Companies today can measure almost every aspect of a business process or investment with a variety of interesting metrics. As the amount of computing power and number of solutions targeted at the front office increases, so too has the appetite to measure sales and marketing productivity and effectiveness. ERP and other back office systems have provided manufacturing, finance, logistics and other departments with key measurements which have allowed those functions to achieve huge productivity gains over recent years.
Traditionally, the Sales team is a little ahead of marketing in terms of their comfort level when talking with management about conversion rates, win-loss ratios, pipe-to-close, sales velocity etc. Sales mangers have taken those low level metrics and used them to help build sophisticated models for forecasting and trending bookings. However, even those marketing departments that have the skills generally don’t have the systems to operate at such a high level in trending and forecasting their business.
Heads of Marketing are beginning to understand that they also need to bring more science to a critical business process that was for too long seen as a art form rather than being seen as a key part of the company that should be accountable to sales, finance and the CEO.
A Multidude of Marketing Metrics
The arrival of digital platforms (Web, Search, Content) and the availability of business process solutions such as marketing automation and CRM have accelerated the adoption of key marketing metrics.
Today’s marketing meetings are often full of ratios, metrics and numbers floating around like a math class. These metrics have evolved from the very simple notion of counting website visitors, to prospect conversion rates by category over time, to cost per lead, to cost per click, to marginal and cumulative conversion rates etc. So there is now a serious risk of blinding people with too much science. All of this detail is useful and has its place, but a CMO needs to have a clear view of some key marketing metrics.
The sales and marketing funnel has great potential for endless numbers of metrics, which can be evaluated as point in time data points or trends. A top-of-the-funnel measurement such as cost per name/prospect or web visitor conversion rate can be as valuable as a middle-of-the-funnel metric such a Marketing Qualified Lead to Sales Lead conversion rates, but they don’t give a quick, easy-to-track metric that describes the likely health of the total funnel.
One Metric to Rule Them All
One that does, and my personal favourite metric, is Pipe-to-Spend because it brings the marketing, sales and finance functions together. If a CMO spends a dollar on a particular programme then it’s very useful to know how much pipeline was generated by that dollar. A figure above 10 is a good staring point because it means that if I had a pipe to close of 33% than my marketing programme dollar would have generated over $3 in bookings. The Pipe-to-Spend also tells me that prospects are being worked through the funnel and that sales are accepting marketing generated leads. So if this figure is high then its probably indicates a well working funnel process, a low figure of course indicates that a deeper look at the finer detailed metrics mentioned above to see if there is a process or programme selection problem.
Does your organization use Pipe-to-Spend? What successes or challenges have you had using it?