Marketing Performance Management Isn’t Hard, It’s Good Business
Sales has always enjoyed a quantitative edge over marketing but today that’s changing. Sales managers measure many things like sales calls per rep per week, forecasted revenue, the time a deal stays in the pipeline or in a particular deal stage and much more. Forecasts are often tallied in spreadsheets and they always involve an impressive array of revenue numbers and probabilities of close.
Pity the poor marketer. Marketing has been at a quantitative disadvantage because they have tracked response rates, click-through rates and many other qualitative measures of interest that can be as reliable as fickle customers. Worse still, the rest of the C-suite speaks the language of costs and profits while the CMO talks about things that don’t directly result in revenue. It doesn’t matter that some sales numbers, like probability of close, are just as qualitative.
In the past all marketers could do to arrive at “serious” numbers was to add up marketing campaign expenses and divide them by the number of leads and revenue that came in. This macro approach didn’t take into account which campaigns did the best job of attracting the customer initially or which one pushed the deal over the top. As a consequence, marketers couldn’t tell if one campaign or style of campaign was better or worse at doing a specific job and resource allocation was hit or miss.
But what if there was a way to define and track marketing metrics that more closely track revenue? For many years marketers couldn’t hope to track those metrics but thanks to the confluence of big data, analytics, social techniques and CRM, marketers can track the data their campaigns give off and make measurements that can stand on an equal footing with sales metrics. This reality has made the marketing funnel a real and important part of the overall sales process and spawned the discipline of Marketing Performance Management of MPM. Full Circle CRM provides a good example of an MPM solution.
A marketing department that tracks data on its activities can put itself and its company on a path to having greater certainty about its pipeline and revenue forecasts and greater influence in the C-suite. Every marketing campaign generates valuable data from the raw number of prospects it attracts to the time it takes to close a lead and even to knowing how many prospects with initial interest make it all the way to closure. So the issue for marketers no longer revolves around which data to collect or how to do it. Instead emphasis has shifted to which calculations to make and which metrics to apply.
If a marketing department tracks spending, dates of transition through the steps in the marketing funnel and number of leads generated — by each campaign — it can calculate many meaningful measures of performance that will make anyone in the C-suite smile. Here are some metrics that every marketer who is intent on improving MPM should consider.
- Immediately, the cost of marketing becomes clear with simple metrics like cost per lead, cost per revenue dollar and conversion rates by each campaign.
- A slightly more sophisticated measure can calculate cost per lead based on campaign type — trade show, direct mail, social campaigns — whatever. This can tell you the best sources of leads by volume and it can identify the best mix of campaigns by cost per lead and quality of lead.
- Capturing the date when a customer first raised a hand and date of close (from the SFA system) averaged over a number of leads in a specific time range gives the average sales cycle. It also gives the overall velocity of the sales funnel — the speed from first contact to closed deal. Further identifying leads by campaign type will also show which campaigns produce the most sales ready leads.
- You can use the deal velocity calculation on leads from specific campaigns too. This will tell you which deals might be accelerated to help ensure sales plans are met.
- By capturing dates for transition from one funnel or pipeline stage to another marketers can tell conversion rates by stage and, most importantly, if and where deals get stuck. This will naturally also show the kinds of campaigns that might be most effective at getting the funnel flowing again.
All of this data can be captured and stored in the CRM system. Many of these metrics depend on establishing historical norms or averages but that’s easy to do and the norms get refined over a short time.
So, tracking data on a relatively small number of attributes and applying the right math can significantly improve marketing’s visibility into the funnel — that’s what sales does and marketing can do the same. Of course, plenty of consideration ought to be given to the vagaries of each marketing department including overall budgets, product type and customer types. Marketing organizations therefore need ways to customize weightings for various programs and scores for resulting leads.
So when shopping for modern marketing automation solutions, keep an eye out for the performance management side of the equation and include marketing performance management as part of your shopping list. It can easily mean the difference between success in your new approach to marketing and remaining at a quantitative disadvantage to sales.
The marketing funnel is not exactly a new idea but neither is sales or customer service though all have morphed considerably from what they were more than a decade ago when CRM got started. Sales and service evolved organically making incremental changes as markets transformed and new technologies became available. Marketing is in the middle of some major changes itself right now, especially considering the social revolution, though it was earlier constrained by finance trying to figure out its ROI, and justly so.
Evolution of Marketing Metrics
Back in the day, marketing somewhat resembled the weekend sailor’s definition of a boat — a place in the water into which you throw money. Greater attention to the blocking and tackling of marketing (i.e. attending to program and campaign costs and the resulting revenue), helped mollify the accountants somewhat. But as any seasoned marketing professional will tell you, it often takes multiple touches by marketing to move a prospect to action so accounting for marketing has remained an inexact science.
Also, and very importantly, all of the major CRM disciplines have had to adjust to market changes that transformed new green field markets to mature zero-sum states. Many researchers like Clay Christensen and Geoffrey Moore have noted that during green field days, sales and marketing are rather bare bones operations dictated by the simple hunting logic of see an opportunity, sell to it, close the business.
Social media came along in force at the end of early markets’ salad days, just in time, not simply to provide a very low cost sales channel to the customer but also to provide a conduit of useful information from the customer. Ditto for analytics without which all that social data would be a bunch of gobbledygook.
What’s in Your Funnel?
So that brings us to the marketing funnel (or what it used to be). Just like a sales funnel where prospects and events are graded, scored and promoted or demoted as candidates for closure, the marketing funnel is a place where suspects and leads are scored and matured until they are acceptable to sales for the final push. But the marketplace changes alluded to above have conspired to bring the marketing and sales funnels together and today everyone’s prosperity depends on it. (See David Lewis’ book “Manufacturing Demand” for more.)
The most successful organizations in many markets admit to little if any daylight between sales and marketing funnels beyond the obvious rationale that marketers and sales people manage the processes in their respective areas. But generally, there is a mindset that all are one when it comes to progressing a lead from earliest contact to final closure. That’s because, as Lewis accurately observes, it’s all about demand.
So that brings up an important question, how do you know your marketing efforts are succeeding? That they’re generating enough demand at a reasonable cost? Certainly, cost per revenue dollar and similar measures of ROI are useful, but that leaves a great deal unsaid, like what’s happening with all the leads that don’t contribute to the “R” in ROI? Are they stuck? Where are they stuck? What will unstick them? For that you need Marketing Performance Management, a new term but you’ll pick it up quickly.
MPM — Marketing Performance Management
With process comes management and management requires measurement, which inevitably drives metrics. In the sales part of the funnel most organizations have a process and metrics that help them to evaluate progress but in marketing? Not so much. Truth be told, sales has always been able to process leads faster than marketing could make them which means that marketing must make even more but it also brings us right back to management and metrics.
If sales is going to persist with its process analysis and if marketing is ever going to bridge the gap to provide sufficient leads for sales, then marketing has to adopt some of the same performance management approaches that sales uses. Of course we are not talking about using the same tactics or metrics; we are talking strategy.
Strategy involves developing standards for lead development and velocity through the funnel. This is where marketing performance management (MPM) comes in. MPM might not roll off the tongue just yet but it neatly encompasses the need for strategic approaches to marketing and to managing the progress of leads through the funnel.
Full Circle CRM is an early leader in the marketing performance management market. They use a no-nonsense approach of collecting marketing data and analyzing it for patterns. Full Circle CRM then enables marketers to easily develop the measures and metrics that can help them understand which leads are worth while and which campaigns and programs are driving the results they need.
From what I can see, MPM is the next logical step in CRM’s long evolution. It comes along at a time when spray and pray marketing techniques are just about played out and marketers are hungry for new approaches. You will still need social media, content and inbound marketing to name a few other worthwhile tools. But MPM is right up there with those tools to help you measure and understand your successes with your new marketing kit.