This post was originally published on the Crownpeak blog.
Everyone wants to scale Marketing, but doing so without the right data framework in place is a bit like playing roulette with your budget.
Many marketing departments allot their budget based on engagement stats, MQL numbers, or even just gut feel, and cross their fingers that those choices pay off. Maybe you guess right and invest in the right space, but maybe you don’t.
Alternatively, you can use data to connect Marketing to revenue and build a predictable engine that allows you to invest more dollars with confidence. The right metrics will give you hard evidence of which campaigns are working and which ones are not. With this information, you can determine where to allocate your budget and track the success of those investments.
To connect Marketing’s actions to revenue and get clarity on where your marketing dollars are going, you first need to track the performance of Marketing-generated leads from the MQL stage all the way through the funnel to closed-won. Below are three ways you should be using full-funnel reporting as part of any Marketing growth strategy.
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In less mature organizations, marketing teams often report on the number of leads or MQLs they generate as their ultimate accountability. This means that Marketing generates MQLs, hands them off to Sales, and considers their job done.
But hand-offs are where Go-To-Market strategies break down. Sales might discover that those leads don’t meet BANT criteria. And each time Marketing brings in a lead that is a bad fit or a waste of time, they lose credibility with Sales. If Marketing doesn’t adjust its spend away from campaigns and channels bringing in those bad leads, the organization becomes increasingly Sales-led, and investment in Marketing shrinks.
Having metrics like leads or MQLs as Marketing’s core accountability means the business views growth as a Sales-only problem. In these kinds of organizations:
Part of Marketing’s job is to make Sales better at their job, so if Sales is failing, so is Marketing. This is an accountability problem.
The solution is to make sourced pipeline and revenue the ultimate accountability metrics.
This makes growth a holistic problem that is owned by everyone in the organization. It means that marketers have to stop worrying about vanity metrics like the number of MQLs they brought in and really think about the quality of those leads. And because Marketing is delivering better quality leads, their credibility with Sales and the organization as a whole increases.
To bridge the gap between marketing activities and revenue, you need full-funnel analytics that track the performance of each lead Marketing generates across every stage of the buyer journey.
You need to know:
Once you know how Marketing-generated leads are performing right through the funnel, you can start identifying opportunities to increase Marketing-driven revenue. And with revenue as the key to accountability, this becomes a priority.
Before you start increasing or decreasing marketing budgets, you need to know: How much can you spend to acquire an MQL?
Your acceptable cost per lead (ACL) is the amount you can spend on each lead and remain profitable. Once you know your acceptable cost per lead, you’ll have a baseline to compare your current and proposed investment against to ensure you aren’t wasting money on dead ends.
Acceptable cost per lead = Average contract value (ACV) x MQL to close rate
For example, let’s say that your conversion rate at each stage of the funnel is 50%. That means that you need eight MQLs to deliver one closed-won deal, and your overall MQL to close rate is 12.5%:
If we assume an ACV of $5,000 for this example, the ACL equation would look like this:
$5,000 x 12.5% = $625 per lead
Your ACL is a vital yardstick to have. What if you spent $200,000 to generate 200 leads? At first glance, that seems like a great investment. But at $1,000 per lead, this is way over your ACL. When you apply the MQL to close rate, you see that only 25 of those leads are likely to convert, so your $200,000 investment will likely only generate around $125,000 in total.
Using full-funnel reporting to track your MQL to close rate (and therefore your ACL) means you have an indicator of whether you’re spending beyond profitability or if you have space to increase your investment while still delivering on ROI.
By drilling down further into your marketing funnel reporting, you can identify opportunities for Marketing to increase revenue contribution by using resources more effectively.
It might be acceptable to spend more than your ACL on some channels if they deliver the right kind of leads that convert at a higher rate. On the other hand, you may need to spend much less on other channels if they deliver fewer high-quality leads that convert.
Some channels generate leads who are more ready to buy, and at the MQL level, that nuance is hard to distinguish. But when you look at pipeline and closed-won deals from each channel and campaign, you can see which areas are delivering ROI and could benefit from more budget, and the areas where your investment could be spent more profitably.
|Campaign 1: Industry event||$100,000||400||120||40||16|
|Campaign 2: LinkedIn ad campaign||$100,000||200||140||90||30|
In this situation, the cost per lead for the industry event is only $250. But the low conversion rate means that those leads only generated 16 closed-won deals, giving a total revenue of $80,000 from this campaign.
By comparison, the cost per lead for the LinkedIn ad campaign is $500. However, because the MQL to close rate is 15%, this campaign delivered a total of $150,000 revenue for the same marketing investment.
Clearly, the LinkedIn ads give a much better ROI. With this kind of full-funnel reporting in front of you, it’s a no-brainer to transfer some of the budget from the event to the LinkedIn ads instead. But if you aren’t tracking Marketing performance in granular detail right the way through the funnel, you’d likely double down on the industry event since it generates more MQLs.
As well as helping Marketing generate more leads, full-funnel reporting also helps you convert those leads at a higher rate by highlighting the gaps in your strategy. Use your marketing funnel analytics to identify where you’re losing the most prospects: often, that’s an indicator that you need more marketing support at that stage of the customer journey.
Are you bringing in lots of leads at the top of the funnel, but lose most of them before you can start a sales conversation? Consider building out more mid-funnel nurture content, like webinars or blog posts. Are you losing a lot of prospects at the final hurdle, just as they’re about to sign a contract? You may need to develop more sales enablement materials for customers at the consideration stage, like case studies and demos.
The better your marketing data foundation is, the clearer the growth levers inside Marketing become. This has never been more critical: many businesses are shifting their focus from a sales-led mentality to marketing as the primary revenue driver. Marketing leaders need to understand how key strategic revenue levers connect to their function and responsibilities, and full-funnel tracking is the first step towards this.
To learn more about how your business can use data to scale Marketing and build a demand generation engine, join the upcoming webinar, Critical Growth Levers that Impact Marketing-Driven Revenues. Join best-selling author and Founder and CEO of How To SaaS, Shiv Narayanan, along with Lacey Ford, CMO of Crownpeak and SaaS company board advisor to discuss the critical growth levers that impact marketing-driven revenues.
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