When spending a significant amount on marketing promotion, it's vital to justify this expenditure through a comprehensive presentation of marketing and financial metrics.
I have sat through many a presentation from marketing and been astounded that the metrics presented don't reflect what the business needs to know about the ROI for the marketing spend. I once quizzed a CRO if he even understood what the CMO was presenting, he did not. All he wanted was better MQLs (marketing qualified leads) for his team from ideal prospects and he was being sorely disappointed.
As a business consultant and this article is about technology sales I will provide insights into the effectiveness of marketing activities and their contribution to business growth and MQLs.
Here are the key metrics that should be presented:
1. Marketing Metrics:
a. Marketing Qualified Leads (MQLs):
- Total MQLs generated month-over-month (MoM) and year-over-year (YoY).
- Cost per MQL.
- Source breakdown for MQLs (e.g., events, webinars, online campaigns, etc.).
b. Conversion Rates:
- MQL to SQL (Sales Qualified Lead) conversion rate.
- SQL to Opportunity conversion rate.
- Opportunity to Customer conversion rate.
c. Customer Acquisition Cost (CAC):
- Total spend divided by the number of new customers acquired.
d. Channel Performance:
- Breakdown of marketing spend by channel (e.g., paid search, social media, content marketing, etc.).
- ROI for each channel.
e. Website & Content Analytics:
- Website traffic, bounce rate, session duration.
- Top-performing content pieces.
- Lead generation from content (e.g., whitepapers, case studies).
f. Engagement Metrics:
- Email open and click-through rates.
- Webinar and event attendees and engagement rates.
g. Customer Feedback and Testimonials:
- New testimonials acquired.
- Net Promoter Score (if available).
2. Financial Metrics:
a. Return on Marketing Investment (ROMI):
- (Net Profit from Marketing - Cost of Marketing) / Cost of Marketing.
b. Lifetime Value (LTV) of a Customer:
- Estimated net profit attributed to the entire future relationship with a customer.
c. LTV to CAC Ratio:
- This shows the value of a customer in relation to the cost of acquiring them. An LTV:CAC ratio greater than 3:1 is generally considered good.
d. Monthly Recurring Revenue (MRR) & Annual Recurring Revenue (ARR):
- Especially relevant for software companies with subscription-based models.
e. Churn Rate:
- The percentage of customers that stopped using your company's product during a certain timeframe.
f. Net New Revenue:
- The difference between new revenue from acquired customers and lost revenue from churned customers.
g. Sales Cycle Length:
- Average duration from MQL to closed sale.
It is up to the leadership team to assess the performance metrics to understand operational trends and force adjustments if necessary.
When the CFO presents to the CEO, focus on strategic and high-level metrics, particularly ROMI, LTV:CAC, ARR, and Churn, as these provide a snapshot of the long-term health and profitability of the company from the marketing spend. Always frame your metrics in terms of both current performance and future projections to provide a comprehensive view.
I apply the simple rule of do more what works and less or cease completely activities that don't. Each companies products and markets are different and only by measuring and reporting can you adjust accordingly.
Reach out if you would like a free template for your presentations and further insight into measuring and formulating the data.
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