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 Accountability4 Method Two: Single Attribution withWhy
Now Is The Time For Marketing Metrics7 Revenue Cycle Projections 41
Method Three: Attribute across Multiple ProgramsPart 2: Planning
for Marketing ROI 9 and People44Step One: Establish Goals and ROI
Estimates Up-Front11 Method Four: Test and Control Groups46Step
Two: Design Programs to Be Measurable15 Method Five: Full Market
Mix Modeling 48Step Three: Focus on the Decisions Program specific
metrics what you shouldthat Improve Marketing16 measure and track
49 Conclusion: Program Measurement Applied 50Part 3: A Framework
for Measurement 17Where Metrics Go Wrong19 Part 6: Marketing
Forecasting 51The Right Metrics 21 Part 7: Dashboards55Part 4:
Revenue Analytics 23Define the Revenue Cycle24 Part 8:
Implementation People, Process,Revenue Cycle Metrics That Matter 29
and Technology59Revenue Performance Management Metrics33 People and
Culture60 Process 62 Technology64 Conclusion65 Key Lessons to
Improve your Performance, Profitability, and Credibility with
Marketing Metrics and Analytics66 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 What are the most important marketing5
QUESTIONS TO GUIDE YOURLead Generation Marketing ROI Study,
themetrics for me to use?MEASUREMENT INSIGHTmost common answer to
this question is1. What are your specific objectives for marketing
How can I measure my various marketingI Dont Know.investment and
how will you connect yourprograms impact on revenue and
profit?Forty-four percent (44%) of qualifiedinvestments to
incremental revenue and profit? How can I best communicate
marketingmarketers have no idea what a 10% budget2. What impact
would a 10% change in yourresults with my executive team and
board?increase could do for their companies. marketing budget (up
or down) have on your Which personnel, procedural, and profits and
margins over the next year?If you fit into this 44%, you will
experiencecultural changes need to occur within my The next three
years? Five?difficulty protecting your budget. In fact,
youllorganization so I can implement marketinglikely find yourself
asking the question the other3. Compared to relevant benchmarks
(historical,measurement?way around: What will happen now that
mycompetitive, 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 valueand
profit growth?The bottom line of any business is the topon
something youre unable to quantify. line: revenue and faster
growth!4. Which are appropriate targets for improving revenue
leverage (defined as dollars of profitSo lets get started. over
dollars of marketing and sales spend) over the next few years?
Which initiatives will get you there?5. What questions do you still
need to answer 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. How much profit was made last
quarterTypically, executives outside the marketing versus this
quarter?department perceive that marketing exists How much revenue
and profit do youCUT PROGRAMS TO BUILD CREDIBILITYsolely to support
sales, or that it is an arts andforecast for the next
quarter?According to Marketo CEO Phil Fernandez, the #1crafts
function that throws parties and churnsout color brochures. Either
way, marketing Why are you confident in the above answers? 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 youimpressions, organic search
rankings andpreviously did that either A) didnt work; B) werentWhat
can marketers do so they are seenreach are important but only to
the extentaligned with evolving company goals; or C) seemas part of
a machine that drives revenuethat they quantifiably connect to
hardless important now than other initiatives. This helpsand
profits? How can marketers take moremetrics 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, andOf course, marketers must track and
measurethe 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 themost critical metrics internal
to marketing.Use metrics that matter toBy speaking the same
quantitative languagethe CEO and CFO as the CEOs and CFOs,
marketers will betterIts no secret that CEOs and boards
dontcommunicate marketings value and impact tocare about the open
rate of your last emailthe 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 CFOsthe right revenue
metrics.marketing more respect. Source: Forrester Researchcare
about growing revenue and profits: How much faster are we growing
nowversus 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,Marketing has always been a
grueling and competitive sport notmarketing investmentother
executives think of costs and profitunlike running a marathon. With
the changes in the buying process,If you cant confidently identify
which parts ofloss. 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 willTo formulate accurate forecasts,
saleswas already difficult is becoming increasingly difficult. If
youreand marketing must sit together at thegoing 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 toSee Part 6 for
more on Marketing Forecasting. Marketing Measurement
Marathonimprove results over time.See Part 5 for more on measuring
the impactMake hard business cases for spendingWith its forecast in
place, marketing must thenof various marketing programs.make a hard
business case for the resourcesit needs to deliver the results it
has promised.Forecast results, not spendingThis requires knowing
what it will take inForecasting is perhaps the single mostmoney,
time, and effort to acquire newimportant thing marketers can do to
changequalified 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 quicklyMarketers who use
this type of rigorousif you rely only on your rear-view mirror,
youmethodology are able to frame their budgetscant be an effective
marketer if you onlyin 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 AccountabilityAs the function that
owns the relationshipCEOs 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 portionof the revenue cycle than
ever before.The way that prospects research and buysolutions today
has been forever transformedBut with great power comes greatby the
abundance of information available onresponsibility.Not sure the
marketing programswebsites and social networks, and this in turn
made a dierence, but they probablyEnter Marketing Metrics. had some
impact even thoughfuels a significant change in the way
marketingcontribution wasnt measuredand sales teams must work and
workCEO ratings of marketings performance47%together to drive
revenue.directly rise and fall with marketings abilityto quantify
how their campaigns and programsBecause they have ready access to
deliver value in line with company revenueinformation, buyers
resist engaging with salesobjectives. It is more important than
ever foruntil much later in the buying process. marketing to link
the impact of its efforts andMarketing programs madeThis presents
an incredible opportunity financial investments to revenue and
profit, a dierence but contributionfor marketing to reinvent itself
as a coreand establish a true process for marketing ROI wasnt
measuredpart of the companys revenue engine. in their
companies.35%70% of the buying process is now complete Marketing
programs made an by the time a prospect is ready to engage
withimpact and marketing was able to sales. SiriusDecisions, Inc.
document their contributionSource: VisionEdge Marketing &
Marketo 2010 MarketingPerformance Measurement and Management Survey
of423 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 beI 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 thisis
inevitable, but the path to achieve it5. 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 placeplace, but there is no
holistic understandingin front of the revenue pipeline where2. Fear
of how marketing activities are impacting keymarketing 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-Promotionwhen the
CMO can act, and talk, like a trueespecially when you dont yet know
howHey, come look at all these chartsC-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 trulyIn a desperate attempt to appear accountable,sword,
shining a bright light on weakearns a seat at the revenue
table.marketing measures everything that can beperformance as well
as good performance.(easily) measured from website page
viewsGetting to this final stage of marketingSome CMOs may be
tempted to avoid to press release downloads to search
engineaccountability 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 mayIt can also require a
rethinking of marketingbe, they lack an explicit connection to hard
incentives and compensation. The journeymetrics like pipeline,
revenue, and profit. Themay not be easy, but the resultsin
termsresult is a focus on soft marketing KPIs instead of peer
respect and impact on profitsareof hard revenue growth, on
short-term ROIclearly 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
asThe 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 companiesnot just
proving ROI.Process begins with ROIrecognize that reporting for
reportings sakescenarios early in thePlanning for marketing ROI
involvesplanning cycle to shapeis less important than the decisions
thosethree main activities: objectives, strategiesROI
Scenariosreports enable to improve profits. and tactics.1.
Establishing targets and ROIThis is the difference between
backwards- estimates up-frontlooking measurement and
decision-focusedmanagement. 2. Designing programs to be measurable
2aObjectives Strategy Tactical Plan Impact & Measurements
areContributionIts important to plan your programs with ROI 3.
Focusing on the decisions that will 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 PlanOnly with discipline, planning, and
aand variations can be Test Variations in Planinvestment, you can
then determine exactly incorporated tohow you will measure the
program againstclosed-loop process will you be able toimprove
precision.those goals and position yourself to achieveimprove 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 ROISTEPONEESTABLISH GOALS AND Benefits of
ROI goalsWith ROI goals in place, the CFO will see notROI ESTIMATES
UP-FRONTonly the cost that goes out the door, but also SHOULD
MARKETING HAVEexactly what benefit is expected to come fromTO
JUSTIFY ITSELF?When planning any marketing investment, that cost.
As a result, he or she will be muchyour first step is to quantify
your expectedmore likely to support the investment. According to
consultancy MarketingNPV, the twooutcomes. All too often, marketers
planmost 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 aboutyou
are making estimates. As long as they arewhat impact they expect
the program toclearly labeled, the CFO will understand that1. Does
our marketing generate any value forhave. 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 numbersestablishes 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
Identify the key profit drivers that most 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 Create what if scenarios to see howPO came with an ROI plan
with best case, worstchanging 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 Establish
the targets you will use to comparejustifying 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 ROISTEPONEHow to build models for ROI goals
Heres an example ROI calculation, courtesyNot every program will
have a complete ROIof 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
anleft, 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 generatedCampaign Development$25,000Target
Reached 27,000 How much revenue each sale producesMass
Media$100,000 % Convert to Sale2.2% The gross margin percentage The
total marketing and sales investmentDirect
Marketing$40,000Incremental Sales594Total Marketing Budget$165,000
Net Present Value per New Sale $875MARKETING STAFF
EXPENSEIncremental Revenue$519,750Number of Staff Days6.25Average
Daily Rate$450 Average Gross Margin % 38.0%Total Staff Expense
$2,813 Profit from Incremental Sales$197,505Total Marketing
Investment$167,813 Incremental Gross Margin $197,505Gross Margin
Marketing InvestmentReturn (i.e., Net Profit)$29,693Return /
Marketing InvestmentROI17.7%(Source: Lenskold Group) 2011 Marketo,
Inc. All rights reserved.12
13. Definitive Guide to Marketing Metrics and AnalyticsPart 2:
Planning for Marketing ROISTEPONELenskold 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 ROISTEPONEUnderstand 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
variousreturns 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 Staff costs within marketingrisks that
would hurt your programs ROI. Its Travel expensesoften a good idea
to run your assumptions and The cost of sales time spent following
up on leadstargets by the most skeptical and pessimisticmember of
your team. Let them find all theTake, 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 managesales 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 ROISTEPTWODESIGN PROGRAMS TO BE Data
CollectionA key part of planning for measurement isMEASURABLEsimply
tracking the appropriate attributes MEASUREMENT COSTS MONEY for all
your marketing programs (and their SO SPEND WISELYThe best
marketing programs havevariants). This can include target
audience,intentional measurement strategies plannedmessage,
channel, offer, investment level, and Exercise discernment.in
advance. So as part of planning anyany other relevant attributes.
While its possible to measure just about anythingprogram, you need
to answer these threein 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
morewhat to measure based on the answers you needsophisticated
approaches towards measuring to make decisions that will improve
your profits.In almost every case, you will need toprogram
effectiveness. These attributes canInvest in Marketing R&D.take
specific steps to make your marketingbe stored in anything from
your marketingThis is a term used by consultant Jim Sterneprograms
measurable. This often includesautomation 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 tomost 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 torun a marketing program
where the primary goal isuse modeling to tease apart the
incrementalto learn whether something works, or how to makeimpact
of your marketing programs andit 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
ROIpotentially 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 ROISTEP THREEFOCUS ON THE DECISIONSYour
highest-ROI decisions will often flowfrom strategic questions about
offers,THAT IMPROVE MARKETINGmessages, target segments and
geographies MARKETING REPORTING: JUST BECAUSEYoull deliver the best
ROI and reap thenot simply pass/fail assessments of specific YOU
CAN DOESNT MEAN YOU SHOULDprograms 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 canapplied across
the wrong strategies wontlooking decisions. torture the data until
it confesses? What this meansproduce a fraction of your desired
results. is its important not to measure just what you can,This is
the difference between marketingIn 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 wereEach measurement should seek to augmentX or Y?An
integral part of your planning process your understanding of how to
make theis identifying up-front what decisions youprogram better
and align it with yourneed to make to drive company profits,
andcompanys strategic objectives. This way,then building your
measurements to captureeven 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
anFor many companies, a key metric is their Net Promoter Score
(NPS),metrics that directly affect revenue and profits: incremental
customera customer loyalty metric based on customer answers to the
question, Revenue Metrics: Marketings aggregateWeb Analytics:
Measures Web visibility to how likely are you to refer us to friend
or colleague? According toimpact on company revenue target
audiences against potential audiences, answers on a 0-to-10 rating
scale, customers are grouped into threeand compares against
industry and competitorcategories: Marketing Program Performance
Metrics:benchmarksPromoters (9-10)The incremental contribution of
individualmarketing programsPublic Relations: Measures views and
impact Enthusiastic customers who will fuel growth with repeat and
referralof corporate communications initiatives business.Passives
(7-8)Product Performance: ComparativelyCurrent customers
susceptible to competitor offerings and thus have ameasures the
total sales and margins ofneutral brand impact.individual
productsDetractors (0-6)Brand Preference and Health:
AssessesCustomers who voiced dissatisfaction and harmbrand
preference in relation to preference forthe brand.competing
brandsTo calculate a brands NPS, use the following equation:Sales
Tool Usage: Measures which productNPS = [% of Promoters] [% of
Detractors]marketing materials are being used the mostA companys
Net Promoter Score has been shown to have positiveAnd many other
areas correlations with faster growth and profits. Marketos own
researchThis is not to imply that these metrics are not provides
support for measuring customer satisfaction: high-growthimportant
for marketers to track just thatcompanies are more likely than
low-growth companies to incorporatethey 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 WRONGMeasuring what is
easy Activity, not resultsWhen it is difficult to measure revenue
andMarketing 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 allthat stand in for those numbers. This canresults are
hard to measure. In contrast, salesof them measure something of
value. The be OK in some situations, but it raises theactivity 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 andwhether 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 perceivedabout. 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 marketingIn a
related point, Kathryn Roy of Precisiondecisions. But its best to
avoid sharing themFocusing on quantity, not qualityThinking
suggests paying attention to thewith other executives unless youve
previouslyAccording to a 2010 Lenskold Group / emediadifference
between effectiveness metricsestablished why they matter.Lead
Generation Marketing ROI Study, the (doing the right things) and
efficiency metricsnumber one metric used by lead generation(doing
possibly the wrong things well).Vanity metricsmarketers is lead
quantity, whereas barely halfFor example, having a packed event is
noToo often, marketers rely on feel goodof marketers measure lead
quality. Focusinggood 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 initiallysenior 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 includenot
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 metricsWhat went wrong here? The
marketerThe worst kinds of metrics to use are cost performed well,
but he made the mistakemetrics because they frame marketing asof
not connecting his marketing results to FINANCIAL OUTCOMES OVER
ACTIVITYa cost center. If you only talk about cost andbottom-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 anBy 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
marketingcost and quantity.Lets take a look at a real-life example:
is a cost center. Within this context, its onlynatural that the CEO
would reduce costs andWe seem to be purchasing GRPs and click-thrus
at a lower cost than Recently, a marketer improved his leadmost
other companies, but what value is a GRP to us? How do wereallocate
the extra budget to a revenue quality and simultaneously reduced
hisknow that GRPs have any value at all for us, separate from what
others cost-per-lead to $10. Thrilled with hisgenerating 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 forpurchased
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 costMARKETING CHAMPIONSthey 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 cutproduces. Sales
sells, but what does marketing either online or offline the
marketing budget and used the extraproduce? 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 ofdisempower the marketing function. The
best advertising exposure (including none) in different markets
which mightanswer is that marketing generates cash flow in actually
give us some better sense of the payback on our marketingthe short
term and identifies sources for future expenditures.cash flow in
the long term. My experience tells me that we are not approaching
our marketingRoy 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 DimensionSet
GoalsLenskold Group points out that there areAs discussed in
Section 3, make sure you setIf activity, cost, and quantity arent
thealso different types of metrics in each goals for each of the
key metrics you chooseright metrics to use, what are?
Anythingcategory, 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 threecorresponding
metric categories:This is what Roy Young and Allen Weissof
MarketingProfs call speaking the financialBusiness 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 twoLast quarter?categories of financial
metrics:Diagnostic Metrics These metrics deliver insight into your
CURRENTWhat is working, and what can work better? performance,
often by comparing against historical dataRevenue Metrics
Marketings aggregatetrends 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
individualmarketing 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
PERFORMANCEDIAGNOSTIC METRICSLEADING INDICATORSPAUL ALBRIGHT,
MARKETOS CHIEF REVENUE METRICS & KPISPRESENT: WHAT FUTURE: HOW
WILLOFFICER, SHARES HIS SECRETS FOR PAST: HOW DID WE DO?IS WORKING?
WE BE DOING?MEASUREMENT SUCCESS:Revenue Metrics Aggregate impact
Lead generation Conversion rate Size of prospect1. Choose no more
five key metrics. Its hard toon company revenue versus
targetsversus trend or database sizeput organizational focus on
more than that, so Cycle timebenchmark Marketingchoose wisely.
contribution forecast 2. Measure success versus goals for those
metricsfor every campaign, every channel, every salesMarketing
Program Incremental Investment Response rates Expected rep/region,
every product, etc.Performance Metrics contribution of Pipeline
contribution Lift over control contribution forecastindividual
marketing Program ROI group 3. Show trends for those metrics over
time thatprogramsway you can immediately see where you areimproving
and where you are not.Profit Per Customer Lifetime value of an
Average selling price Investment to Retention rates 4. Put on a
dashboard for everyone to see so thereincremental customer acquire
Products per is always a succinct view of what marketing is a
customercustomer trying to achieve, and where you stand. Marginal
cost to Net promoter scores serve 5. Have recognition systems tied
to goals. Makesure top contributors get recognition give thembadges
they can put on the desks or cube. 6. Rinse and repeat. The best
performing companiestrack 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 fora prospects
movement from one stage tobuilding marketings credibility are
thethe next, they create the foundation for ametrics that show
marketings aggregate comprehensive set of robust revenue metrics. A
NEW BREED: REVENUE MARKETERSimpact on revenue.MethodologyTo 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,
reliableTraditional sales methodologies such as SPINmarketing is
responsible for up to 70% offunnel with a plan that ultimately
produces higherSelling and Miller Heiman provide standardthe entire
buying process which meansvalue leads and maximizes
revenue.benchmarks and best practices for the salesmarketing and
sales need to rethink howfunction, and these sales methodologies
form Todays successful marketer has evolved beyondthey work (and
work together) to generatethe basis for the best sales analytics.
At their the language of traditional marketing. The
Pedowitzrevenue. This new way of working requirescore, these
methodologies break the sales cycleGroup 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 processtrack movement through the stages which
in Debbie Qaqish, Chief Revenue Marketing OfficerRevenue Cycle
Analytics, and this new turn lets them answer key questions such
asof 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
targetstheir contributions with metrics that measurefor this
quarter? pipeline, opportunities, and revenue. They
measureTraditionally, marketers have not appliedwhat matters to a
CxO and talk about these metricsDEFINE THE REVENUE CYCLEthe 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 isit is
the only way marketers will be ableAt any given moment, a Revenue
Marketer knowsto define the stages of the revenue cycle,to
understand how their activities movehow 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 closedThat 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 determinethe 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 whatAWARENESSdefinitions 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 NamesMarketingSTAGE DEFINITION EngagedAll Names
This is the entry point for everyone. We have purposely called this
stageNames because these individuals are not leads when they first
enter thefunnel.Prospect &Engaged This definition applies to
those who show real engagement, such as attending Recycleda
webinar, downloading content from our website, or clicking an email
thatwe send. At this stage, we filter out the names that havent
engaged with usas a brand, such as those who simply threw business
cards into our bowl atNurturinga trade show. Database MQL
LeadSDRProspectThis stage refers to qualified prospects that could
buy one day, but arent yetready for engagement with sales.
Qualified denotes the right kind of personat the right kind of
company, as determined by our fit scoring rules. This is Sales
SALLeadthe first metric that we report to fellow executives and the
board.Opportunity CustomerLeadThese marketing-qualified leads are
prospects that show enough behavioralSalesengagement or buying
intent that we want to call them.SQLSales LeadThese 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 asa deal they are actively working.CustomerWe have closed
these deals and won new customer business. (These customersare 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:CATEGORYDEFINITION / TIMELINEEXAMPLEInventory StagesAn
inventory stage is a holding pool where leads and Common examples
of inventory stages include the prospectaccounts 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 timeAssume your company only wants leads from companies
ofdimension. $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 StagesSLA stands for
service level agreement. These stages denoteWhen a lead is deemed
sales-ready, it can becomea defined time period in which a lead
must be evaluateda marketing-qualified lead. The appropriate
salesbefore 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 PracticesDetoursDETOUR
DISQUALIFIED INACTIVERECYCLED LOSTA best-practice revenue stage
model is basedOf course, not all leads follow a linear STAGESon
three fundamental principles:success path, so make sure your
modelalso defines detour stages to captureSales resources are
relatively expensive. To Definition NamesProspects QualifiedLost
orleads that are not qualified, or that requireprovide the highest
value, sales should not marked aswho are non-leads in deferreda few
rounds of nurturing before theyreengage with prospects until
prospects are not-in-profile responsiveneed of more
opportunitiessales-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 lowerAs the final step in
formulating your revenuecost channels such as marketing to
developstage model, you need to define the businessrelationships
with everyone else. rules that govern how and when yourprospects
move from one stage to another.No lead left behind. Dont let
potentialThis includes how your leads move from thecustomers end up
in lead purgatory. traditional success path to various
detourImplement SLA stages wherever possiblestages and back again.
For example:to ensure your leads either flow forward orare recycled
back to marketing. Keep your 1. A person may move from Engaged
toinventory stages to a minimum perhaps just Prospect if their
company reports annualone in marketing so prospective
customersrevenue above $10 million and belongs todont sit idle.one
of your target industries.A prospects journey from initial
awareness 2. A Prospect may become a Lead when his/to 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 stagnantif they dont
respond to a campaign or visitin the system, these leads should be
recycledyour website in more than six months.back to marketing for
nurturing.4. An Inactive Lead may move back to Prospect status if
they respond to a new program. 2011 Marketo, Inc. All rights
reserved. 27
28. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsExample:Marketos Complete Revenue CycleBelow is
Marketos final revenue cycle as BENEFITS BEYOND ANALYTICSshown in
the Revenue Cycle Modeler. Youllnote that it includes the success
path stage, A revenue cycle model creates a common language the
entireas well as detours and transition rules.organization can use
to measure results, understand the status ofany prospective
customer, and define the actions required from eachdepartment.
Based on this, Sales and Marketing can better coordinatetheir
activities and ensure alignment throughout the revenue cycle.A
revenue stage model also provides operational benefits that
improvelead management processes. A revenue stage model can help
you:Customize lead nurturing based on each prospects location in
the cycleand automatically move prospects between nurturing tracks
as theymove through the funnel.Adjust lead scoring rules and sales
alerts by stage. For example, youmight be interested if an
early-stage prospect visits your pricing page,but expect it from a
late stage opportunity.Trigger campaigns and sales actions as
prospects transition from stageto stage.Define service level
agreements for how long a lead can stay in certainstages, and
automatically send alerts and trigger campaigns when leadsgo stale.
For example, you can reassign a lead if no sales action is
takenwithin a specific time. 2011 Marketo, Inc. All rights
reserved.28
29. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsREVENUE CYCLE METRICS METRICQUESTIONS IT WILL
ANSWEREXAMPLESTHAT MATTERFlow (LeadHow many people entered each
stageHow many new prospects were createdWith the model in place,
marketers can beginGeneration) in a given period?last month, and
how many marketing qualifiedto explore the four key metrics that
matter:Are these trending up or down?leads did we pass last
week?Flow, Balance, Conversion and Velocity.This is where critical
insight can be gainedBalance (Lead How many people are in each How
many active prospects do I have in measuring and optimizing
marketings Counts) pipeline stage? since the size of my target
prospect databaseaggregate impact on revenue.How many accounts?is a
key leading indicator of future success?How does that vary by lead
type?Are the balances going up or downover time?ConversionWhat is
the conversion ratioWhich (if any) of my conversion ratesfrom stage
to stage?are trending up or down?Which types of leads havethe best
conversion rate?VelocityWhat is the average revenue cycle time? Do
certain types of leads move faster throughHow does it break down by
stage?the pipeline?How is their speed changing over time? 2011
Marketo, Inc. All rights reserved. 29
30. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsThe larger your flow in any givenstage, the more
meaningful thesemetrics become.QUESTION: SHOULD METRICS COUNT
PEOPLE,Companies that sell a lot of deals at lowerACCOUNTS OR
DOLLARS?price points will find more significance in theirconversion
metrics and flow than companies People are the easiest variables to
track across thethat sell fewer deals of greater size. But
evenentire revenue cycle, but the value of these metricscompanies
in the latter scenario will find is limited because revenue usually
comes frommeaningful flow and results data at the earlyaccounts,
not individuals.stages of their funnel. In this case, digging into
Accounts are relatively easy to track for later-stageyour earlier
stages can serve as a valid proxy deals, but CRM systems such as
salesforce.com makefor marketing ROI. it hard to track accounts for
early-stage leads.For example, a company that closes onlyDollars
are what we want, but it is difficult toseveral deals per quarter
may find it more accurately track revenue until the sales cycle.
Also,meaningful than a company closing many if your deal amounts
are highly variable (or justdeals to measure marketings results
onlarge), some of your marketing activities will showqualified
leads generated rather thanwild profits while others will not,
based simply onmeasuring closed business especially the whether a
deal has closed. Its a bit like playingROI of specific
programs.roulette. Given these pros and cons, most companies
(including Marketo) find that a mix of these three approaches is
best.Here is a screenshot of Marketos Revenue Cycle Analytics
Dashboard. Note the ability to see the metrics thatmatter: balance,
flow, conversion, and velocity. The ability to track how all those
metrics are trending over timegives critical insight into trends
versus historical benchmarks, and drilling down into performance by
lead source,business unit, geography, etc. helps to understand the
aggregate revenue impact of each lead type. 2011 Marketo, Inc. All
rights reserved. 30
31. Definitive Guide to Marketing Metrics and AnalyticsPart 4:
Revenue AnalyticsExample: Marketos MetricsOpportunities. As
discussed above, ourUnderstanding the conversion rates andSDRs
apply a very strict filter to what theyvelocities of each stage in
your revenuequalify and pass onto the sales team. OurLEAD
DEFINITIONS & CONVERSION RATES:cycle will help you better
understand and SDRs only pass 7% of all Leads to our AEsAN INTIMATE
RELATIONSHIPcommunicate your revenue cycle economics. as Sales
Leads but a full 80% of what theypass gets converted to an
Opportunity. There will always be a trade-off between how
strictlyLets use Marketos actual revenue cycleIts typical for more
than one lead to beyou define your leads and the conversion rates
youmetrics to illustrate:attached to each Opportunity, so the
resulting see as a result. At Marketo, we use behavioral leadPaid
Names. As of early 2011, Marketo spendscombined conversion between
number ofscoring to determine when a Prospect becomes a~$275,000 a
month on various demand leads and number of opportunities is 4%.
ThisLead that one of our Sales Development Representa-generation
programs to produce 9,500 newmeans an incremental opportunity is
worthtives (SDRs) should contact.paid Names each month.about $2,000
in terms of variable demand For Marketo, it is relatively
inexpensive for an SDRgeneration investment. to call an incremental
lead, but relatively expensiveProspects. About 40% of paid
Namesultimately become Prospects, generating New Customers.
Finally, Marketo wins about in opportunity cost if we miss out on a
potentialof all our Prospects; inbound programs35% of all
opportunities (the vast majority of deal. For this reason, Marketo
is relatively loosegenerate the remaining . Our average the others
are deferred or no decision), so an in what we call a Lead. At the
same time, we dontinvestment per paid Prospect is $73, and
theincremental customer is worth about $5,800 want to annoy
potential customers by calling themaverage for all Prospects is
$55. of marginal demand generation investment.too early in the
buying cycle. So weve set our scoring thresholds such that about
20% of all newConversion of Prospects to Leads. Typically,This
information is invaluable when it comes Prospects become Leads
within a short timeframe,20% of our new Prospects become Leads in
thetime to set and defend the marketing budget. and about 4% of the
active Prospect databasefirst month, and the rest enter our
nurturing At Marketo, we set the demand generation becomes a Lead
every month.database. Slightly less than half of our Leadsbudget by
working backwards from how manycustomers we want to close in future
months. But while we incur a relatively low cost on SDRs, itscome
from new Prospects, and the rest comeIt also allows us to answer
precisely howmuch more expensive when our Account Executivesfrom
the nurture database. On average,and when more (or less) budget
will impact (AEs) call Sales Leads. Thats why Marketos SDRs4% of
the nurture database becomes a Leadrevenue. apply a very strict
filter to which Leads they qualifyeach month, and about 10% goes
inactive, and pass on to the Sales Team. In fact, our SDRs
passmeaning they havent done anything in six only 7% of their Leads
to Sales but a full 80% ofmonths. About 40% of Prospects will
become those Sales Leads convert to Opportunities.Leads over a
two-year period. 2011 Marketo, Inc. All rights reserved.31