By Andra Hedden, CMO, Marketopia
Marketing evolves at breakneck speeds, and it’s easy to become reliant on antiquated tactics that no longer translate to actual dollars in today’s paradigms. As a CFO, consider this: If your team is still predominantly relying on ambiguous tactics from the past, then the money they bring in may not make up for departmental spend.
The biggest challenge a marketing team faced in 2005 was finding a way to measure the success of its efforts. Measurements were very subjective in those days, mostly based on aesthetics vs. results. This was a massive issue because the CRO and CFO wanted to understand exactly how marketing efforts were driving revenue, which segments could be attributed to marketing and how much those activities were worth. CMOs had a difficult time answering these questions and demonstrating the full value of their team.
Unfortunately, many CFOs still face the same challenge, which reflects outdated marketing strategies. In 2005, we measured marketing success with KPIs that said much about individual campaigns but not much about marketing’s overall contribution to the business. Too often, that’s still the case. Today, we should measure marketing teams by their ability to go from generating impressions to providing the sales team with sales qualified leads — or in the case of B2C, directly to sales.
This requires marketing leaders to ensure their teams understand the goals of the business and their part in its growth. Oftentimes, marketing and sales work independently, creating a massive divide that inevitably results in loss of revenue. Your marketing team’s goal is to generate leads, and your sales team’s goal is to close them. Those goals are interconnected. Yet, 34% of B2B marketing teams(opens in a new tab) say sales and marketing misalignment is the biggest obstacle to converting leads.
The only way your marketing team can fulfill its role is if it gets its goals directly from the CFO or CRO. Today, marketing teams need to understand the following metrics:
These answers will help your marketing team drive real results. They’ll better understand how they generate business and the number of leads they need to produce in order for sales to hit its numbers.
For instance, a SaaS application provider may have a lower total cost of ownership (TCO) but rely on a quicker sales cycle or annual renewals. Hardware manufacturers, on the other hand, may have a higher price tag on their products but only expect customers to make a purchase once every few years. The SaaS organization, thus, may be more focused on generating a high quantity of leads, while the hardware manufacturer is most likely focused on quality of leads. These require two very different marketing approaches.
Running a smart marketing strategy in 2021 is all about intent data. Intent data allows your marketing team to create theories about consumers’ intent based on their previous actions — and then reach out at the right time, to the right contacts, with the precise message that will resonate. This approach also allows the CFO to determine the ROI of a marketing strategy by measuring marketing activities against sales-generated revenue.
In other words: Before CFOs can track the effectiveness of lead-generation campaigns, they must understand how to tie marketing activities to desired business outcomes. Only then can they track the metrics that contribute to those outcomes, such as:
While CFOs don’t need to be up to speed on nitty-gritty marketing KPIs, they should be able to track how much the company is paying for each lead, as it points to the effectiveness of a particular campaign. When calculating cost per lead, ensure marketing teams are able to attribute leads to specific campaigns rather than just providing the number of leads generated overall. Then, you can divide the total cost of the campaign by the number of attributed leads to calculate how much of marketing’s budget was spent for each.
Customer acquisition cost (CAC) is how much the company has spent in marketing dollars to acquire a new customer. To calculate this figure, divide total marketing costs by the number of closed sales. If you’re spending more to acquire the customer than the sale brings in, you’ve got a serious issue with either the quality of leads your marketing team is bringing in or your sales team’s ability to close a potential customer. Working backward from customer acquisition cost, you can set goals for annual customer acquisition, then align marketing budgets to those goals.
Lead close rate can also reveal disconnects between the leads marketing brings in and sales’s ability to close those leads. It also helps pinpoint successful campaigns vs. those which may need to be rethought or retired.
It isn’t always easy to tie tactics to leads, since marketers foster a customer relationship along a journey from awareness to interest to value realization and appreciation to purchase.
From a marketing perspective, the goal is to turn generated leads into marketing qualified leads (MQLs). MQLs are leads that have engaged with your brand at some level, like downloading a whitepaper. They’ve expressed interest but aren’t yet solid opportunities.
Sales teams take MQLs and vet them further through individual outreach. Those leads they determine to be worth the cost of continued engagement become sales qualified leads (SQLs). This is when marketing and sales teams often work separately and without communication, leading to a disconnect. If your lead close rate is low, something is broken in the marketing-to-sales handover process. Are your marketers bringing in the right leads at the right point in the sales funnel?
Remember that not all campaigns are designed to result in conversion. It’s marketing’s job to get leads into the sales funnel in the first place and then usher them along the road to becoming SQLs. It’s also the CFO’s responsibility to ensure sales and marketing are working in tandem and continually communicating with one another.
In a lead nurturing campaign, the finance team should look at the number of initial leads promoted to MQLs and how many MQLs are promoted to SQLs. These KPIs are the best way to determine where in the funnel your strategies need to be tweaked.
From an ROI perspective, some marketing programs are easier to measure than others. If marketing is running campaigns that don’t have a measurable return, don’t try to force KPI measurements. Chalk the program up to a lesson learned, and move on to tactics that create trackable outcomes.
When evaluating whether a campaign is worth the investment before it starts, remember that different campaigns are measured with different metrics. CFOs shouldn’t track these granular KPIs on a daily basis; that’s marketing’s job. But if finance determines a campaign is costing more than it’s worth, the CFO should know which metrics are used to measure each campaign, so it can help marketing identify what’s broken. Some examples:
It’s the marketing team’s job to demonstrate that its budgets are put to good use and lay out a plan of consistent improvement from quarter to quarter.
To ensure improvement, the CMO needs to be crystal-clear on the business outcomes her team is trying to support. It’s impossible to measure the ROI of any campaign without having a goal to map it to. Soft goals like “generate more MQLs” won’t cut it here. Rely on the tried-and-true SMART method. Marketing’s goals should be specific, measurable, achievable, relevant and time-bound. (Yes, we’ve been hearing about SMART goals for decades. Yes, it’s still a great approach for defining performance objectives.)
Each SMART goal will have its own unique set of KPIs, as illustrated above. Every KPI should point to the desired business outcome. “Increase website traffic by 10%” is useless unless it’s tied to an outcome-based KPI like “engage 25 users per month in website content,” which puts a visitor into the sales funnel and makes them an MQL. In this way, teams can work backward into the business goals set with finance, such as delivering a specific number of MQLs to the sales team per quarter.
Marketing teams know that it may take some testing and experimentation to achieve these KPIs and should not be afraid to do so. A/B testing not only helps teams land on the right tactic to achieve a KPI, but it can also uncover unexpected opportunities that support organizational goals.
Finally, marketing leaders must not be afraid to boldly act on their own initiative at the appropriate levels. Marketing teams need the ability to adjust strategies quickly if something isn’t working, so as to increase ROI on campaigns. Marketers understand the nuances of marketing data science in a way that CFOs never will.
There must be give and take: Marketing has to understand that finance has quarterly and annual organizational goals to track against, and CFOs need to understand that marketing, while increasingly data-driven, is more fluid and nuanced than the purely analytical leader may be entirely comfortable with. Marketing strategies constantly change, and so do their associated KPIs. There has to be clear and continual communication between the heads of finance, marketing and sales to ensure a marketing ROI. Take a metrics-based, revenue-oriented approach to marketing science, and you’ll step into true marketing excellence in 2021.