities. This metric is a key indicator as to the quality of the leads marketing generates.
Perhaps this metric requires some clarification of terminology, and I should note that you don’t have to use this terminology – you can use your own. But you do have to be consistent, and everyone on both the marketing and sales teams needs to understand your terminology.
Sales-qualified leads are people who want to speak with sales. They’ve self-selected based on their buyer journey to be ready to speak with a salesperson.
Sales opportunities have been evaluated by sales and officially tagged as a qualified opportunity worth working on. That means they have pain, they are a good fit and sales is engaged with power. Again, your qualification methodology might be different, but the net result is the same.
This metric illustrates that the leads coming from marketing are moving at a high rate into the hands of the sales team, and sales believes the leads are good opportunities for the company.
6. Sales Opportunities To Onsite Meeting
While most of the above metrics are marketing metrics or shared marketing/sales metrics, the next two metrics are purely reflective of how good your sales process is at driving revenue.
Our sixth key revenue growth metric shows how effective your sales team is at taking highly qualified opportunities and moving them through your sales process.
Depending on your business, this might mean getting them to visit your facility for a walk-through. This might mean scheduling a demo if you’re a software company, or if you’re a professional services firm it might mean getting the prospect to agree to a review or to share financial info.
In some cases, this metric might mean getting a prospect to ask for recommendations or a proposal. This step is going to be very specific to your business, but the metrics remain the same. How effective is your sales team at taking a qualified opportunity and moving them through their buyer journey to the point where they want to hear about your solution to their challenges in detail?
7. Sales Opportunities To New Customer
This is another purely sales metric, but it’s a very important one. To clarify, this is not close rate. Close rate is proposals submitted to new customers signed. This is sales opportunities to new customers. It’s a better reflection of your sales team’s ability to execute your sales process and a reflection on your sales process, too.
The efficiency of your sales process is important. You don’t want to have 20 sales reps when 10 would do the same level of work and produce the same level of revenue. To make sure you’re not overstaffing sales, these metrics play a big role.
We haven’t talked about benchmarks for these metrics, but I bet you have lower expectations than you should have for both close rate and sales opportunities to new customer numbers.
Your close rate on proposals submitted should be pushing 80%, and your sales opportunities to new customers number should probably be pushing 70%. Even small improvements in this area can have major impact on revenue growth.
Because of this, our seventh key revenue growth metric is sales opportunities to closed new clients.
The reason we use this metric is you need a highly efficient sales process. One that qualifies early and often. One that allows reps to off-ramp unqualified prospects, prospects who are not ready to move forward, prospects who are misaligned with how your business delivers or prospects who are not a good cultural fit.
You want your sales reps to get to no early, not late. You want a low conversion rate early in the sales process and an extremely high conversion rate at the end of the sales process.
8. Website Visitors To Sales-Qualified Leads
One of the easiest metrics to track, report on and optimize is visitors to your website. That’s generally why this becomes one of marketing’s favorite metrics when it comes time to justify investment or energy. But we like a slightly different and related metric better.
Our eighth key revenue growth metric is the percentage of website visitors that become sales-qualified leads.
One of the best elements of this metric is its ability to show the effectiveness of your website to tell your story and to identify how good your content is at moving prospects through their buyer journey based on your influence.
If your website is turning a high percentage of visitors into sales-qualified leads, it’s quickly getting someone’s attention, telling them an emotional and compelling story, and serving up the right content that gets them to feel safe with your company. As a result, people feel safe enough to ask to speak to sales.
This is the measure of a highly effective digital marketing machine and why we put so much importance on this number.
9. Pipeline Velocity
Tracking pipeline velocity is a lot like tracking regular velocity, which is to say you divide a change in position by the change in time. In the case of pipeline, the equation is this: number of sales-qualified leads 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.
Using this formula, your result will be the estimated amount of revenue you have coming through the pipeline every day. The higher that number, the better your pipeline velocity.
That’s why pipeline velocity is our ninth revenue growth metric. Want more guidance on how to calculate pipeline velocity for your company? Here’s an example.
One of our clients has 43 qualified sales opportunities in the pipeline this month. The win rate on qualified sales opportunities is 30%. The average deal size is $50,000 and the current sales cycle is 65 days. This makes the client’s current pipeline velocity $9,923 for the month. What this tells you is that every day around $9,900 is flowing through the pipeline.
To give you an example of how making small changes in your sales process can improve your pipeline velocity, look at the calculations with some small improvements. If our client can get to 50 sales-qualified leads and increase the close rate to just 33% without increasing average revenue per new client but shortening the sales cycle from 65 days to 60 days, pipeline velocity would improve from $9,923 a day to $13,750 a day.
That’s a pretty big increase by moving just a few metrics a modest amount. We have a longer and more detailed article on pipeline velocity calculations. Click here to learn more about pipeline velocity.
10. Qualification Metrics
One of the trickier aspects of marketing and sales is forecasting. What leads are going to close this month? What about next month? How much revenue can we count on? What are the decisions around hiring, investment, purchasing and more that spin off from those forecasts? Forecasting revenue is critical, and most companies are horrible at it.
Our tenth revenue growth metric is more system than number. But we recommend you quantify your sales opportunities to the point where everyone is speaking a defined quantifiable language around the potential for a new customer to close or not.
We use the pain, power, fit system that applies a simple 0 to 5 score for each of the three qualification criteria. If you’re talking to power, like the CEO, that opportunity scores a five for power. If that opportunity needs exactly what you do in exactly the way you do it, that opportunity scores a five for fit. If they express a major desire to move quickly or their pain is acute, they get a five for pain.
A sales opportunity that scores a 15 is likely to close quickly (typically within a week or two).
Sales opportunities that score lower are less likely to close sooner, and we forecast those out while the reps continue to work those opportunities, getting closer to power, building on fit and tweaking at pain.
When it comes to forecasting new revenue, you only look at the 14s or 15s for this month. You only look at the 13s, 12s and 11s for next month, and everything else is far too unqualified to forecast. This common language puts everyone in the organization on the same page.
11. Open Rate And Click-Through Rate On Sales Emails
I am cheating here and looking at two very closely related metrics, but I think you’ll understand and appreciate why. Email marketing metrics are easy to track and do provide some insight, but we like to track sales email metrics to make sure the emails the sales team is using are actually moving people along in their buyer journeys. We think these are more important than the marketing air-cover emails most people track.
The eleventh revenue growth metric includes open and click-through rates for sales emails.
Sales is almost always left to their own when it comes to prospect communication, nurture and follow-up. Marketing typically washes their hands after the leads are passed to sales and sales picks them up. This is a big mistake.
Aligned teams work together to help measure the effectiveness of these emails. They work to tweak and adjust the copy, subject lines, links and offers in these emails so that they are more effective at delivering that amazing prospect experience we talked about at the start of this article.
Education must be delivered in every email. We tell clients to NEVER send a naked email or an email to a prospect that doesn’t have some educational content included. You need content that is in context to the conversations your sales reps are having with prospects.
It’s this attention to detail around the prospect experience that gets prospects to sit up and take notice. It helps you differentiate your business and it makes prospects feel like you listened. Today, 62% of customers expect companies to anticipate their needs, just like Netflix and Amazon.
By tracking the performance of your sales emails and working to improve that number, you’ll be shortening your sales cycle and improving your sales process conversion rates like you’ve never been able to do before.
12. Total Sales Cycle Time And Time Between Stages
Our last metric is perhaps obvious given the title of this article, but it’s still required. Our research shows that fewer than 20% of CEOs know their sales cycle length in days. How can you improve something if you don’t know what it is?
Our twelfth and final revenue growth metric is the sales metric average sales cycle length. This is defined as the amount of time from your first touch with a prospect to closing the deal, averaged across all won deals.
Your sales cycle length is going to be as unique as your business. We’ve had clients with sales cycles of 10 days and others with cycles of 365 days or more. There is no benchmark, and while there might be industry averages, I’d caution you from comparing yourself to other businesses, even those in the same industry.
What you should be working on is how to shorten your cycle, no matter what it is. The faster you can get customers to say yes, the more revenue you’ll generate and the faster you’ll grow.
You’re also going to want to look at the time (days) between stages of your sales process. This tends to identify parts of the sales process where more friction exists and parts of the sales process that might need more of your attention.
Here’s an example.
If your process is rolling along, but it tends to stall after your proposal is submitted, we should look at that document and the touches from your sales team around that document. Perhaps it’s too legal, or perhaps some sections make the prospect feel anxious.
By tracking sales cycle time between each stage, you quickly see where your process might need some upgrades.
Tracking the metrics is clearly just the first step and far from the end game. What you’re really searching for are the insights from the data and your team’s ability to take those insights, turn them into recommendations and create action plans to drive business results and business outcomes. This is not always an easy task.
But to paraphrase Peter Drucker, “What gets measured gets done.” Start tracking these key metrics first and then work your way into driving optimization, upgrades and enhancements over time. The result will be the finely tuned revenue generation machine we talk about in our book, Smash The Funnel.
What you’ll get is month-over-month revenue growth that will drive your business well into the future.
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Posted By Author Mike Lieberman, CEO and Chief Revenue Scientist
Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.