Metrics Series: Sales & Marketing

7 July 2022

Why metrics matter for sales and marketing

Metrics are a proven staple of the finance department, helping managers to monitor their company’s financial health and optimize their resources to support future ambitions. They also play an important role in optimizing results in other departments. In this article, we will look at the role of metrics for both marketing and sales and explore how they can optimize your campaigns to achieve the best possible return on investment (ROI).


Metrics as part of your marketing strategy

All successful marketing strategies have one element in common: easily defined and measured metrics to reach agreed upon goals. The range of possible metrics is broad, and can include the size of the target audience, amount of brand awareness, or number of online views and shares. This ensures that the goals are known by all team members before the project starts, so that everyone works together towards the same results. By constantly monitoring these metrics, it is possible for the marketing team to adjust their campaign if they notice that some parts are delivering a higher or lower ROI than expected. Additionally, these metrics can be shared with investors to encourage further investments.

Let’s take a look at an example: a SaaS provider launching a collaboration workflow tool  for companies who work with different freelancers. Its new minimum viable product (MVP) has recently entered the market and has been developed to attract the attention of the first potential customers.

Before we start to plan our marketing strategy, we define our potential target audience in as much detail as possible. In this blog we cover three metrics that assist with this.

Total addressable market (TAM)

his is the total market for your product or service. In other words, the customers who are interested in the type of product or service your company is offering.
For our SaaS provider, this could divide the market into companies of a certain size or turnover, active in particular sectors, or located in a specific country or region.

Serviceable available market (SAM)

Tis is the part of the market that you are targeting based on your business model and service possibilities. This metric shows investors what the long-term growth potential is.
Our SaaS provider would need to take a critical look at the TAM and analyze which parts of this market are interested in the new SaaS tool.

Serviceable obtainable market (SOM)

This is the percentage of SAM that you can realistically obtain within a certain time period. Being able to deliver this on time will show your investors that you are credible and, hopefully, help to increase your market share compared to your competition.
For our SaaS provider, this could be the percentage of the SAM where they already have prior contacts for a personalized approach or a selected part of the SAM using a narrower focus on company size, industry, or geographical location.

Based on the information generated by establishing these metrics, we can establish our marketing strategy to generate as many qualitative leads as possible with the aim of converting these leads into customers.

The marketing strategy can be inbound, outbound, or a combination of the two.

Inbound marketing uses personal outreach via social media, content marketing, and thought leadership to focus on your target audience to entice an influx of interested visitors to your website, or outreach to your sales team. Once on your website, the visitors find content that speaks to them, for example by touching on their current needs (that your product or service can solve) or by providing content that they enjoy and share. This helps your company to get qualified leads and build up trust and credibility that turns into conversions.

Outbound marketing promotes product messages to as wide an audience as possible using generic outreach via TV commercials, online and offline adverts,  radio commercials, cold calling, direct mailing, … This high level of visibility enables you to see the results of your efforts immediately through the immediate response from the market, allowing you to quickly adapt.


The marketing funnel

Attracting customers can be organized by preparing every step of the customer’s process before engaging in action. The creation of an effective marketing funnel is based on a good definition of the customer journey. It starts with getting your customer to know your brand up to making them active ambassadors.

Let’s take a look at a company in the e-commerce sector to see how the funnel generates leads.

Awareness

Inbound and outbound marketing combined with word-of-mouth advertising help improve knowledge of the brand, so more of the target audience is aware of what the brand stands for and offers, helping them to take the next step to consideration.
An e-commerce company is likely to use a mixture of marketing strategies, including targeted banners, online adverts, email mailings, and offline adverts. The company could also encourage purchasers to share details of their purchase with their friends on their social media channels and follow-up purchasers to ask for reviews, all of which helps word-of-mouth advertising.

Consideration

At this stage, potential customers look for more information about the company and the results they deliver. It often involves customers visiting the website, reading reviews, and evaluating testimonials. Clear call to actions (CTA) help direct the visitor towards conversion, the next step.
When it comes to the consideration stage for an e-commerce company, potential customers are interested in the experiences of others, especially their friends. This comes in the form of reviews and recommendations of both the product/service and the e-commerce company itself.

Conversion

This step turns the potential customer into a paying customer and includes techniques to reassure customers that they are making the right choice. For example, a free trial, free shipments and/or returns, an informative FAQ, an approachable contact service, and customer testimonials.
An e-commerce company can use any of these techniques, as well as emails that confirm the order, share tracking details, and follow-up with customers after delivery.

Loyalty

The last step encourages customers to become repeat customers. This is achieved by offering the right balance of price, value, and service throughout the funnel, from first contact to after sales.
E-commerce companies achieve brand loyalty by delivering on their promises and ensuring continual good service and follow-up.


Metrics and tracking the funnel

After determining the marketing strategy, we need to focus on the marketing funnel that moves the target audience from being informed to conversion into paying customers.

Just like for our marketing strategy, there are also metrics to help optimize the results of the funnel.

Leads conversion rate

The percentage of leads that convert into customers or users. It indicates how successful your business is in attracting the right type of audience and how well you can convert your target audience into leads.

Customer acquisition cost (CAC)

The cost to acquire each customer. See our blog on SaaS metrics for more details.

End-to-end lead time

The length of the customer journey, in other words the time it takes for the customer to move through the entire funnel, from start to end.

Marketing qualified lead (MQL)

A lead that has shown interest in a brand due to its marketing efforts. MQLs usually appear early in the funnel, as the leads are aware of the brand’s products but have not yet shown much, if any, interest in purchasing. By gaining insight into these leads, you get a better view of your current audience. Sales teams are more effective when they focus on MQLs compared to all potential leads.

Sales qualified lead (SQL)

This is an MQL that the sales department has determined to be a potential customer as they have shown an active interest in the product by requesting more information or a quote, etc. Leads only become SQLs when salespeople contact them and qualify them.

Sales accepted leads (SAL)

This is an MQL that has been reviewed and forwarded to the sales team for approval and further investigation. It creates an immediate feedback mechanism that ensures alignment between the marketing and sales team. When both departments agree on the definition of a good lead, the acceptance rates from MQL to SAL should be at least 90%.

Qualified lead velocity rate (LVR)

This is the growth rate of qualified leads per month which shows the growth and efficiency of the funnel. This indicates how many (quality) potential customers you are currently trying to convert into actual customers. If your pool of qualified leads is increasing in a reliable manner, it is a good sign of future growth and a solid foundation for accurate growth planning that relies less on estimates.

Cost per click lead velocity

This is the actual price you pay for each click in a marketing campaign, where a click represents a visit to your product page or interaction with your product. Your ROI is determined by how much pay for clicks and the quality you get in return.

Revenue

This is calculated by the conversion rate, the deal size, and the number of customers.


Using metrics to assist sales

Operations in the sales department will depend on the size of the potential sales opportunities. When it comes to large deal sizes, the Account Managers or Sales Development Representatives (SDRs) approach potential B2B and B2B2C leads to entice them through the funnel. For smaller deal sizes, the sales department focuses on generic outreach.

In some companies, the sales department is also known as business development. We tend to use sales instead of business development as this term has a broader focus and meaning, which can be important for the delivered results.

Let’s use the example of the consultancy sector to see how, starting from the SQL metric, we can use metrics to monitor the effectiveness of the sales approach. These metrics include:Number of qualified meetings per time period with a qualified lead. This is usually monitored on a monthly basis.
Like in other sectors, companies in the consultancy sector use this to measure the effectiveness of their sales leads.

Conversion rate

The percentage of sales meetings that result in a deal. The higher the conversion rate, the more ground you can cover without increasing your advertising budget. Alternatively, you can reduce your advertising budget to save money in order to test new marketing tactics.
In addition to monitoring the results of sales meetings to see if a particular type of lead or meeting is more successful, consultancy companies can also use the conversion rate to check that they are generating the right type of leads and the effectiveness of their current sales tactics.

Pipeline

This is particularly useful for large deal sizes.
Sales directors use this information to alert the rest of the company about upcoming projects that need to be planned for. For consultancy companies, this helps with personnel planning.

Weighted pipeline

The value of transactions at each stage of the funnel as a percentage. Again, this is useful for companies with larger deal sizes.
This alerts the company about potentially quiet or busy upcoming periods that need to be planned for. With their high reliance on personnel, this is important for consultancy companies.

Closed won

A sales deal that has reached the final stage in your sales cycle. By marking the sale as closed, it removes it from the company’s funnel, allowing the sales team to move onto new potential sales.
In addition to focusing on the next upcoming sales when they close a successful sale, the consultancy company’s sales team can also learn from the sale by investigating what went well and how they can repeat it in the future.

Closed lost

The opposite of closed won. This is when a customer refuses to make a purchase from you. By performing a closed lost analysis, you can see what mistakes were made, why they were made, and how they can be improved in the future.
The analysis can help the consultancy company’s sales team to decide if their sales approach needs to be redirected and what changes are needed.

Orderbook

Orders are being added to the orderbook when a sale is confirmed. This means that the client has decided to choose for you product or service. The customer confirms to the sales team, on which the execution or delivery is planned. The invoice or formal contract will follow.
By tracking your orderbook, you can estimate how much of the sales target is already achieved for the upcoming periods.


Talk to the experts

Are you interested in discovering the difference metrics can make for your marketing and sales activities? Contact CFOrent for expert help on implementing metrics throughout your company.


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