How’s the marketing doing? What’s the ROI look like? What results have our marketing efforts produced? These are questions CEOs, CFOs and COOs ask marketers every single day.
What these questions uncover is that there is no alignment around expectations from marketing and no visibility into what metrics the marketing is actually moving.
The alignment, expectations and visibility can be solved with a simple set of metrics.
First, a quick point about ROI. Not every investment you make in your business has an ROI calculation associated with it. Marketing should fall into that category. Yes, it has to produce results, and yes, you should be clear on expected results over specific time periods. However, you can’t not do marketing, so the ROI is irrelevant in my mind.
Do you need a CEO? What’s the ROI on that? Do you need a CFO? What’s the ROI? When you go to the big industry trade show every year and come back with only a handful of mediocre leads, what’s the ROI there? How about your office? What’s the ROI on that expense?
All of these examples highlight business situations where value is added but the actual ROI is hard to calculate and no one questions it. Marketing should be in the same category.
Yes, it needs to produce results, just like your CEO and CFO. Yes, it needs to add value, just like the costs associated with your office. But it’s a cost of doing business, not something that should be measured on ROI.
It’s not that I’m trying to skirt accountability for the performance of marketing. It does need to be trackable and measurable. The actual ROI calculation is what I’m pushing back on.
Quick story: Your CEO meets a new person at a dinner party, and the person turns out to be a legitimate prospect. After a brief conversation, the meeting is over and everyone goes back to the party.
The next day, the prospect visits your website, downloads a whitepaper, signs up for a webinar and completes a form asking for a free assessment. After working with sales for three weeks, the prospect becomes a new client worth $250,000 annually. Where does this revenue get assigned to run the ROI calculation?
To networking? To the CEO? To marketing? To sales? To the dinner party? Who cares, right? Your entire revenue generation engine functioned flawlessly and revenue was generated. The marketing worked, sales performed, legal didn’t mess up the deal and the new customer is happy. Does it matter how the revenue is allocated? I don’t think so.
But you should be measuring the performance of your marketing, just like you measure the performance of your CEO, CFO and other investments at your company.
Here’s the weekly reporting dashboard that uncovers whether your marketing is working correctly or not. Using it, your marketing team should be able to uncover what’s needed if the numbers are not going up and to the right.
Also, note that if you’re six months or less into a new marketing program or an upgraded marketing program, you should not expect these numbers to be significant. It’s only after an appropriate investment in your marketing and the necessary amount of time to get traction that you’ll start to see these numbers move up and to the right.
I’d also like to note that knowing these metrics is always helpful, so even if you’re just starting out, track these numbers and be patient. You’ll soon see the improvement you’re looking for, and you’ll remember where you were when they really start cruising up and to the right.
Here you go!
Number of sales opportunities generated (this month vs. last month and this month vs. goal)
You’ll notice that we’re starting with sales opportunities and not marketing-qualified leads (MQLs). Once you start ungating most of your early buyer journey content, generating MQLs is more difficult, if not impossible.
I’m not sure that’s a big problem since most MQLs are early buyer journey prospects with no real and active intent to do anything with you right now. It’s not that they’re bad leads, they’re just early in their buyer journey.
Knowing who they are isn’t super helpful and could potentially waste a sales rep’s time. Instead, by ungating your content, you get many more people looking at your content, and while you don’t know who they are, you’re connected to many more people this way.
Remember, your content has to be solid, entertaining and highly educational if this is going to work.
Tracking the number of sales opportunities is a much better indicator of how your marketing and overall revenue cycle is working.
New pipeline value created (this month vs. last month and this month vs. goal)
Sales opportunities don’t always turn into revenue. The sales team could qualify them out of the process or the prospect could change their mind and not move forward.
Assuming your pipeline is only populated with active, qualified and potentially closable opportunities, pipeline value is a much better measure of how you’re doing at generating revenue through marketing activities.
This is not a measure of how effective your sales reps are at turning opportunities into actual revenue. Keep that in mind. If your marketing is working and attracting the right people, this measure should be increasing month over month.
Revenue to date (this month vs. last month and this month vs. goal)
This is an easy one. Almost every CRM provides monthly revenue numbers that can easily find their way to a dashboard for marketing and sales leadership to review. More importantly, you should be able to watch this number move up and to the right.
If you’re not growing, you’re dying, so make sure your marketing and sales execution is contributing to growing revenue numbers each month.
Percentage of revenue from inbound-sales-generated opportunities compared to percentage of revenue from outbound sales opportunities
For every easy metric like the last one, we have to have one more challenging, and this is one of the most challenging key performance indicators (KPIs) on the list.
Today, most companies aren’t doing just inbound or just outbound. They’re doing a mix of both. You should have an idea of how each approach is working. The best way is to attribute revenue to one of the two approaches.
- Inbound-sales-generated opportunities: These are people who appear out of the ether, visit your website, download your content and eventually find themselves talking to a sales rep.
- Outbound-sales-generated opportunities: These are people who sales has identified, from a list or other source, and cold-called or cold-emailed.
With these definitions in place, it shouldn’t be hard to attribute sales opportunities and revenue to each type.
If you’re starting an inbound approach to add to your outbound efforts, this percentage is going to be low out of the gate. But as your inbound efforts pick up steam, this should become a bigger percentage contributor.
Over time, as your inbound sales opportunities ramp up, you can decide if ramping down your direct outbound efforts make senses or if a strategic blend of inbound and outbound works better for your business.
Number of late-stage buyer journey offer conversions (this month vs. last month and this month vs. goal)
If you’re at a software company, the easiest way to understand these metrics is to think of them as demos requested. Demos are a traditional late-stage buyer journey offer for software companies. People who request demos are usually active in their buying intent and ready to speak with a sales rep about the software.
But what if you’re not at a software company? Or what if you are at a software company but you’re considering other alternatives instead of demos to measure late-stage buyer intent?
There are plenty of ways to create innovative, value-oriented and engaging offers and drive late-stage intent signals for prospects. Here are two simple ones.
For an insurance company, offer a free no-obligation 30-minute policy review. This gives prospects some tangible value, gets the reps asking the right questions, causes prospects to share important information and positions the rep as a trusted advisor.
For a flooring finishing company, offer a free no-obligation floor finish assessment. Have the prospect send a few pictures of their floors, and in 30 minutes the technical team will let them know exactly what they can do to make the floor look better for their guests or workers.
Measuring these shows how your demand generation is working to drive awareness and how well your thought leadership and educational efforts are working to bring buyers back to your website.
It’s critical that you know how your sales team is doing at closing new customers. This is a reflection on your sales process, the quality of your salespeople and the quality of the sales opportunities the marketing team generates.
As the quality of sales opportunities increases, and as you make upgrades to your sales process, this metric should be going up.
From a HubSpot blog article, here are some industry-specific close rate metrics:Biotechnology: 15%
Business and industrial: 27%
Computer software: 22%
Computers and electronics: 23%
In general, these are pretty low, and you know I don’t love averages. Instead, baseline your current close rate and simply work to improve it month over month. You should be pushing 50% to 60% or higher if you’re doing everything you should be around lead qualification and sales process improvement.
Average deal size (this month vs. last month and this month vs. goal)
If you want to grow, then you have to grow your average deal size, too. This means doing a better job diagnosing all of the areas where your company can help your prospects, taking prospects through a process where they understand the full value you provide and getting them to trust your sales team so they happily invest fully out of the gate.
This approach is different than land and expand. Instead of getting even a little revenue now and hoping you’ll grow the account later, you spend enough time with the prospect to recommend everything you provide in a meaningful and valuable way.
Again, track this every single month. Set goals that your entire team is working toward, then track against these goals and against last month’s results.
Small improvements over time will translate into major revenue gains and, in a lot of cases, huge gains in net profit, too.
Sales cycle in days (this month vs. last month and this month vs. goal)
How long it takes you to close business has a direct impact on how many new customers you need to hit your goals. If you can close faster, you’ll turn over your pipeline faster and grow faster, too.
There are no average sales cycles. Every company is unique, and it only matters what your sales cycle in days is now and how quickly you can work to lower it.
This almost always involves looking at your process, identifying where the process introduces friction for your prospects and removing that friction.
For example, a prospect asks for references on day 30. It takes you two weeks to get all of the contacts over, check with your customers, schedule the calls, have the calls and then get together internally to talk about the outcomes.
Your 45-day sales cycle can be cut dramatically by simply sharing a reference reel video on day 28, taking your 45-day sales cycle down to 29 days with one simple upgrade.
Pipeline velocity (this month vs. last month)
Finally, pipeline velocity is defined as the speed by which leads move through your pipeline, whether won or lost. What’s interesting about the pipeline velocity metric is that you should care more about the changes in the number over time than you should about the actual number. In other words, pipeline velocity data is only relevant when compared to the velocity over time.
Here’s how you calculate pipeline velocity and how it powers revenue growth. 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 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.
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.
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, which means that every day around $9,900 is flowing through the pipeline.
To learn more about this interesting and little-used metric, read this article on pipeline velocity.
These metrics aren’t at the top of most marketing agencies’ dashboard checklist playbooks. But for a revenue growth shop like Square 2, we’re looking for metrics that help us and our clients measure performance as it improves over time.
While some of these are rollups of other metrics, you must have an idea day in and day out about how your programs are doing. That data must inform your action planning based on the insights uncovered in the data.
These advanced dashboards and revenue operations metrics are key to helping uncover those insights and informing a more performance-based action plan.
Square 2 — Building The Agency You’ll LOVE!
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.