There is a classic Dilbert cartoon in which, as part of a rotational assignment, Dilbert gets transferred to Marketing.  When he arrives at the Marketing Department, its entrance is framed by massive Doric columns; inside everyone is wearing togas, laughing, and drinking wine from huge, overflowing goblets. Over the entryway is a large banner that reads, “Marketing: Two Drink Minimum.” Later, they dine on unicorn.

Those were the days.  While our friends in the Sales department were killing themselves chasing hard quotas to pay our salaries, Marketing’s measurements were far less tangible: calls to the 800-number… BRCs mailed in, and information packets mailed out… bingo cards sent from the magazines in which print ads ran.  Our colleagues in Finance made attempts to instill some fiscal discipline and calculate ROI on Marketing’s spending, but hard measurements were hard to construct because data correlating marketing programs and sales results was elusive.

Today, the opposite is true. The problem of not having the data has long passed.  Modern marketing departments are drowning in data generated by their automated systems; their challenge today is how to wade through the daily digital tsunami to extract relevant and actionable customer insights.  Like the 787 airline pilot with hundreds of displays within his or her sight – only a handful being truly vital – savvy marketers, and the CEOs to whom they report, can maintain high altitude by keeping a watchful eye these 10 metrics:

1. LTV/CAC
2. SAM (not TAM)
3. Website traffic
4. TOFU new names
5. Conversion rate
6. PPC/CTR/CPC
7. PR & Social Media Metrics
8. Nurturing / Lead Scoring
9. References & NPS
10. Revenue, Profit & Pipeline

1. LTV/CAC
LTV/CAC (“Life Time Value/Cost of Acquiring Customer”) should be the gold standard of your company’s marketing measurements, because it is something everyone – Marketing, Sales, and Finance – should be able to agree on.  Who would object to investing a $1 million in a marketing campaign that – given the benefit of a crystal ball – is going to bring in $3.5 million in new business?

Unfortunately, there are no crystal balls, but LTV/CAC is the strongest possible indicator of your team’s track record for successful marketing strategy and ideas.  If the Marketing team can point to past initiatives that returned 2x, 5x, or 10x, it is a safe bet that they can be trusted to deliver high ROI on new investments they propose.  Thus, LTV/CAC provides dual benefits: it lets good Marketing teams validate their successes, while helping CFOs objectively understand the revenue contribution of the Marketing team.

To calculate your LTV/CAC ratio, divide the expected lifetime value (LTV) of new customers – the average revenue forecasted from these customers over the expected duration of their account – by the cost of acquiring them (CAC): LTV ÷ CAC = LTV/CAC. For example, if your company spends $1 million in marketing programs, but those programs bring in new customers whose projected lifetime value is $3 million, your LTV/CAC ratio would be 3:1, a good return. The higher the return, the higher the LTV/CAC; if your LTV/CAC is low, or even negative, you need to seriously rethink your messaging, marketing, and customer acquisition strategy.

2. SAM (not TAM)
People love to toss around huge, impressive-sounding TAM figures; but in many cases, working with stratospheric TAM-level numbers is really not practical for strategic planning purposes.  If you’re like most companies it’s time to say goodbye TAM, and hello SAM.  Here’s why:

• Your TAM – or Total Addressable Market – constitutes the absolute number of prospective customers for your products and services, or the absolute revenue target those sales represent at 100% saturation. But it’s rarely a relevant number: for example, if you sell protective cases for iPhones, not all 7.4 billion people on Earth – or even all 2.5 billion smartphone users — are necessarily qualified buyers for your product. You need something much more precise and actionable.
  
  
• Your SAM – or Serviceable Addressable Market – is a far more germane number: it’s the number of prospective customers you can realistically serve within a defined market segment, e.g. 700 million iPhone users worldwide. That’s a much more targeted and serviceable market.
   
• Your SOM – or Share of Market – is the percentage of market share you have been able to actually capture. If you are able to sell 7 million iPhone cases, you will have captured 1% of the 700 million-user market; 70 million cases is 10%, and so on.  This is a figure that’s easy to work with, and to update quarterly as you compare Apple’s iPhone shipments with your own.

So, while you certainly have to know your TAM, your SAM should be the day-to-day yardstick that helps you become a metrics-driven organization that can validate the contribution of everything you’re doing in Marketing and Sales.

3. Website Statistics
The first rule of real estate is “location, location, location.”  In the virtual world of digital marketing, that translates to “traffic, traffic, traffic.”  The goal of brick-and-mortar and click-and-mortar marketing is the same: get prospective customers stopping by to take a look around, and entice them into buying something… either products, services, the company’s stock, or just buying into the brand message.

Once you know your SAM, you have a benchmark against which all of your marketing results can be measured. From there, some of the most important statistics you need to watch include:

• New and return visitors: These numbers tell you if your content is attracting new visitors, and if past visitors found your site compelling enough to return. When measured against your SAM, it helps you know what percentage of prospective customers are visiting your site.
• Traffic sources: Tells how visitors are finding you… e.g. they are typing in your name (direct), or are they learning about you from a third-party source like a search engine (organic), another website (referral), or a social media source (social).
• Bounce rate: Tells you how many visitors came to your sight, took a look around the page they landed on, and left without clicking on any other content… meaning that particular page lacks “stopping power,” and fails to entice visitors into wanting to know more.
• Top pages: Tells which pages are attracting the most visitors, giving you a clue as to what kind of content is most effective.
• Conversion rate: Tells you what percentage of visitors take a desired action, e.g. fill out a lead form, register for a webinar, make a purchase, etc.

4. TOFU new names
In lead generation vernacular, most of us are familiar with the concept of the “sales funnel” and the four stages – awareness, interest, desire, and action (AIDA) – that prospects go through as they move deeper through the funnel and closer towards their purchase decision.

In most companies’ funnels, they have large numbers of not-yet-qualified “new names” in the awareness stage at the top of the funnel (TOFU)… a smaller number of contacts they are nurturing in the interest and desire stages in middle of the funnel (MOFU)… and a small number of leads in the action stage at the bottom of the funnel (BOFU), for prospects who are near the final stages of the purchase decision.

If Marketing is doing its job, Sales should not have to be distracted by unqualified contacts before the BOFU stage.  But since 15-25% of prospects disqualify themselves at each stage, only about 5-10% of new names will make the complete journey to being a customer. If you are going to lose 90-95% of your contacts, you’d better be generating new TOFU names at a very aggressive pace.

5. Conversion rate
As mentioned above, your conversion rate is the percentage of website visitors who take a desired course of action – called a conversion – among all those who visited: Action ÷ Visitors = Conversion Rate. So, if your website gets 10,000 visitors per month, and 500 of them converted, your conversion rate is 5% (which puts you in the top 25% of all business websites.)  

For some marketers, this action may be something as low-committal as a visitor filling out a lead form providing their name and contact information.  For others, conversion means a higher-committal task like accepting a sales call, or even making an online purchase.

Good marketers can raise both website traffic and conversions simultaneously: even as you increase traffic by improving the desirability of your site content, you can maintain (or even increase) your conversion rate by generating offers that are compelling to visitors. Ideally, your conversion rate should be tied back to your traffic source, so you understand which sources consistently produce the most qualified leads.

6. PPC/CTR/CPC
PPC, or “pay-per-click,” is a type of search engine marketing (SEM) in which search engines like Google or Bing surround search results with advertisements, and advertisers pay Google or Bing every time their ad is clicked. PPC can be incredibly effective in generating website traffic… but it can also be terribly wasteful and expensive, even if you are constantly scrubbing your SEO keywords lists.

CTR, or “click-through rate,” is the percentage of people who clicked on your ad (“clicks”) among all of those to whom it was displayed (“impressions”): Clicks ÷ Impressions = CTR. CTR is a bit of a balancing act: you want a high CTR, but only among people who are good, qualified candidates.  Otherwise, you are wasting money on unqualified click-throughs who are nibbling away at your budget… especially given the auction-style methodology of search engine marketing (SEM), where you and your competitors are bidding up the price of each click-through.

That’s exactly why measuring CPC, or “cost-per-click” is so important. CPC is calculated by dividing the total cost of your clicks by the total number of clicks (Google and Bing both provide CPC in their reports to advertisers.)  The goal, of course, is to generate large numbers of qualified leads at lowest possible CPC, meaning that you are generating quality traffic and leads without overspending for them.

7. PR & Social Media Metrics
The popular myth is that because of the collapse of traditional media, the PR function is dead. In reality, the need for people who can write feature-quality informational content has never been greater… whether content is created internally, or developed in cooperation with independent industry influencers. Because of search engines and the direct publishing model, the traditional PR role has evolved into more of a home-grown content generation function.

The metrics to watch include volume and reach – the extent to which you’re being talked about – positive or negative engagement, influence of participants, and competitive comparisons like share-of-voice versus your competition..

What does that mean for PR people working in or closely with marketing departments?  Well, here’s an interesting factoid that I got from a digital marketing guru: Companies that publish at least 16 blog posts/month get about 4.5x more leads than those that publish less than four posts/month.  Given the Web’s voracious appetite for high-quality feature content, your skills have never been more valuable.

PR and Social Media are not typically huge drivers of pipeline. But because of their broad reach into the SAM – coupled with the fact that content that has the appearance of being vetted by third-party publishers seems very credible – they can be significant sources of new names to feed the funnel.  And because digital marketing and leadflow has become a numbers game, the value of original content needs to be taken and measured seriously.  There are dozens of good social media analytics programs, including ones that advise you on who to follow, and who you need to get following you. That can be a smart investment.

8. Nurturing / Lead Scoring
When you have tens of thousands of new names and contacts working their way through your funnel, but only want your Sales team focused on the top 5% of the best leads, how do you go about qualifying them? 

First, you continually “nurture” contacts by serving them fresh new content or invitations to educational events; even if they decline, you’ve at least impressed upon them that you are a thought leader in the industry.  But when they do partake, they become a higher-potential prospect for your Sales team. 

Lead-scoring is one of the coolest and most underutilized functions in Marketing Automation systems like Marketo, Pardot, Eloqua, Hubspot, and others.  It allows you to assign a weighted score to every line item in your marketing mix, to measure how increasingly engaged individual prospects are with your company over time.  For example:

• If you have a wide range of marketing activities, you can assign a value to each. As examples, if a prospect makes a return visit to your website, that might add five points to their overall score… downloading a whitepaper might add 10 another points, attending a webinar might add another 20 points, and so on. When a prospects amasses 75 points – or 50 points in a 72-hour period, suggesting heightened time-critical interest – they might be ready for a quick sales call.
  
  
• Or, if you track information about prospects’ use of your competitors’ products, and you learn that one of those competitors is struggling, you might give added weighting to those contacts, in the hopes that they come to your Website shopping for an alternative.

Lead scoring protects one of your company’s most rare and valuable assets: your salespeople’s time.  Every moment they spend chasing bad prospects is time that isn’t spent selling good ones… and it can never be recovered.

9. References & NPS
In today’s review-driven world, references are worth their weight in gold.  That why review sites like Yelp, Angie’s List, Glassdoor, CarFax, TripAdvisor, Rotten Tomatoes, and others are so popular… as are peer-to-peer reviews on social media sites like Facebook, Twitter, and others.

Prospects are distrustful of marketing hype.  They want to hear from people who’ve faced the same challenges the face, and found solutions with which they are really pleased. So smart marketers have already researched the top sites serving their prospects, and stocked the pond with reviews from their most satisfied customers.  That’s why VOC (Voice of the Customer) marketing using customer vignettes is so hot right now: it’s a low-cost, high-ROI way to get self-qualifying leads into the pipeline.

Which brings us to NPS, or Net Promoter Score.  NPS is a surveying methodology that allows customers to rank you on a scale of 0-10: 0-6 are detractors (negative), 7-8 are passives (neutral), and 9-10 are promoters (positive).  Results are tallied and plugged into an NPS-generation formula, resulting in a score ranging from -100 to +100.  There’s real value in the NPS exercise, if for no other reason than it helps you find those 9-10 customers… people who you need to put front-and-center in your VoC marketing efforts, in the form of case studies, references, customer panels, etc.

10. Revenue, Profit & Pipeline
I’ve saved the best for last.  All of the metrics listed above are really just marketing games-within-the-game; the real scoreboard is revenue and profit, and the pipeline that makes them possible. 

Revenue and profit are crucial daily statistics for the sales-minded marketer.  Every member of the Marketing team should know who your 10 biggest customers are, the two or three biggest deals Sales is working on, and all of the largest deals brought in over the past year.

It’s been said that “the role of Marketing is to make Sales redundant.”  That’s not true of course; but it IS Marketing’s job to create a pre-sales environment where Sales is only calling on prospects who are already fully-versed on the products, solutions, and competitive benefits that await them.

Summary
Mastering the data – of the market, lead generation, and sales activity – is the key to understanding where the business stands, where it’s going, and what it will take get it to the next level.  Becoming an expert in the 10 data points listed above will not only make you a better marketing professional, it will propel your company – and your career – to new heights.

About the author:

Jim Neumann founded Webmark Partners from IBM, where he was vice president of marketing and communications for the IBM Technology Group. Working either as a consultant or on-staff executive, he has many years of experience leading companies to +400% revenue growth, outpacing their competitors by as much as 12x, in STEM, Healthcare, MedTech, Analytics, CyberSec, IoT, Power and Energy, and others

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