A few weeks ago I had a chance to present to Sheryl Root’s Agile Marketing class held at Carnegie Mellon’s Silicon Valley Campus. It was fun to participate and present one of my favorite topics “Measuring Marketing: Top 3 Marketing Metrics.”
Here’s an excerpt:
There are and three key concepts for measuring marketing for B2B marketers: Funnel Metrics, Campaign ROI, and Campaign Influence. Let’s start with Funnel Metrics.
Above is a relatively simple sales and marketing funnel with 5 stages. The responses stage represents all the responses to marketing campaigns. The marketing qualified response stage represents the responses that have been through some sort of marketing qualification. Qualification can be completed by an individual, but more often than not, it’s completed by some sort of automatic lead scoring based on actions taken by the respondent and the respondent profile. Best practice is to do both – have the automated lead qualification and also have a telemarketing person qualify the response. However, some companies skip this step when the volume is too low. You know your volume is too low if you are skipping this step!
Once you’ve qualified the marketing response, sales must accept the response. Sales will accept responses they intend to follow up on — ones look like good prospects. This handoff step is very critical and it’s often here where marketing and sales processes can be improved. So watch the conversion rates here.
As sales accepts the response, qualifies it, and works the opportunity, this stage is called Sales Qualified. The fact that there’s one stage where sales is working their magic with the prospects made me smile when I first saw this model but let’s go with it for simplicity. The last stage is Closed, which of course when sales has closed the deal.
This basic funnel should be used to track three key metrics: volume, conversion rates, and velocity. What the funnel does is really put incoming leads into the context of your business. When you apply funnel metrics to leads, it allows you to track the outcomes of every response and thus tie them to pipeline, won deals, and lost deals. I wrote a blog post on Why Funnel Metrics are Essential to Marketing Operations which goes into more detail on volume, conversion rates, and velocity and check out the slide below.
Something to remember about funnels is you can track one funnel for all of your funnel sources such as marketing campaigns, telesales campaigns, partner activities, and sales campaigns. Or you can break up the funnels by source. Here’s a slide that shows days in stage (= velocity) by source – marketing, telesales and sales. You can see that the marketing funnel takes the longest as these are often prospects that are completely new to that company. This will be typical as telesales and sales are often calling existing and known contacts.
Key Concept #2 is Return on Marketing Investment or ROMI (pronounced “Ro-mee”). This is an interesting metric but has some flaws.
ROMI is a numeric value for which you can compare marketing campaigns. In the example above, the ROMI is 4. In other words, for every $1 you put in, you get $4 back. That’s calculated by taking the revenue that is associated with the program and subtracting the cost of the program. That value is then divided by the cost of the program.
If you have a typical ROMI of 4 that means that 25% of the revenue goes to marketing program cost. One caution on this – most marketing teams don’t put in the people cost on a program. And another caution is that there is more than just marketing at work to drive revenue for a company – sources could be sales, telesales, or partner programs for example. So you could have different ROMIs by source.
The big flaw in ROMI is that a typical B2B prospect has 5-10 marketing touches prior to the sale. So how do you divide the revenue credit among those marketing campaigns?
This brings us to the third key concept which is Campaign Influence. Campaign Influence describes the revenue amount that a campaign may have had some sort of association. (You can more read about Campaign Influence vs. ROI here.)
The three most common ways to calculate campaign influence are the following: (1) each campaign associated with the deal gets 100% revenue credit, (2) the deal’s revenue is spread evenly across all associated campaigns and (3) revenue is spread across campaigns based on a weight given to the campaign.
The first calculation where each campaign gets 100% revenue credit is rife with issues. The reason is, of course, that most prospects will respond to multiple campaigns so you can end up double or triple counting the revenue. In addition, when you add up all the revenue driven by marketing that number is much larger than the actual revenue of the company which will make no sense to sales, finance or other company leadership.
The second calculation could be a good start. When revenue is spread evenly over all associated campaigns, at least the total calculation should add up to be the revenue for that period. However, some campaigns are clearly more important than others and this has a lot to do with a specific business.
In some companies, respondents with the right profile are most important. In others, getting new leads is most important. Still in others, the campaign that drives sales to engage with the prospect is most important. So we advocate of a Weighted Campaign Influence Model.
In summary, while a myriad of choices exist in what marketing metrics to track, we believe that companies should have the highest visibility to metrics that are tied to revenue activities by sales.