Measurement is just great. A wonderful way for supervisors to hang staff. Or managers to hang supervisors. Or senior managers to hang managers. But the most wondrous thing of all is that those “hanging metrics,” as often as not, convict the innocent and exonerate the guilty. Especially in companies attempting to improve customer-alignment.
Simple. You’re trying to do one thing while measuring another. While you’re trying to realign around customers, you’re continuing to apply traditional metrics that reward interfering behaviors while penalizing positive ones.
‘Any business process that creates conflicts with customers’ preferences instead of resolving them is inherently counter-productive.’
Consider a B2B company my firm worked with recently. Marketing generates lots of sales inquiries through the web, print and trade shows. And that’s marketing’s lead-generating metric: inquiries received. End of accountability—but not the end of responsibility. Marketing has to assign inquiries to either company reps or partners and distribute these raw inquiries. And marketing even makes a feeble attempt to track outcomes by sending out a computer printout monthly and asking for sales feedback.
There are no sales results to show for any of this, but that’s not marketing’s job. Sales is responsible for closing new business. But it’s not accountable because there’s no data measuring close rates or even contact rates. Because most of these inquiries are crap, including some from inquisitive competitors, most company sales reps deep-six them. And no one knows what happens with inquiries assigned to partners, but we can sure guess. Sales reps get bad raps for being “uncooperative,” and partners get bad-mouthed for not being team players. Swell.
What’s the right way to measure sales lead-generating programs?
Starting with the inflow of inquiries (how to best generate inquiries is a whole other, very important discussion), here’s one model. It’s an approach taken by Performark, one of several quality, third-party, lead-management firms out there that happens to be a long-time client of ours and has assisted our own clients.
First, you realize you’re not dealing with marketing’s process or sales’ process, you’re dealing with customer process—in other words, how customers want to buy. And any business process that creates conflicts with customers’ preferences instead of resolving them is inherently counter-productive. So you don’t go anywhere customers don’t want to go.
Next, you respect the reality that adding new value to customers is an essential first step to adding value to the company. Accordingly, you design the lead-management process, itself, to deliver value to customers.
But beyond these important, but “soft,” goals, you measure hard numbers. And one dwarfs all others: the ratio of profitable revenue gained against expense required to generate new revenue. We commonly call this cost-per-order, or “CPO.”
Seems an obvious thing to do. Why don’t more companies focus lead-generation measurement on CPO? Resistance.
Marketing and sales quickly realize they’re going to have work as one to generate maximum CPO. Marketing will have to send only qualified, ready-to-buy inquiries to sales, otherwise sales follow-up costs for pursuing “tire kicker” prospects will go through the roof. And sales is going to have to follow up these inquiries, or there’ll be no revenue to track. Plus, sales will have to report back sales outcomes, so marketing can track inquiries generated by different channels, specific media outlets and different messages—enabling marketing to kill non-productive stuff and invest in what’s productive.
On a management level, though, when you start integrating marketing and sales, you raise the specter of two management jobs becoming one or a peer relationship becoming a reporting relationship. Therefore, CPO measurement becomes, more than a goal, a change agent that requires functions to swallow hard and do what’s right for the company—and the customer. Enacting this type of change requires strong corporate leadership.
But CPO is a “lagging” metric. You don’t see outcomes until after the fact—and after potentially wasting lots of money barking up the wrong trees. You’re also going to need “leading” metrics: process outcomes predictive of future success. That’s why Performark applies a number of different interim measures, each of which dictates specific process steps, and each of which generates more points of resistance:
- Inquiry quality. Distribute inquiries into three buckets: qualified (ready-to-buy); longer-term interest; and disqualified (Performark estimates the breakdown at 15 percent, 30 percent and 55 percent). Measuring the “bucket flow” gives you an initial reading on the effectiveness of each inquiry-generating variant. But getting this information takes tele-qualification in most cases. Tele-qualification sounds expensive but is very cost-effective, compared to sales following up “disqualified” prospects or failing to follow up “future interest” prospects.
- Nurture marketing. With roughly 30 percent of inquiries landing in the “future interest” bucket, how successfully these inquiries are nurtured over time and converted into sales is critical to CPO. But talk about a lagging indicator! The need to covert these inquiries to lower CPO drives the use of nurture marketing. And having benchmarks for measuring percentage likelihood of closing over time allows us to predict the future value of these inquiries. And by the by, it’s called nurture marketing for a reason. The time and focus requirements of moving long-term prospects across the decision line conflicts with sales activity and triggers the same marketing budget angst I talked about earlier.
- Sales activity. You can get effective early indicators of eventual sales success though tracking and measuring sales follow-up activities (including opportunity management). It also helps identify strong and weak sales performers. Tracking sales follow-up has also identified many a “priority conflict” where sales is being pressured to meet other goals in ways that create time allocation conflicts.
Out of one measure come many. And from one point of resistance spring multiple points—which brings to light a terribly important concept:
More often than not, implementing measurement drives significant process change; and implementing process change creates resistance to change.
But more than a few companies are finally getting past the “resistance” phase and making the process changes required to enact appropriate measurement tools. And for you, I suggest the following leading and lagging measures for sales lead-generating activities.
|Common Measurement Criteria||More Appropriate Measurement Criteria|
Glad to see this article since the premise resonates strongly with my views. While we like to say that one “can’t manage what they don’t measure” it is worse than that: people actually don’t do what we can’t measure. Measurement is not a burden, it sets us free as managers.
Unfortunately there is a point of difference I believe should also be voiced. In measuring both marketing and sales the end result that really matters is incremental cost per incremental revenue dollar. In particular the sales metrics relationships acquired, maintained miss the point – the number of relationships is actually a cost driver not a revenue metric. Look to the new business revenue value produced for a real sales metric. In banking, for example, few can measure this due to product substitution and cannibalization effects. My view: not good enough. We have solved this problem and can measure the flow of funds within customer portfolios, which improves the focus of these metrics by over 30%. You might want to consider adopting an incremental business metric suite as the basis for your metrics – it will alter the landscape drastically.
Again thanks for a stimulating article.
Retention & Sales metrics
Dick Lee – David, I may not have expressed myself as clearly as I should have. I’m in violent agreement with you. In fact, I’ve been fighting product/service-based metrics in financial institutions for a couple of decades now.
Dick, you might be interested in the metrics we’ve developed which measure the flow of funds in customer relationships within complex portfolios. I would welcome your thoughts about this approach.
Retention & Sales metrics
Dick Lee – I’d be happy to review.