Metrics
"You can't manage what you don't know" — bringing measured visibility to key marketing parameters is of paramount importance. The more you are aware of what you need to know, the more you can manage issues towards specific goals. When it comes to operational metrics, especially in Marketing, the secret sauce is to choose the very few that would cause change in the business operation as the metric itself changes.
It's surprising how many organizations embark on extensive business analytics and largely come up with a bunch of "that's interesting" insight. With all the data found, nothing actually changes, objectives are not formed around the specific findings, a waste of time in the end. You should always ask "so what does that mean we should do" whenever presented with business analysis.
Value starts with unambiguous accurate raw data. Establishing formalized data gathering infrastructure from day 1 makes it possible to analyze what needs to be analyzed. From a Marketing perspective, it might be:
- The number of raw leads generated per period of time (day, week, month, quarter, year)
- The number of raw leads that convert to qualified leads (including how long it takes)
- The number of qualified leads that become sales opportunities
- The number of sales opportunities that close (including reason for closing -- sold, abandoned, etc)
- The source of each lead (by defined category or campaign)
The above marketing metrics can be surprisingly insightful to a business. They should allow you to deduce the following actionable parameters:
- What is my lead2opportunity ratio — this helps to establish whether more or less front-end campaigns are needed to fill a sales pipeline. It equally tells you when you can reduce certain marketing spend if the lead counts outgrow what the organization can handle — or, it defines a business case justification to expand the sales team.
- Which campaign is generating the best business results overall -- invest more in that campaign (if appropriate) and less in others to maintain balanced budget. It's a bit like borrowing from Peter to pay Paul, but it works effectively if the right actionable data is at hand.
- What is the gross profit from each campaign? Which campaign generated the best leads (e.g. ones that closed faster) — you want more of these leads, it also helps to refine the definition of the target market. It may also help deduce which aspect of the sales organization is operating at a high level. If all areas process the leads equally well, all is good, if one territory is doing better than others, training or sales leadership may require review.
Keep in mind that you need to track data and relevant trends over long periods of time — often years. Avoid the temptation to continually restart the data collection when you sit down to do strategic planning, you'll have too many apple and orange comparisons to make important decisions on. Use spreadsheets initially but ultimately invest in some form of sales management system (e.g. Salesforce.com is a good one for most all size businesses).
Trends in Marketing metrics help develop some control over the business result you seek. This is especially true in emerging markets where you are largely at the start of a long cycle of potential. You can build a fairly metric-driven business in some cases allowing you to almost predict the return of certain investments — call this a "money-in money-out" model. The more you can predict the impact of certain marketing expenditures (money-in), the more you can predict with confidence the resultant business growth (money-out). Using a sound money-in money-out approach, seasonality becomes one of those items you can purge from a business -- you need to understand the inputs and outputs of your metric model well to make this happen.
Circulate the metrics so that all team members -- not just marketing, are aware of the key trends of the business. Communication helps people understand changes that are being made and also how to adjust their performance to head in the appropriate direction. Obviously make a sound judgment for issues where the metrics show a business failing -- not everyone has to see this (but those tasked with creating an upswing are).
Detecting Turning Points
Markets mature through stages, so it is important that the turning points of each stage become visible to your operation so any needed corrective action can be taken. Sales cycles change based on level of market and buyer maturity, amount of competition, even the level of completeness of your own product offering. All of these items should be at hand when the leadership team convenes to assess the next steps in an operational plan and certainly when its time to hold strategic planning meetings. The Marketing leader should take the initiative to do this type of analysis and present a thoughtful set of recommendations to the team. For example, in the first year or two of a business, a sense of business seasonality could show itself usually confirmed after 2 or 3 years of operational data. It's useful to know this when you forecast your results.
Typically the data model you are basing decisions on needs to change to adapt to a turning point. Simple examples might be a competitor who enters the market with pricing disruptions (or even free products). This may impact the shape of your revenue curve but would certainly impact how you do in certain market segments. Perhaps the entry point sales in the small business market fades away in favor of the new competitor — your efforts need to shift to the mid and high points in the market. The Marketing metrics should reveal this turning point and help you make the right business decisions at the right times (e.g. change focus of lead generation, retool parts of the sales team, etc).
Some example turning points to look for might include:
- Longer opportunity2close time frames. Possible indication that sales complexity is increasing. Perhaps the product has too many features (or too many are being highlighted by sales), competition is increasing (instead of one comparison a prospect is looking at three). You might look to repackage the product to resimplify how it is sold, add some new differentiation to speed competitive analysis, train the sales team with a new sales approach that focuses higher in the organization.
- Rapid increase in leads2opportunity ratios. The business needs to prepare for an upswing -- a fast growth spurt. Ideally you can respond rapidly to this situation, both hiring more people to sell and service the products but also the sales infrastructure is robust as well. There is nothing more frustrating that drowning (or taking in water) during a period of strong success.
A good follow-on metric is tracking age of leads. If age starts to increase, either sales is less efficient than it should be or marketing is generating too much interest -- a little of both tends to be true. If you place a dollar value on each lead, having them idle is the same as throwing money away. If you can't process the leads, don't generate the leads. You would be better spending the money on other aspects of your business.
Decision Making
Although the math applied to marketing metrics produces what many think is unambiguous results (e.g. lead2close ratios, age of leads, etc), care must be taken to decide on what they mean for your business. For some reason it seems easier to decide that an initiative is failing than to increase the investment in it.
When a program is put together, it should be accompanied with a forecast of all the relevant metrics that would be tracked. The decision process to implement the program should include a variety of what-if scenarios related to when the gas is pressed (more investment), the brakes are pressed (stop the program) or a need to alter key program parameters (try a different direction for a defined amount of time). A program definition on its own is not measurable -- you can't manage what you can't measure.
Some key things to keep in mind when analyzing a program proposal:
- What if the assumptions around marketing timing are off (but not wrong)? You might prematurely give up on the program only to find out a few months later it would have hit the mark (because someone else likely did it).
- Is the program implementation aligned with other key operational elements? An obvious one in the marketing realm is sales compensation structures. Are the sales team properly aligned to handle the output of a new program and be motivated to switch gears if needed? Do special incentives need to be established to handle the output of the program?
- WIll the new program run over an existing program? As you get larger, you have to keep in mind any interplay between programs so that the Company is not only focusing on the 'newest'.
The best decisions are usually made at time of program review -- not during its implemenation. It is too easy to throw the baby out with the bath water when under the emotion of the day.