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1. Thetive i efinideD GuMarketingMetrics
&Analyticsmarketo.com
2. Definitive Guide to Marketing Metrics and
AnalyticsContentsWhy Should I Read the Definitive Guide Part 5:
Program Measurement 37to Marketing Metrics and Analytics? 3 Why
Measuring Marketing Programs is Difficult 38 Method One: Single
Attribution (First Touch / Last Touch) 40Part 1: Measurement Builds
Respect and Accountability 4 Method Two: Single Attribution withWhy
Now Is The Time For Marketing Metrics 7 Revenue Cycle Projections
41 Method Three: Attribute across Multiple ProgramsPart 2: Planning
for Marketing ROI 9 and People 44Step One: Establish Goals and ROI
Estimates Up-Front 11 Method Four: Test and Control Groups 46Step
Two: Design Programs to Be Measurable 15 Method Five: Full Market
Mix Modeling 48Step Three: Focus on the Decisions Program specific
metrics what you shouldthat Improve Marketing 16 measure and track
49 Conclusion: Program Measurement Applied 50Part 3: A Framework
for Measurement 17Where Metrics Go Wrong 19 Part 6: Marketing
Forecasting 51The Right Metrics 21 Part 7: Dashboards 55Part 4:
Revenue Analytics 23Define the Revenue Cycle 24 Part 8:
Implementation People, Process,Revenue Cycle Metrics That Matter 29
and Technology 59Revenue Performance Management Metrics 33 People
and Culture 60 Process 62 Technology 64 Conclusion 65 Key Lessons
to Improve your Performance, Profitability, and Credibility with
Marketing Metrics and Analytics 66 2011 Marketo, Inc. All rights
reserved. 2
3. Definitive Guide to Marketing Metrics and AnalyticsWhy
Should I Read the Definitive Guideto Marketing Metrics and
Analytics?Do you know what profits a 10% increase This guide will
help you do just that. Wein your marketing budget would generate?
will help you answer key questions like:According to the Lenskold
Groups 2010 B2B hat are the most important marketing W 5 QUESTIONS
TO GUIDE YOURLead Generation Marketing ROI Study, the metrics for
me to use? MEASUREMENT INSIGHTmost common answer to this question
is 1. hat are your specific objectives for marketing W ow can I
measure my various marketing HI Dont Know. investment and how will
you connect your programs impact on revenue and profit?Forty-four
percent (44%) of qualified investments to incremental revenue and
profit? ow can I best communicate marketing Hmarketers have no idea
what a 10% budget 2. hat impact would a 10% change in your W
results with my executive team and board?increase could do for
their companies. marketing budget (up or down) have on your hich
personnel, procedural, and W profits and margins over the next
year?If you fit into this 44%, you will experience cultural changes
need to occur within my The next three years? Five?difficulty
protecting your budget. In fact, youll organization so I can
implement marketinglikely find yourself asking the question the
other 3. ompared to relevant benchmarks (historical, C
measurement?way around: What will happen now that my competitive,
marketplace), how effective are youbudget has been decreased by
10%? And many more at converting marketing investment into
revenueYou cant expect your organization to place value and profit
growth? The bottom line of any business is the topon something
youre unable to quantify. line: revenue and faster growth! 4. hich
are appropriate targets for improving W revenue leverage (defined
as dollars of profit So lets get started. over dollars of marketing
and sales spend) over the next few years? Which initiatives will
get you there? 5. hat questions do you still need to answer W with
regard to your knowledge of the return on marketing investments?
What are you going to do to answer them? (Source: MarketingNPV)
2011 Marketo, Inc. All rights reserved. 3
4. Definitive Guide to Marketing Metrics and AnalyticsPart 1:
MeasurementBuilds Respect andAccountability 2011 Marketo, Inc. All
rights reserved. 4
5. Definitive Guide to Marketing Metrics and AnalyticsPart 1:
Measurement Builds Respectand AccountabilityMarketing suffers from
a crisis of credibility. ow much profit was made last quarter
HTypically, executives outside the marketing versus this
quarter?department perceive that marketing exists ow much revenue
and profit do you H CUT PROGRAMS TO BUILD CREDIBILITYsolely to
support sales, or that it is an arts and forecast for the next
quarter? According to Marketo CEO Phil Fernandez, the #1crafts
function that throws parties and churnsout color brochures. Either
way, marketing hy are you confident in the above answers? W thing a
marketer can to do to build credibility withoften does not command
the respect it the CEO is to offer some cuts to marketing
programs.deserves. Soft metrics like brand awareness, GRP, Show
that you are de-funding things you impressions, organic search
rankings and previously did that either A) didnt work; B)
werentWhat can marketers do so they are seen reach are important
but only to the extent aligned with evolving company goals; or C)
seemas part of a machine that drives revenue that they quantifiably
connect to hard less important now than other initiatives. This
helpsand profits? How can marketers take more metrics like
pipeline, revenue, and profit. demonstrate a strong sense that you
are managing acontrol over the revenue process, build the portfolio
of investments, and that you are willing torespect of their
organizational peers, and Of course, marketers must track and
measure the impact of all key marketing activities, make hard
choices with company money.earn a seat at the revenue table? both
hard and soft. But keep all but the most critical metrics internal
to marketing.Use metrics that matter to By speaking the same
quantitative languagethe CEO and CFO as the CEOs and CFOs,
marketers will betterIts no secret that CEOs and boards dont
communicate marketings value and impact tocare about the open rate
of your last email the executive suite. Seventy-six percent (76%)
of B2B marketing professionals agreecampaign or your last press
releases numberof views. See Part 4 for more on how to measure or
strongly agree that their ability to track marketing ROI givesIn
todays economy, CEOs and CFOs the right revenue metrics. marketing
more respect. Source: Forrester Researchcare about growing revenue
and profits: ow much faster are we growing now H versus last
quarter? Last year? 2011 Marketo, Inc. All rights reserved. 5
6. Definitive Guide to Marketing Metrics and AnalyticsPart 1:
Measurement Builds Respectand AccountabilityKnow the impact of each
When you talk about marketing spending, arketing has always been a
grueling and competitive sport not Mmarketing investment other
executives think of costs and profit unlike running a marathon.
With the changes in the buying process,If you cant confidently
identify which parts of loss. When you talk about future results,
in media and technology, and managing expectations, its likeyour
marketing truly deliver financial returns, they think of revenue
and growth. running a marathon as the ground shifts beneath your
feet. Whatmarketings impact and influence will continueto be
limited across your company. This will To formulate accurate
forecasts, sales was already difficult is becoming increasingly
difficult. If youre and marketing must sit together at the going to
do it without measurement, its like running a marathon,not only
hurt marketings influence and revenue table.credibility; it can
also prevent your company in an earthquake, blindfolded. David
Raab, Author, Winning thefrom making the right strategic
investments to See Part 6 for more on Marketing Forecasting.
Marketing Measurement Marathonimprove results over time.See Part 5
for more on measuring the impact Make hard business cases for
spending With its forecast in place, marketing must thenof various
marketing programs. make a hard business case for the resources it
needs to deliver the results it has promised.Forecast results, not
spending This requires knowing what it will take inForecasting is
perhaps the single most money, time, and effort to acquire
newimportant thing marketers can do to change qualified leads and
nurture those leads untilthe perception that marketing is a cost
center. they are ready to talk with sales.In the same way that you
cant drive quickly Marketers who use this type of rigorousif you
rely only on your rear-view mirror, you methodology are able to
frame their budgetscant be an effective marketer if you only in
terms of investments, not costs, and arereport what has happened in
the past. The better able to justify and defend their budgets.best
marketers forecast the results they expectin the future and
quantify their forecasts interms of leads, pipeline, and revenue.
2011 Marketo, Inc. All rights reserved. 6
7. Definitive Guide to Marketing Metrics and AnalyticsPart 1:
Measurement Builds Respectand Accountability As the function that
owns the relationship CEOs Grade MarketingWHY NOW IS THE TIME FOR
with these early stage prospects, Marketing 67% of CEOs give their
marketing departments a B or CMARKETING METRICS 20% now is
responsible for a much greater portion of the revenue cycle than
ever before.The way that prospects research and buysolutions today
has been forever transformed But with great power comes greatby the
abundance of information available on responsibility. Not sure the
marketing programswebsites and social networks, and this in turn
made a dierence, but they probably Enter Marketing Metrics. had
some impact even thoughfuels a significant change in the way
marketing contribution wasnt measuredand sales teams must work and
work CEO ratings of marketings performance 47%together to drive
revenue. directly rise and fall with marketings ability to quantify
how their campaigns and programsBecause they have ready access to
deliver value in line with company revenueinformation, buyers
resist engaging with sales objectives. It is more important than
ever foruntil much later in the buying process. marketing to link
the impact of its efforts and Marketing programs madeThis presents
an incredible opportunity financial investments to revenue and
profit, a dierence but contributionfor marketing to reinvent itself
as a core and establish a true process for marketing ROI wasnt
measuredpart of the companys revenue engine. in their companies.
35% 0% of the buying process is now complete 7 Marketing programs
made an by the time a prospect is ready to engage with impact and
marketing was able to sales. SiriusDecisions, Inc. document their
contribution Source: VisionEdge Marketing & Marketo 2010
Marketing Performance Measurement and Management Survey of 423
executives 2011 Marketo, Inc. All rights reserved. 7
8. Definitive Guide to Marketing Metrics and AnalyticsPart 1:
Measurement Builds Respectand AccountabilityTHE 5 STAGES OF
MARKETING ACCOUNTABILITY1. Denial 3. Confusion Inevitably, this
will reinforce the perceptionMarketing is an art, not a science. It
cant be I know I should measure marketing results, that marketing
is a cost center, not a revenue-measured. The results will come;
trust me! but I just dont know how. producing asset.At first, the
CMO may deny the need to be The CMO knows that marketing
accountabilityaccountable for results. Being stuck in this is
inevitable, but the path to achieve it 5. Accountabilitystage often
leads to marketings isolation from remains hidden. Basic metrics
such as lead Revenue starts with marketing.other departments and
executives. source tracking and cost-per-lead are put in At this
stage, marketing truly finds its place place, but there is no
holistic understanding in front of the revenue pipeline where2.
Fear of how marketing activities are impacting key marketing stops
being a cost center andWhat if my marketing activities dont impact
bottom line metrics. starts justifying marketing expenditures asthe
bottom line? Will I lose my job? investments in revenue and growth.
This isTaking on accountability can be scary, 4. Self-Promotion
when the CMO can act, and talk, like a trueespecially when you dont
yet know how Hey, come look at all these charts C-level executive,
measuring and forecastingwell (or poorly) your department is doing.
and graphs! marketings impact on metrics that matter toMarketing
accountability is a double-edged the CEO and CFO. This is when
marketing truly In a desperate attempt to appear accountable,sword,
shining a bright light on weak earns a seat at the revenue table.
marketing measures everything that can beperformance as well as
good performance. (easily) measured from website page views Getting
to this final stage of marketingSome CMOs may be tempted to avoid
to press release downloads to search engine accountability is
difficult for any organization.accountability just to avoid facing
which rankings. These CMOs proudly display their It requires
top-level commitment, discipline,category they are really in.
results and claim marketing accountability. and investment in the
right systems and tools. However, important as these metrics may It
can also require a rethinking of marketing be, they lack an
explicit connection to hard incentives and compensation. The
journey metrics like pipeline, revenue, and profit. The may not be
easy, but the resultsin terms result is a focus on soft marketing
KPIs instead of peer respect and impact on profitsare of hard
revenue growth, on short-term ROI clearly worth it for any
marketing team. over long-term marketing accountability. 2011
Marketo, Inc. All rights reserved. 8
9. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning forMarketing ROI 2011 Marketo, Inc. All rights reserved.
9
10. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROIMany marketers think of marketing ROI as
The fastest-growing companies measure Marketing ROI Management
Processreporting on the outcome of their programs, ROI to find not
just what works, but whatoften in the form of a set of reports they
have works better. They focus on improving ROI, 1 Best
Assumptionsto deliver monthly. But the best companies not just
proving ROI. Process begins with ROIrecognize that reporting for
reportings sake scenarios early in the Planning for marketing ROI
involves planning cycle to shapeis less important than the
decisions those three main activities: objectives, strategies ROI
Scenariosreports enable to improve profits. and tactics. 1.
stablishing targets and ROI EThis is the difference between
backwards- estimates up-frontlooking measurement and
decision-focusedmanagement. 2.Designing programs to be measurable
2a Objectives Strategy Tactical Plan Impact & Measurements are
ContributionIts important to plan your programs with ROI 3. ocusing
on the decisions that will F prioritized rst andin mind from the
outset. When you quantify improve marketing then planned
concurrentthe outcome you expect from each marketing to campaign
plans, so tests Measurement Plan Only with discipline, planning,
and a and variations can be Test Variations in Planinvestment, you
can then determine exactly incorporated tohow you will measure the
program against closed-loop process will you be able to improve
precision.those goals and position yourself to achieve improve your
marketing ROI. Measurementsthem. 2b Measurements capture lift,
diagnose weaknesses, and generate insight to improve eectiveness. 3
ROI Measurement ROI results guide changes to strategies and tactics
in the next cycle of marketing, based on which have the History to
Guide higher ROI potential. Next Campaign (Source: Lenskold Group)
2011 Marketo, Inc. All rights reserved. 10
11. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP ONEESTABLISH GOALS AND Benefits of
ROI goals With ROI goals in place, the CFO will see notROI
ESTIMATES UP-FRONT only the cost that goes out the door, but also
SHOULD MARKETING HAVE exactly what benefit is expected to come from
TO JUSTIFY ITSELF?When planning any marketing investment, that
cost. As a result, he or she will be muchyour first step is to
quantify your expected more likely to support the investment.
According to consultancy MarketingNPV, the twooutcomes. All too
often, marketers plan most common questions asked by
non-marketingprograms and commit their budgets without Dont worry
too much about the fact that executives are:establishing a solid
set of expectations about you are making estimates. As long as they
arewhat impact they expect the program to clearly labeled, the CFO
will understand that 1. Does our marketing generate any value for
have. This is a terrible habit, and is one of any plan requires
numerous assumptions. shareholders?the underlying reasons why other
executives, Just the fact that the marketer is walking 2. How do we
know that marketing really works?especially CFOs, question
marketing in the door with a spreadsheet of numbers establishes
that marketing is speaking the Unfortunately, these questions
immediately putinvestments. CFOs language. That in itself is highly
effective marketing on the defensive and inevitably causeThe
solution is to assign up-front goals, for building credibility.
marketers to conduct time-consuming and expensivebenchmarks and
KPIs for each marketing analysis to justify their business
function. This resultsprogram. Modeling your ROI goals will also
help you to: in a significant insight opportunity cost since all
the resources that could have been directed towardsThe first step
of any program plan should be to dentify the key profit drivers
that most I the pursuit of true insight are instead diverted
todefine your objectives and then pick measurable affect the model
and ultimately your profits. proving that marketing works.metrics
to support those goals. Imagine if each reate what if scenarios to
see how CPO came with an ROI plan with best case, worst changing
parameters may vary the results Most companies will find that
profits increase whencase, and expected case scenario outcomes and
impact profitability. constrained analytics resources are focused
on thethat answered the basic (but critical) question of key
decisions that will improve profits rather thanwhat do we expect
will happen in exchange for stablish the targets you will use to
compare E justifying marketings existence.this money we want to
spend? actual results. 2011 Marketo, Inc. All rights reserved.
11
12. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP ONEHow to build models for ROI
goals Heres an example ROI calculation, courtesyNot every program
will have a complete ROI of Lenskold Group. Note how it captures
allcalculation. Some programs will have softer expenses including
all variable costs on thegoals, such as number of attendees at an
left, and focused on incremental gross marginevent, but as always,
the closer you can get to on the right.measuring profits and ROI,
the better you willjustify the investment. Basic ROI
CalculationEven the simplest ROI goals should include: MARKETING
EXPENSES (EXCLUDING OFFER COSTS) MARKETING IMPACT QUANTITY How many
incremental sales are generated Campaign Development $25,000 Target
Reached 27,000 ow much revenue each sale produces H Mass Media
$100,000 % Convert to Sale 2.2% he gross margin percentage T he
total marketing and sales investment T Direct Marketing $40,000
Incremental Sales 594 Total Marketing Budget $165,000 Net Present
Value per New Sale $875 MARKETING STAFF EXPENSE Incremental Revenue
$519,750 Number of Staff Days 6.25 Average Daily Rate $450 Average
Gross Margin % 38.0% Total Staff Expense $2,813 Profit from
Incremental Sales $197,505 Total Marketing Investment $167,813
Incremental Gross Margin $197,505 Gross Margin Marketing Investment
Return (i.e., Net Profit) $29,693 Return / Marketing Investment ROI
17.7% (Source: Lenskold Group) 2011 Marketo, Inc. All rights
reserved. 12
13. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP ONELenskold Group provides
excellent toolsfor managing marketing ROI, including anonline Lead
Generation ROI planning tool.This and other tools are available for
freefrom the Lenskold Group website
(http://www.lenskold.com/tools/LeadGenTool.html). (Source: Lenskold
Group CMO Guide to Marketing) 2011 Marketo, Inc. All rights
reserved. 13
14. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP ONEUnderstand Best Case, Worst
Case,and Risks ScenariosThe best plans show a range of targets,
INCORPORATE ALLincluding expected case, best case, and worst
RELEVANT EXPENSEScase scenarios. This lets you protect
yourcredibility in case things go sour, and shows Often, marketing
ROI models show ridiculously highan understanding of how changes to
various returns because they dont incorporate all
relevantassumptions might impact the results. variable and
semi-variable costs. Examples include:It also shows that you
understand the possible taff costs within marketing Srisks that
would hurt your programs ROI. Its ravel expenses Toften a good idea
to run your assumptions and he cost of sales time spent following
up on leads Ttargets by the most skeptical and pessimisticmember of
your team. Let them find all the Take, for example, a program that
generates a lotways the program could fail and then, where of leads
but does not include the cost of the timepossible, put in place
contingencies to manage sales wastes on pursuing leads that dont
convert.the risks. This may include things directly Its quite
possible that a program that at first appearsrelated to the
program, but it can also include profitable will show a negative
ROI once thesebroad changes to the business environment expenses
are included.and economy. By proactively identifyingand managing
risks up-front, you lessen thelikelihood that other executives will
shootbullets at your feet later on. 2011 Marketo, Inc. All rights
reserved. 14
15. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP TWODESIGN PROGRAMS TO BE Data
Collection A key part of planning for measurement isMEASURABLE
simply tracking the appropriate attributes MEASUREMENT COSTS MONEY
for all your marketing programs (and their SO SPEND WISELYThe best
marketing programs have variants). This can include target
audience,intentional measurement strategies planned message,
channel, offer, investment level, and Exercise discernment.in
advance. So as part of planning any any other relevant attributes.
While its possible to measure just about anythingprogram, you need
to answer these three in marketing, it is impossible (and
unprofitable!) toquestions: Most companies do not begin this
process measure everything. early enough in their lifecycle, and
they pay What will you measure? for it later. Even if you dont use
the data Begin with the end in mind. When will you measure? right
away, it will become invaluable down As Jim Lenskold says,
Prioritize when and How will you measure? the road when you attempt
any of the more what to measure based on the answers you need
sophisticated approaches towards measuring to make decisions that
will improve your profits.In almost every case, you will need to
program effectiveness. These attributes can Invest in Marketing
R&D.take specific steps to make your marketing be stored in
anything from your marketing This is a term used by consultant Jim
Sterneprograms measurable. This often includes automation system to
a simple spreadsheet (@jimsterne). Just like the overall
corporation investssetting up test and control groups or varying
hosted on a share drive what matters the in R&D to generate
future profits, marketing shouldyour spending levels across markets
to most is that you start to build the history as do the same to
generate similar insights to optimizemeasure relative impact.
Without variance early as possible. future profits. In other words,
sometimes it is OK toin your marketing, you may not be able to run
a marketing program where the primary goal isuse modeling to tease
apart the incremental to learn whether something works, or how to
makeimpact of your marketing programs and it work better. A good
rule of thumb is that allocatingimprove your marketing precision
and mix. It is more important to periodically capture 10% of your
budget to testing and experimentationSee Section 5 for more on
measuring ROI potentially high-impact insights than to frequently
is usually a wise investment.using test and control groups. measure
less important outcomes simply for reporting purposes. Jim
Lenskold, Lenskold Group 2011 Marketo, Inc. All rights reserved.
15
16. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROI STEP THREEFOCUS ON THE DECISIONS Your
highest-ROI decisions will often flow from strategic questions
about offers,THAT IMPROVE MARKETING messages, target segments and
geographies MARKETING REPORTING: JUST BECAUSEYoull deliver the best
ROI and reap the not simply pass/fail assessments of specific YOU
CAN DOESNT MEAN YOU SHOULD programs or tactics. You can always
evolvehighest corollary benefits when you move past your mix of
tactics, but even the best tacticsbackward-looking measurement to
forward- Perhaps youve heard the adage that you can applied across
the wrong strategies wontlooking decisions. torture the data until
it confesses? What this means produce a fraction of your desired
results. is its important not to measure just what you can,This is
the difference between marketing In other words, marketers should
focus but what you can ACT on. Think about where youmeasurement and
marketing management. beyond what is and start measuring want to
end up before you begin, and strategize fromIt is the difference
between data, intelligence, what if. there. Ask yourself, What
question am I trying toand knowledge. answer, and what would I do
if the answer were Each measurement should seek to augment X or
Y?An integral part of your planning process your understanding of
how to make theis identifying up-front what decisions you program
better and align it with yourneed to make to drive company profits,
and companys strategic objectives. This way,then building your
measurements to capture even if you dont meet all of your
programinformation that facilitates these decisions. goals, you can
still figure out why and how toThis means you must measure things
not just improve the program. This is almost alwaysbecause they are
measurable but because better than launching a new program youthey
will guide you towards the decisions dont yet know anything
about.you need to make to improve companyprofitability.Isnt it time
to swap your over-the-shoulderstance, which prevents you from
movingforward efficiently, for strategic, objective-driven
momentum? 2011 Marketo, Inc. All rights reserved. 16
17. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Frameworkfor Measurement 2011 Marketo, Inc. All rights reserved.
17
18. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Framework for MeasurementCEOs and boards dont care about 99% of
There are many other areas of marketingthe metrics that marketers
track but they metrics that are not addressed directly in thisdo
care about revenue and profit growth. Guide. These include:
CUSTOMER SATISFACTION AND NET PROMOTER SCORESThere are two primary
categories of financial Customer Profitability: Lifetime value of
an For many companies, a key metric is their Net Promoter Score
(NPS),metrics that directly affect revenue and profits: incremental
customer a customer loyalty metric based on customer answers to the
question, evenue Metrics: Marketings aggregate R W eb Analytics:
Measures Web visibility to how likely are you to refer us to friend
or colleague? According to impact on company revenue target
audiences against potential audiences, answers on a 0-to-10 rating
scale, customers are grouped into three and compares against
industry and competitor categories: arketing Program Performance
Metrics: M benchmarks Promoters (9-10) The incremental contribution
of individual marketing programs Public Relations: Measures views
and impact Enthusiastic customers who will fuel growth with repeat
and referral of corporate communications initiatives business.
Passives (7-8) Product Performance: Comparatively Current customers
susceptible to competitor offerings and thus have a measures the
total sales and margins of neutral brand impact. individual
products Detractors (0-6) Brand Preference and Health: Assesses
Customers who voiced dissatisfaction and harm brand preference in
relation to preference for the brand. competing brands To calculate
a brands NPS, use the following equation: Sales Tool Usage:
Measures which product NPS = [% of Promoters] [% of Detractors]
marketing materials are being used the most A companys Net Promoter
Score has been shown to have positive And many other areas
correlations with faster growth and profits. Marketos own research
This is not to imply that these metrics are not provides support
for measuring customer satisfaction: high-growth important for
marketers to track just that companies are more likely than
low-growth companies to incorporate they are likely to be less
relevant to financially- customer satisfaction into their marketing
executives compensation. focused executives outside of marketing.
2011 Marketo, Inc. All rights reserved. 18
19. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Framework for MeasurementWHERE METRICS GO WRONG Measuring what is
easy Activity, not results When it is difficult to measure revenue
and Marketing activity is easy to see and measureThere are
literally hundreds of marketing profit, marketers often end up
using metrics (costs going out the door), but marketingmetrics to
choose from, and almost all that stand in for those numbers. This
can results are hard to measure. In contrast, salesof them measure
something of value. The be OK in some situations, but it raises the
activity is hard to measure, but sales resultsproblem is that most
of them relate very little question in the mind of fellow
executives (revenue coming in) are easy to measure. Is itto the
metrics that concern a CFO, CEO and whether those metrics
accurately reflect the any wonder, then, that sales tends to get
theboard member. financial metrics they really want to know credit
for revenue, but marketing is perceived about. This forces the
marketer to justify as a cost center?Of course, its okay to track
some of these the relationship and can put a strain onmetrics
internally within your department marketings credibility.
Efficiency instead of effectivenessif they will help you make
better marketing In a related point, Kathryn Roy of
Precisiondecisions. But its best to avoid sharing them Focusing on
quantity, not quality Thinking suggests paying attention to thewith
other executives unless youve previously According to a 2010
Lenskold Group / emedia difference between effectiveness
metricsestablished why they matter. Lead Generation Marketing ROI
Study, the (doing the right things) and efficiency metrics number
one metric used by lead generation (doing possibly the wrong things
well).Vanity metrics marketers is lead quantity, whereas barely
half For example, having a packed event is noToo often, marketers
rely on feel good of marketers measure lead quality. Focusing good
if its full of all the wrong people.measurements to justify their
marketing on quantity without also measuring quality Effectiveness
convinces sales, finance andspend. Instead of pursuing metrics that
can lead to programs that look good initially senior management
that marketing deliversmeasure business outcomes and improve but
dont deliver profits. (To take this idea to quantifiable value.
Efficiency metrics are likelymarketing performance and
profitability, they the extreme, the phone book is an abundant to
produce questions from the CFO and otheropt for metrics that sound
good and impress source of leads if you only measure quantity,
financially-oriented executives; they will be nopeople. Some common
examples include not quality.) defense against efforts to prune
your budgetpress release impressions, Facebook Likes, in difficult
times.and names gathered at trade shows. 2011 Marketo, Inc. All
rights reserved. 19
20. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Framework for MeasurementCost metrics What went wrong here? The
marketerThe worst kinds of metrics to use are cost performed well,
but he made the mistakemetrics because they frame marketing as of
not connecting his marketing results to FINANCIAL OUTCOMES OVER
ACTIVITYa cost center. If you only talk about cost and bottom-line
metrics that mattered to the CEO.budgets, then no doubt others will
associate Look at the following (sanitized) letter from a CFO to a
CMO for an By framing his results in terms of costs, he
illustration of why financial outcomes are more important than
activity,your activities with cost, too. perpetuated the perception
that marketing cost and quantity.Lets take a look at a real-life
example: is a cost center. Within this context, its only natural
that the CEO would reduce costs and We seem to be purchasing GRPs
and click-thrus at a lower cost than Recently, a marketer improved
his lead most other companies, but what value is a GRP to us? How
do we reallocate the extra budget to a revenue quality and
simultaneously reduced his know that GRPs have any value at all for
us, separate from what others cost-per-lead to $10. Thrilled with
his generating department such as sales. are willing to pay for
them? How much more/less would we sell if we results, he went to
the CEO to ask for purchased several hundred more/less GRPs? more
money to spend on this highly I think we need to look beyond these
efficiency metrics and find a successful program. way to compare
all these options on the basis of effectiveness. We Did the
marketer get his budget? need a way to reasonably relate our
expenses to the actual impact No. The CEO decided the reduced lead
cost MARKETING CHAMPIONS they have on the business, not just on the
reach and frequency we create amongst prospective customers. Until
we can do this, Im not meant marketing could deliver the same
Marketers have to be clear about what marketing comfortable
supporting further purchases of advertising exposure results with
fewer dollars and so she cut produces. Sales sells, but what does
marketing either online or offline the marketing budget and used
the extra produce? You might answer brand awareness, funds to hire
new sales people. It seems to me that, if we put some of our best
minds on the challenge, leads, and sales tools. But these answers
we could create a series of test markets using different levels of
disempower the marketing function. The best advertising exposure
(including none) in different markets which might answer is that
marketing generates cash flow in actually give us some better sense
of the payback on our marketing the short term and identifies
sources for future expenditures. cash flow in the long term. My
experience tells me that we are not approaching our marketing Roy
Young and Allen Weiss, MarketingProfs programs with enough emphasis
on learning how to increase the payback, and are at best just
getting better at spending less to achieve the same results.
(Source: MarketingNPV) 2011 Marketo, Inc. All rights reserved.
20
21. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Framework for MeasurementTHE RIGHT METRICS The Time Dimension Set
Goals Lenskold Group points out that there are As discussed in
Section 3, make sure you setIf activity, cost, and quantity arent
the also different types of metrics in each goals for each of the
key metrics you chooseright metrics to use, what are? Anything
category, based on time: to track. Your goals will put your
performancethat speaks to the CFOs areas of primary Past: How did
we do? into context, and help you and your fellowconcern: revenue,
margin, profit, cash flow, Present: How are we doing? executives
see if your results are on par withROI, shareholder value in other
words, your Future: How will we do? whats expected or better, or
worse.companys ability to generate more profitsand faster growth
than your competitors. These questions break into three
corresponding metric categories:This is what Roy Young and Allen
Weissof MarketingProfs call speaking the financial Business
Performance These are the most common reporting metrics
thatlanguage of business. Metrics & KPIs you share with fellow
executives, often on a dashboard.Financial Metrics How did we do
last week? Last month? They are mostly BACKWARDS looking
metrics.Most B2B marketers should focus on two Last
quarter?categories of financial metrics: Diagnostic Metrics These
metrics deliver insight into your CURRENT What is working, and what
can work better? performance, often by comparing against historical
dataRevenue Metrics Marketings aggregate trends and competitor and
marketplace benchmarks. impact on company revenue Leading
Indicators These metrics help you look FORWARD and
forecastMarketing Program The incremental How will we be doing in
the future? future results. (See Section 6,
Forecasting.)Performance Metrics contribution of individual
marketing programs 2011 Marketo, Inc. All rights reserved. 21
22. Definitive Guide to Marketing Metrics and AnalyticsPart 3:
A Framework for MeasurementThe Right Metrics: Summary BUSINESS
PERFORMANCE DIAGNOSTIC METRICS LEADING INDICATORS PAUL ALBRIGHT,
MARKETOS CHIEF REVENUE METRICS & KPIS PRESENT: WHAT FUTURE: HOW
WILL OFFICER, SHARES HIS SECRETS FOR PAST: HOW DID WE DO? IS
WORKING? WE BE DOING? MEASUREMENT SUCCESS:Revenue Metrics Aggregate
impact ead generation L onversion rate C ize of prospect S 1. hoose
no more five key metrics. Its hard to C on company revenue versus
targets versus trend or database size put organizational focus on
more than that, so Cycle time benchmark arketing M choose wisely.
contribution forecast 2. easure success versus goals for those
metrics M for every campaign, every channel, every salesMarketing
Program Incremental Investment Response rates xpected E rep/region,
every product, etc.Performance Metrics contribution of Pipeline
contribution ift over control L contribution forecast individual
marketing rogram ROI P group 3. how trends for those metrics over
time that S programs way you can immediately see where you are
improving and where you are not.Profit Per Customer Lifetime value
of an verage selling price A nvestment to I Retention rates 4. ut
on a dashboard for everyone to see so there P incremental customer
acquire roducts per P is always a succinct view of what marketing
is a customer customer trying to achieve, and where you stand.
arginal cost to M Net promoter scores serve 5. ave recognition
systems tied to goals. Make H sure top contributors get recognition
give them badges they can put on the desks or cube. 6. Rinse and
repeat. The best performing companies track results weekly,
monthly, and quarterly so they can improve just as often. 2011
Marketo, Inc. All rights reserved. 22
23. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
RevenueAnalytics 2011 Marketo, Inc. All rights reserved. 23
24. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsPerhaps the most important metrics for a prospects
movement from one stage tobuilding marketings credibility are the
the next, they create the foundation for ametrics that show
marketings aggregate comprehensive set of robust revenue metrics. A
NEW BREED: REVENUE MARKETERSimpact on revenue. Methodology To
thrive in todays changing marketplace, marketingSome old-fashioned
marketers say that Defining the stages of the revenue cycle must
begin to operate and sound more like sales.marketing isnt
responsible for revenue. We requires a new revenue methodology. As
demand generation agency The Pedowitz Groupdisagree. In todays
online and social world, says, marketers must manage a predictable,
reliable Traditional sales methodologies such as SPINmarketing is
responsible for up to 70% of funnel with a plan that ultimately
produces higher Selling and Miller Heiman provide standardthe
entire buying process which means value leads and maximizes
revenue. benchmarks and best practices for the salesmarketing and
sales need to rethink how function, and these sales methodologies
form Todays successful marketer has evolved beyondthey work (and
work together) to generate the basis for the best sales analytics.
At their the language of traditional marketing. The
Pedowitzrevenue. This new way of working requires core, these
methodologies break the sales cycle Group coined the term Revenue
Marketernew metrics and analytics. into stages and allow the sales
executive to in 2007 to describe this new breed of marketer.We call
this new measurement process track movement through the stages
which in Debbie Qaqish, Chief Revenue Marketing OfficerRevenue
Cycle Analytics, and this new turn lets them answer key questions
such as of The Pedowitz Group, says that these Revenueway of
working Revenue Performance how long is the sales cycle? and how
much Marketers use the language of business to describeManagement.
pipeline coverage will help me hit my targets their contributions
with metrics that measure for this quarter? pipeline,
opportunities, and revenue. They measure Traditionally, marketers
have not applied what matters to a CxO and talk about these
metricsDEFINE THE REVENUE CYCLE the same level of rigor to their
portions of in terms their executive leadership can understand and
evaluate. the revenue cycle. This is unfortunate, sinceThe first
step in Revenue Cycle Analytics is it is the only way marketers
will be able At any given moment, a Revenue Marketer knowsto define
the stages of the revenue cycle, to understand how their activities
move how their key metrics stack up against their targets,starting
with potential buyer awareness and prospects forward. and what they
plan to do to improve their results.moving through marketing and
sales to closed That is why the foundation of Revenue Cyclebusiness
and beyond. When marketing and Analytics rests in clearly defined
stages andsales collaborate to formally define each stage, clear
rules for how prospects move throughas well as the business rules
that determine the stages over time. 2011 Marketo, Inc. All rights
reserved. 24
25. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsExample: Marketos Revenue CycleDifferent companies
will make different decisions about what AWARENESSdefinitions best
suit their revenue cycles, but as a case studyexample, here are
Marketos definitions. The methodologybehind these definitions is in
part responsible for Marketoshighly efficient revenue engine and
fast growth. All Names MarketingSTAGE DEFINITION EngagedAll Names
This is the entry point for everyone. We have purposely called this
stage Names because these individuals are not leads when they first
enter the funnel. Prospect &Engaged This definition applies to
those who show real engagement, such as attending Recycled a
webinar, downloading content from our website, or clicking an email
that we send. At this stage, we filter out the names that havent
engaged with us as a brand, such as those who simply threw business
cards into our bowl at Nurturing a trade show. Database MQL Lead
SDRProspect This stage refers to qualified prospects that could buy
one day, but arent yet ready for engagement with sales. Qualified
denotes the right kind of person at the right kind of company, as
determined by our fit scoring rules. This is Sales SAL Lead the
first metric that we report to fellow executives and the board.
Opportunity CustomerLead These marketing-qualified leads are
prospects that show enough behavioral Sales engagement or buying
intent that we want to call them. SQLSales Lead These leads have
been qualified as sales-ready by a sales qualification
rep.Opportunity The sales team has accepted these leads and added
them to the pipeline as a deal they are actively working.Customer
We have closed these deals and won new customer business. (These
customers are then passed on to a new revenue cycle for upsell and
retention.) 2011 Marketo, Inc. All rights reserved. 25
26. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsThree Categories of StagesYour company may use
only a few revenuestages, or you may model something
moresophisticated like Marketos model but nomatter which specific
stages you choose, thereare only three categories of
stages:CATEGORY DEFINITION / TIMELINE EXAMPLEInventory Stages An
inventory stage is a holding pool where leads and Common examples
of inventory stages include the prospect accounts can sit for an
unlimited amount of time until theyre pool, where leads are
nurtured until they are sales-ready; ready to move to another
stage. active opportunities are not yet committed to a certain
timeline.Gate Stages A gate stage is a simple qualification check
with no time Assume your company only wants leads from companies of
dimension. $100+ million in revenue. In the gate stage, a lead will
move forward if his/her company has more than $100 million in
revenue. If not, the lead is disqualified.SLA Stages SLA stands for
service level agreement. These stages denote When a lead is deemed
sales-ready, it can become a defined time period in which a lead
must be evaluated a marketing-qualified lead. The appropriate sales
before moving forward or be eliminated from the process.
representative has 14 days to contact the lead and choose to accept
the lead, disqualify it, or recycle it back for further nurturing.
If a lead stays in this stage for over 14 days, it becomes stale,
which can trigger a process that alerts sales management or even
reassigns the lead to a different sales rep. 2011 Marketo, Inc. All
rights reserved. 26
27. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsRevenue Stage Model Best Practices Detours DETOUR
DISQUALIFIED INACTIVE RECYCLED LOSTA best-practice revenue stage
model is based Of course, not all leads follow a linear STAGESon
three fundamental principles: success path, so make sure your model
also defines detour stages to captureSales resources are relatively
expensive. To Definition Names Prospects Qualified Lost or leads
that are not qualified, or that requireprovide the highest value,
sales should not marked as who are non- leads in deferred a few
rounds of nurturing before theyreengage with prospects until
prospects are not-in-profile responsive need of more opportunities
sales-ready.ready to engage with sales. Sales interactions over the
last nurturing (ongoingshould start relatively late in the
pipeline, Transition Rules 6 months nurturing)once leads are well
qualified, and use lower As the final step in formulating your
revenuecost channels such as marketing to develop stage model, you
need to define the businessrelationships with everyone else. rules
that govern how and when your prospects move from one stage to
another.No lead left behind. Dont let potential This includes how
your leads move from thecustomers end up in lead purgatory.
traditional success path to various detourImplement SLA stages
wherever possible stages and back again. For example:to ensure your
leads either flow forward orare recycled back to marketing. Keep
your 1. person may move from Engaged to Ainventory stages to a
minimum perhaps just Prospect if their company reports annualone in
marketing so prospective customers revenue above $10 million and
belongs todont sit idle. one of your target industries.A prospects
journey from initial awareness 2. Prospect may become a Lead when
his/ Ato customer is often non-linear. Sometimes her Lead Score
exceeds 100 points.leads originally deemed sales-ready are not. 3.A
Prospect may become InactiveBecause no lead should ever remain
stagnant if they dont respond to a campaign or visitin the system,
these leads should be recycled your website in more than six
months.back to marketing for nurturing. 4. n Inactive Lead may move
back A to Prospect status if they respond to a new program. 2011
Marketo, Inc. All rights reserv