Measuring Beyond The Lead

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Whether you are a marketing professional in a
large or small organization, working in a B2B or B2C company, you are
expected to demonstrate the value, impact and financial contribution of
the marketing investments you make on behalf of your organization. Your
leadership team wants to know how marketing is affecting the creation of
new customers and the retention of and new business from existing
customers.

As a result, marketers have embraced various approaches
to measuring marketing program performance and ROI particularly when it
comes to demand generation. In the world of B2B, marketers have places a
significant emphasis on measuring cost per lead, lead volume and lead
quality.

A Forrester Research study, “Redefining B2B Marketing
Measurement,” found that “the metrics that most B2B marketers say they
use — like number of leads generated and cost per lead” — rank in the
lower half of the effectiveness list.” In fact, cost per lead may
actually work against us if we don’t look further into the buying
process. At first blush, one program may produce more leads than another
at a lower cost and therefore appear more efficient.

But what
is really important is how many of the leads convert to the next stage
in the buying process. If there is a higher conversion rate from the
more expensive program, than it is actually more effective. But if we
only look at a marketing program in terms of qualified leads generated
and cost, we could potentially be eliminating programs that actually
help build the pipeline.

Therefore, we need to move beyond the
lead as the marketing metric and leverage metrics more meaningful to the
organization — metrics that are more closely tied to revenue. Revenue
— that is, sales — is for most organizations one of the most important
business outcomes. Every company establishes a revenue goal. This
revenue target is generated by some amount of business or dollars from
existing customers and some amount of business or dollars from net new
customers.

These dollars represent the opportunity dollars the
organization needs to generate. So while Marketing may not be directly
responsible for closing these deals, Marketing is responsible for
generating some or all of the opportunities dollars or opportunity
pipeline that will close. By looking at the opportunity pipeline from
end-to-end we can see that generating leads provides only a partial view
into marketing’s contribution.

So what marketing metrics are
more aligned with the opportunity pipeline? These three categories of
pipeline-related metrics enable Marketing to measure its contribution in
terms of opportunities:

1. Pipeline contribution

How are marketing programs and investment positively affecting the
number of leads that convert into sales opportunities and new deals? How
has marketing reduced the number of qualified leads that wither and
die?

2. Pipeline movement How are the marketing
programs and investments accelerated the rate at which opportunities
move through the pipeline and convert into the deals?

3. Pipeline value What increase in the revenue in the pipeline have marketing investment generated?

By moving beyond the lead and by improving our effectiveness and
efficiency in terms of these three metrics, we can actually improve
Marketing ROI. Ideally, over time, by monitoring results and analyzing
the data, Marketing can begin to create more predictable results in
terms of contribution, conversion, and value.

Of course, we
must remember that in addition to pipeline metrics we must also measure
strategic metrics related to customer retention and value, topics for
another time.

1 COMMENT

  1. Great article, thanks. It’s so true that placing undue focus on cost-per-lead can set off a ‘race to the bottom’ where lead quality is overlooked and even undermined. I wrote a response to your article talking about how lead management software can help measure how well marketing campaigns are performing. With lead management software, it’s possible to take calculating cost-per-lead to the next level.

    Read my response here:
    http://www.coffeeforclosers.org/cost-per-lead-the-next-generation/

    Matt Johnson
    Product and Marketing Content Manager
    Leads360

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