Metrics matter now more than ever. In a previous post on metrics, I explored a wide range of key performance metrics, including CAC, CAC to LTV, MRR/ARR, ARPU, ROMI, NPS, Churn, SEO and the Web. As a 6X CMO over 16 years, I’ve tracked dozens (actually 100’s) of metrics and found that many measures are ultimately meaningless, or really only matter to marketers. Having reported to 6 CEOs and 6 boards (3 public and 3 private), I’ve presented marketing metrics at more than 60 board meetings. Based on this experience, I created The Marketing Performance IndexTM (MPI) – an objective framework for quantifying the impact of Marketing. It tracks the key metrics for assessing a company’s relative brand, demand and market strength, and provides a standardized marketing effectiveness score. This framework also serves to better integrate program efforts, helps connect brand to demand, and measures ongoing performance throughout the buyer’s journey and customer’s lifetime.
In this blog, I’ll be illuminating why I picked the 24 key metrics for the MPI. First a caveat: these are not absolute measures – companies can either choose different ones or add weighting to various metrics to suit their needs. And it’s critical to get agreement from key stakeholders, including the CEO, board and investors, on what metrics they want to see, establish a baseline measurement (the current state), measure on a regular basis (at least quarterly),and strive for continuous performance improvement across all metrics.
The MPI has six distinct performance indicators (reach, share, engagement, loyalty, pipeline, and progression) across three measurement components (presence, brand and demand). A lot of companies (especially privately-held firms) make the mistake of believing that pipeline is simply created by executing effective demand generation strategies. Of course, it takes a modern tech stack, well-designed and implemented pipeline creation strategies, programs, and tactics, and a highly experienced, well-managed staff to generate quality pipeline efficiently. But the funnel efficiency – defined as the comparative progression and velocity of unqualified pipeline, to qualified pipeline, to closed/won business- has a variety of variables that influence the actual efficiency realized.
Let’s put aside Sales force efficiency for now. That’s an entirely separate blog, but having helped create more than $20 billion in pipeline and helped close more than $5 billion in bookings, there are many Sales inefficiencies and performance deficiencies smart marketers should track, both to ensure that you’re winning, or falling short, together as “one team,” and to ensure that attribution for poor conversion, progression and close rates is not improperly assigned to Marketing. Every function must be equally accountable.
Two of the most important influences on pipeline efficiency are Market Presence and Brand Strength. Market presence is critical because it ensures that when prospects are seeking alternatives and new solutions (and only about 10% of buyers are truly “in the market” at any time in most segments), your company has adequate exposure. The four Reach metrics are: Earned Media, Social Media, Site Visitors, and Events Reach. The first three are self-explanatory, standardized measures. For this last one, I estimate the percentage of industry events that the company participates in as a proxy for how visible a company is to their prospects. It’s really common sense: you want to be seen when prospects are looking. The four Share metrics are: SOV (share of media voice), Indirect Sales (as a % of total Sales), Unbranded Search (as a proxy for SEO effectiveness) and Branded Search (your company/brands).
The second area that greatly influences pipeline creation success is brand strength. Again, I’ll do a separate blog that will expound on the importance of brand and highlight some quantitative studies and authorities that demonstrate how brand impacts demand. But for now, suffice it to say, if you have a comparatively weak brand (in your chosen category), your demand will suffer, and it will cost a lot more to create every dollar of pipeline than your stronger competitors. The four Engagement metrics are: Social Media, Owned Events, Community, and Third Party Events. Savvy readers will note that Social Media also appears in Reach- that measure is for the relative number of followers; this one is for how engaged your audience is. If you have say 50,000 followers who are largely unengaged (1% or less) vs. a competitor who has say 10,000 followers who are very engaged (5% or more), and is adding followers faster, it’s easy to determine that the more engaged audience is more activated, and likely to respond to your communications, campaigns and overall value proposition.
The four Loyalty metrics are: NPS, Customer Satisfaction, Gross (Customer) Retention, Net (Dollar) Retention. These are widely used metrics; NPS methodology calculation is universal and for Customer Satisfaction, I leveraged the standard CSAT 5 scale, where 5 =100, 4 = 80, and so on. The retention metrics are also standard, particularly in SaaS businesses.
When you think about how the eight metrics contained in the two measurement components for presence and brand can vary vs. your competitors, it’s a lot easier to understand why comparatively weak numbers can lead to reduced, if not anemic market demand.
The third measurement component, Pipeline Health, is certainly the most scrutinized area in B2B companies today, and often the one that CMO’s feel the most pressure to deliver outsized results (and ROI). The reason is that market share and revenue growth, along with profitability, are the primary drivers for company valuations, both public and private.
The four Pipeline metrics are: Leads, Conversion, Pipeline Coverage, and Marketing ROI. Leads is a standard (MQL or MQA) and volume is important for top of funnel health (ignore the provocative declaration that the “MQL is dead,”- you need a lead source to prove contribution and attribution). Conversion is a pick field to select which type of conversion matters most to your business (e.g. website registrations, demos, free to paid, etc.). Pipe coverage is closely tied to close and win rates, but most companies need at least 3x to have a chance to achieve their bookings target. Marketing ROI can be defined several ways. For the MPI, I define it as: the number of pipeline dollars generated for every marketing program dollar invested.
And finally, the four Progression metrics are: MQL to SQL (Marketing Qualified to Sales Qualified), SQL to SQO (Sales Qualified Lead to Sales Qualified Opportunity), Close rate (from stage 1 opportunity to close) and Win rate (head to head win rate vs. top competitors).
During the vetting phase for the MPI, some of my colleagues argued that I should not include any Sales efficiency and progression metrics. There’s a very important reason I did. Every CMO I know is facing unrelenting questioning about the pipeline they create or contribute, the progression of leads from the initial scoring as an MQL/MQA, to conversion to close. And along the way, Sales can ignore, push, delay, evaporate and lose quality pipeline to competitors all by themselves in a variety of ways. So Marketing must measure every aspect of Sales efficiency (ideally together with Sales), from lead qualification and timely processing SLAs (fresh is best when it comes to leads), to conversion to pipeline, to stage by stage progression and velocity, to close, for every customer segment, and each distinct selling team. Marketers are sometimes miracle workers, but it doesn’t happen every day, and you need to ensure Sales is doing their part with proper Sales enablement and training, a disciplined selling methodology, regular, ongoing pipeline hygiene (not just at the beginning of the quarter when, ”oops the deal got pushed,”) etc.
It is my sincere hope that you can lock arms with your CEO, CRO, CPO and other key C-suite peers to agree on the key metrics that determine marketing’s objective performance measures and success, and in so doing, increase your contribution, recognition and rewards.
In upcoming blogs, I’ll delve more in the range of scores reported by the index, what good look like, how to structure your measurement systems to accommodate for variances in company size (e.g. $10 million vs. $100 million) GTM strategy (typical SaaS vs. PLG), Industry, Market (fast-moving SMB/transactional markets vs. Enterprise markets), strategies and tactics to improve all metrics, etc. In the meantime, please share your comments here or directly with me. If you’d like to take the online MPI assessment while I’m developing the self-serve Web version, send me a note and I’d be happy to arrange.
#CMO #marketing-is-provable #BeBold
CMO Mentor 