Marketing metrics that matter

If you’re like many of the CEOs I coach, you feel like your Key Performance Indicators (KPIs) for Marketing are a bit murky at best. Your gut tells you there’s got to be a more specific way to measure the money you spend on Marketing. After all, whether it is an in-house staffer or an outsourced vendor, as the CEO, you are seeking one thing from your Marketing efforts, sales!

Let me introduce you to a new way of thinking about your Marketing return on investment (ROI), so you can visualize a pathway that is right for your business. To be clear, these are my 21-year developed “opinions” with some fact-checking links and examples to show the validity. It really became so crystal clear to me once I could see behind the curtain of 13 separate companies and pull all the “best of the best” that each one was doing into one smooth theory.

Marketing. Sales. Business Development.

Small, family-owned companies under $1 million in annual revenue often use the terms Marketing, Sales, and Business Development interchangeably because they don’t have the cash yet to separate them properly. They are small teams wearing many hats. However, the sooner Marketing, inbound/outbound Sales, and Business Development are distinctly defined, the faster you can envision what you are scaling toward if you are 10x in size. 

What’s the difference?

The keywords used the most often in lead prospecting and defining roles are “Gather vs. Hunter” and “Inbound vs. Outbound.” You gather the berries you see within reach. You hunt the things in the woods you haven’t even seen yet.

The definitions I see the most often in multi-million dollar companies who are Scaling Up are: Marketing gathers inbound leads and Sales hunts outbound prospects.

Right now, if you’re small, you can start by separating the two ideas into two KPIs for clarity in your decision-making. As you grow, you’ll decide when the two ideas of Marketing and Sales need to separate into two distinct roles, people, or vendor contracts. And once you reach the big time, they will become fully distinctive departments.

Marketing

Marketing creates your brand’s environment for Sales success—logo, website, business cards, marketing material—the overall impression you give prospects. Marketing also creates online posts, writes blogs, and establishes the company as a “thought leader” in the industry.

Marketing has an advertising budget to reach more people than your followers or buy Search Engine Marketing (SEM) ads to generate leads. They constantly need to increase the number of berries within reach to gather. In fact, they want to become a magnet, drawing the berries closer to the company funnel and gathering them up for a Sales team.

Marketing creates lead magnets with a gatherer mindset. The ROI for Marketing is to generate MQL, Marketing Qualified Leads. You define at your company what is “qualified.”

Once a company reaches a substantive size, Marketing is not Sales —it directly supports Sales with leads. As a CEO, you cannot judge Marketing solely on their activities, which are leading indicators to success. Counting the number of social media posts, blogs, and press releases is great, but if none of those efforts lead to an MQL, the Marketing team needs to regroup their strategy.

Leading vs. Lagging Metrics

The firms I’ve coached to scale up use MQL on their One Page Strategic Plan Critical Numbers because it’s the final, accountable outcome you want from all the leading Marketing activities.

Leading KPIs are “activity metrics” showing daily and weekly activity that drives toward the final outcome you desire. Examples would be the number of inbound calls, emails, and web leads you receive, the number of appointments you’re generating, and the number of proposals you’re writing.

Lagging Critical Numbers are final outcomes showing the monthly/quarterly results of those daily/weekly activities. For Sales, the lagging final outcome you seek at the end of those activities is total revenue sold and close-ratio per salesperson, for example.

Sales

Sales has to hunt the outbound prospects with actions—pick up the phone, make the appointment, follow up, write the contract, answer the questions, and close the deal.

These intentional Sales actions should either:

A) move the prospect through the funnel (deeper relationships with more touchpoints toward the final deal)

B) or out of the funnel (because it’s not a good fit to waste time on)

Whether it’s cold calls or CRM database searches of Marketing’s Qualified Leads (MQL) in the funnel, the Sales team is to hunt—actively engaging prospects every hour of every day—never waiting on miracle deals to come to them. They don’t wait by the phone; they are on the phone.

For example, the customer should never call asking for an update on their proposal; Sales should always be the hunter calling first about next steps.

The most common leading KPI for daily/weekly activities is counting the stages of your sales funnel. SQL, Sales Qualified Leads, is the initial stage. What’s next in your organization to qualify this lead toward close? Metrics like the number of sales meetings per prospect, the number of sales proposals overall in the department, or the low to high dollar range of proposals in the pipeline are metrics I see as a coach. You decide the factors that take a quailed lead down the proven path to become a sales proposal and then a highly likely to close proposal that can be counted toward your funnel metrics.

If you don’t have a full-time Marketing person or department driving MQLs into SQLs for the sales funnel, you are relying solely on a salesperson or department. Your strategic plan may start with other leading indicators like the number of cold calls and the number of first-time appointments set, then the number of proposals sent and the low to high $ dollar range of proposals in the pipeline.

The two most common lagging critical numbers to show the results of those activities are Sales close-ratio per quarter and total closed sales dollars per month. The CEO holds a Sales team accountable for these ultimate results.

Business Development

Often misunderstood, the term “Business Development” is a long-term function of outbound, hunting Sales teams. It’s usually a department within Sales once you are large enough to desire innovation sales. Sometimes it’s a new customized project that’s never been done before, an innovation partner, an emerging vertical market, or a long-range strategic plan playing out for a sale. 

Business Development departments work on big partnerships with long lead times that require nurturing and moving the needle at a slower pace than a commission-based, transactional salesperson usually desires. 

For example, if you are prepping a rollout of a brand new product still in a beta testing phase, this may be a function for Business Development to test the marketplace appetite for your new idea.

In my opinion, people psychologically react to the word “sales,” so fancy managers over the last decade stopped calling it “sales” on business cards to not turn people off and started using the phrase Business Development in titles just to appease. This video explains how “Sales sells cups,” but Business Development sells the desire to have cups to an industry that has never considered “why cups” before. That’s the difference. 

Common Question: How exactly does the MQL move to an SQL in a funnel?

I’ve heard this clarified set of terms for Sales, Marketing, and Business Development more and more regularly over the last three years by a variety of companies $10M-$250M in range, agnostic of product variety or industry. And I see mid-market companies ($5M-$15M range) using MQL and SQL on their One Page Strategic Plan to define their “line in the sand” where the handoff occurs between teams.

Marketing qualified leads > (line in sand) > sales qualified leads. 

There’s an interesting thought from guru Kendra Lee in this article where she describes the inbound marketing funnel as MQL “suspects” versus SQL “prospects.” That’s an interesting phrase that caught my attention. You might like it, as it’s another way of describing the line in the sand where an inbound marketing lead (a suspect) that has been gathered like berries is “qualified” as a good lead that Sales may be able to work through their own funnel process where they can become (a prospect).

The customized funnel your company creates will need progression milestones defined. Each company is different. The wide funnel that starts with inbound marketing leads narrows slightly as Marketing qualifies the MQL from suspect to prospect. (Do they have an urgent need? Does their pain point match your solutions? Is their budget in line with your services?) Marketing gives these MQLs over to Sales as a prospect, then Sales narrows the SQL funnel to qualify them further to the point of proposal, sales activities, follow-up, and sales close.

Common Question: Is my Sales Funnel my Sales Forecast?

The leads funnel is constantly narrowed from MQL to SQL until it’s a quantifiable set of metrics. Your funnel is not automatically your Sales Forecast.

You will know your:

• Number of proposals in the funnel that could close
• Proposal low to high dollar figures that could close

But now, you must create a subjective likelihood score of whether they will close. You define when you want the Sales team to mark a SQL as a forecast candidate.

Companies only define their potential sales forecast from the funnel items that have a high likelihood to close. Taking the entire funnel as a forecast would be too rosy an outlook.

Imagine this scenario: If you set up six gates (or hoops the client jumps through) that are important to you and your industry, then every gate the potential client crosses during the proposal process makes them more likely to close. You can define to a Sales team that all SQLs in the funnel at gates 1-4 are leading KPIs for Sales funnel proposal count and sales funnel proposal low to high end dollar range. Yet, any SQLs in the funnel that have reached gates 5 and 6 have achieved a high likelihood to close, so you’ll include them in your Forecast metrics.

Defining and tracking these gates allows you to learn over time that 70% of your stage 5 close in 6 months and 90% of your stage 6 close in 60 days. This method of tracking the number of prospects in each stage helps you see if a sales rep needs training or assistance getting people over a hump into a new stage. Where do they stall in the relationship-building/closing process? 

Common Question: What Sales metrics should we consider tracking?

Sales Development Metrics 

• Sales top-line revenue potential
• Sales bottom-line profit potential
• Profitability by salesperson
• Average order size / average account size by salesperson
• Salesperson over or under goal
• Target account status = Top 5 opportunities salesperson is working
• # of new Meetings
• Close ratio
• Length of sales cycle
• Quality of pipeline vs. quantity of pipeline
• Pipeline stage balance per sales rep 

Don’t worry, you’re not the only CEO who is learning this for the first time as you read today. This was one of the hottest topics among large and small companies alike in 2021 and 2022 during my coaching sessions. 

Clarity is essential. If you’d like additional ideas on Marketing & Sales KPI metrics that can help determine your funnel, pipeline, or forecasting, feel free to reach out for a free consultation. I’m here to help.