In God we trust. All others must bring data.” – W. Edwards Deming
I spend lots of time talking to CEOs and B2B marketing and sales executives, and many do not have a good handle on how they are doing on their key performance indicators (KPIs). It’s like Goldilocks: Some are measuring too little, some are measuring too much, and some are measuring just the right amount but not using the data effectively. A minority are not only collecting the right data but also using it to gain competitive advantage.
You’ve heard it over and over: You can’t improve what you don’t measure. That sounds great in theory, but in a world that now has over 6,800 Martech tools, it is now possible to measure almost anything. But this abundance of technology has actually made it more difficult to figure out what to measure and how to report (and act) on results. And, despite the massive amounts of technology thrown at measuring marketing and sales performance, a large segment of B2B companies are no more effective or efficient than they were a decade or two ago. This is evidenced by the fact that many B2B marketing and sales executives can’t answer fundamental questions about their performance.
Why It's Important
"In a world that now has over 6,800 Martech tools, it is now possible to measure almost anything."
There are hundreds of potential items you can measure to track performance, but the following 13 metrics are an excellent starting point. We’ve had great success in utilizing this combination in providing a solid – but not overwhelming – view of B2B metrics as regards marketing and sales performance, especially those companies that have lead-qualification steps. eCommerce companies can customize as necessary.
- The current health of your brand. While you might think of this as a touchy-feely type question that can’t be quantified, my company has developed a Brand Health Scorecard that will quickly give you a sense of where you are versus the competition.
- The number of sales leads needed to hit your revenue targets. The correct answer is not “lots.” Of course we all want lots of sales leads, but this ambiguity doesn’t help you build an effective marketing plan. A later chapter gives you a a process to calculate how many leads you need.
- Your cost to acquire a new customer. We refer to this figure as Customer Acquisition Cost (CaC), and it can be calculated as a marketing program cost only, or as a dollar amount or percentage of the total marketing and sales expense burden as a percentage of revenue.
- Conversion rate of inquiries to marketing qualified leads (MQLs) or sales qualified leads (SQLs). Knowing this number is crucial because it tells you two important things: the quality of the inbound inquiries and the efficiency of your lead qualification process (and yes, you should have such a process in place!).
- Your opportunity close rate. Perhaps you have done a great job at generating and qualifying inquiries. Now you need to understand how efficient you are at closing business. This will also show you how much pipeline coverage you require to hit your revenue targets.
- The average deal size. This is a measurement that should show improvement over time. An increase in average deal size will boost revenue performance even if none of the other indicators improve.
- Average lifetime value (LTV) of each customer. Multiply the average deal size by the average number of times each customer/client will buy over the course of the relationship. For example, if the average customer pays $1,000 and buys three times, the LTV is $3,000.
- The length of your average sales cycle. This is computed as the average amount of time taken from a customer’s first engagement until the close of the deal. I am surprised by how many B2B marketing and sales executives are not aware of this number.
- Marketing media and tactics that produce the leads most likely to convert. Media and campaign effectiveness metrics should be built into every campaign to ensure that you spend future budget dollars wisely.
- What prospects look at and what actions they take when they visit your website. You need to know a few basics: the number of unique visitors monthly, the amount of time visitors spend on your site, the pages they visit most often, and the engagement rate: how many visitors register, buy or download something. This last statistic is important because some websites attract a lot of traffic, but because the content is not relevant to visitors, they convert very few.
- Level of customer satisfaction. The gold standard in customer satisfaction measurement is the Net Promoter Score (NPS) Survey, that bases the NPS number by using the answer to a key, survey question, on a 0-10 scale: How likely is it that you would recommend [brand] to a friend or colleague? However, be aware that there are other ways to measure customer satisfaction (CSAT). Read my friend Ed Powers’ article on this subject.
- Customer retention rate. This is a key metric that shows you whether to spend your marketing dollars on attracting new clients or keeping existing clients. There are lots of ways to measure this, but it simply refers to the percentage of a given pool of customers at the start of a period who are still with you at the end of that period. For example, if you start with 100 customers on January 1, and you still have 85 of them on December 31, your retention rate is 85 percent. You can also view this from the other side. Using the same numbers, you have a churn (attrition) rate of 15 percent. You care about this because it usually costs five- to ten times as much to acquire a new customer than it does to retain a current customer.
- Marketing’s contribution to revenue. Most B2B companies generate some revenue from non-marketing initiated sources (e.g. upsell, services, and existing contracts). The remainder is marketing contributed revenue, and this is the number you need to use for marketing planning, budgeting, etc.
Consider this example of how the lack of measurement can hurt. At the first planning meeting with a new client, the chief sales officer (CSO) boasted that his crack sales team was closing 50 percent of their opportunities; however, when we analyzed the past data, the closing conversion ratio was actually about 25 percent. Had we accepted the anecdotal estimate instead of hard data, this would have made the entire lead-to-revenue (L2R) model unachievable.
Rules for Measurement
Here are a few guidelines to ensure these 13 B2B metrics (and others you choose to focus on) are used to boost revenue.
- Focusing on what matters (quality) is way more important than measuring everything (quantity). Notwithstanding the 13 recommendations above, it is better to start with a few and scale over time, than to try to measure everything at once.
- Don’t measure anything that isn’t both important and actionable.
- The closer a metric is to revenue, the more seriously the executive team will take it. For example, cost-per-sale has a higher status than cost-per-inquiry.
- Don’t spend more time measuring than doing.
- When it comes to sharing results, dashboards work much better than detailed reports.
- If the people that count won’t read the report, don’t waste time producing it.
I’ll leave you with a great quote about data courtesy of Jim Barksdale, former Netscape CEO: “If we have data, let’s look at data. If all we have are opinions, let’s go with mine.”
Note: this post was excerpted from The Expert’s B2B Revenue Growth Playbook: Actionable Strategies to Make Your Business Soar.