Guide to lead nurturing measurement

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Gleanster guide to Lead Nurturing Measurement

Gleanster guide to Lead Nurturing Measurement

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  • 1. Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. August 2013 About the Pie Chart The data presented in the pie chart is derived from the Q2 2013 Marketing Automation survey (n=220). The data serves as the basis for this Gleansight Deep Dive, which provides analyst commentary related to a particular aspect of the topic. The objective is to provide additional perspective and illuminate certain key considerations regarding the implementation of the related technology-enabled business initiative. Additional survey data utilized: » Q2 2013 Gleanster Survey on Inbound Marketing (n=305) » Q1 2013 Gleanster Survey on Nurture Marketing (n=268) To learn more about Gleanster’s research methodology, please click here or email research@gleanster.com. Deep Dive The Definitive Guide to Measuring Lead Nurturing Lead nurturing is a popular subject these days, particularly among Top Performers. According to Gleanster research, 95% of Top Performers report that they currently leverage lead nurturing, versus 57% of Everyone in our surveys. Everyone seems to be sending newsletters or periodic campaigns, which are technically a form of lead nurturing. But a closer look at the data reveals that Top Performers are not only more likely to leverage advanced capabilities such as lead scoring and trigger marketing, they are also much more likely to physically measure the success of lead nurturing. But there’s the rub. Measurement is perhaps the most troubling of lead nurturing challenges, although it ranks the third most common challenge according to Top Performers. How do you actually measure lead nurturing? This Deep Dive will explore tangible ways to justify lead nurturing and the metrics that are essential to Top Performer success. 65% centage of Top Performers that regard “Generate Insights” as a top reason to monitor Social Media 68% Percentage of respondents that rank “measuring return on investment” as one of the three most challenging aspects of lead nurturing. as a series of tactics and processes designed to build relationships with prospects and customers, even when they aren’t actively looking to buy. It therefore comes as no surprise that the two biggest challenges with lead nurturing are developing content to use
  • 2. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 2 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Top Performers Defined Gleanster uses 2-3 key performance indicators (KPIs) to distinguish “Top Performers” from all other companies (“Everyone Else”) within a given data set, thereby establishing a basis for benchmarking best practices. By definition, Top Performers are comprised of the top quartile of qualified survey respondents (QSRs). The KPIs used for distinguishing Top Performers focus on performance metrics that speak to year-over- year improvement in relevant, measurable areas. Not all KPIs are weighted equally. The KPIs used for this Deep Dive are: 12-month change in revenue Growth in new customer acquisition Average lead-to-sales conversion rate in campaigns (92%) and data quality (81%). (See Figure 1.) Nurture marketing is about using value-added content to build relationships and earn a reputation for your brand as a trusted advisor in the purchase cycle. Content can be used to educate, qualify, and sell to individuals. But as most markets are all too aware, the explosion of content and emerging marketing channels has shifted the power into the hands of the buyer, and informed buyers can make for hyper-competitive environments. On top of that, not all content is created equal; it must be relevant and timely. That means extracting value from lead nurturing requires alignment with the buyer’s purchase cycle. Marketers have to expose relevant and personalized content at just the right time in the purchase cycle across any channel a prospect or customer prefers. Unfortunately, all of these forces complicate lead nurturing efforts, which is why even Top Performers sometimes struggle to measure the success of lead nurturing. Nurturing in a Nutshell Over the last 3-4 years, research has consistently shown that marketers are seeing diminishing returns from traditional marketing tactics like mass email campaigns. For B2B marketers, it’s all about relationships, not broadcasting marketing communications. Prospects don’t just disregard generic communications, they are frustrated by them. That’s why Top Performers who embrace emerging B2B marketing tactics like lead nurturing excel in market-share growth, revenue growth, and customer satisfaction. Before jumping into the ways to measure lead nurturing, it’s a good idea to get on the same page about what it means to use lead nurturing. Technically, a periodic newsletter is a form of lead nurturing, which is why survey results constantly suggest that eight out of ten organizations engage in some form of lead nurturing. But in the context of maximizing a return on investment, lead nurturing Top Performers are more likely to leverage. These include things like trigger marketing, lead scoring, content marketing, multi-channel engagement, and the use of multiple lead nurturing campaign types (discussed in the Nurture Marketing Survey 2013, n=268, Qualified Survey Respondents n=219 (Top Performers n= 43, Everyone Else n=176) 57%95% Top Performers Everyone Else Currently using Lead Nurturing 73% 61% 95% 56% 81% 92% 0% 20% 40% 60% 80% 100% Measuring return on investment Quality of customer data Developing nurture marketing content Top Performers Everyone Else Top 3 Challenges with Lead Nurturing Figure 1: Challenges with Implementing Lead Nurturing
  • 3. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 3 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. section: Aligning Lead Nurturing Campaigns to the Lead Lifecycle). Justifying Investments in Lead Nurturing Over the last 3-4 years, research ha It’s a mistake to think that lead nurturing is “just for marketing,” and it’s not just about nurturing leads; it’s about acquiring and engaging customers. For this reason, the success of lead nurturing is largely measured by revenue, and that’s the goal for marketing and sales. As a business tactic, lead nurturing primarily falls on marketers to execute, but without alignment with sales and a holistic approach to fostering relationships across the entire lead-to-close sales cycle, lead nurturing cannot deliver a positive return on investment. While technologies like marketing automation play a critical role, Top Performers invest heavily in exposing the buying and sales cycle to optimization and improvement. That means both marketing and sales will have metrics that impact success, and both functions will likely need to contribute to process improvement and ongoing commitment to collaboration. In fact, justifying lead nurturing investments isn’t possible without some level of understanding about sales performance. After all, what is every bit as important as the process of qualifying and nurturing the lead. Plus, new customer acquisition with lead nurturing represents just one-third of the ways organizations can apply lead nurturing to capture revenue. Lead nurturing can be used to plug the holes in the pipeline when, for whatever reason, a deal falls through but may close at a later time. It can also be used to engage existing customers in up-selling and cross-selling campaigns. Figure 2 provides a basic structure for a tangible and numeric way. This should be a useful framework for demonstrating of lead nurturing relative to what your organization is doing today. If your sales reps continue to perform at the same level and you invest the same money in marketing, what impact would lead nurturing have on your revenue? the model. Average Deal Size (a). This is a dollar value, and it should be the same amount with and without lead nurturing. While this may increase over time with lead nurturing, it consistent amount when justifying the investment. You should be able sales dashboard. Average Opportunity-to-Close (b). This is a measure of how successful sales is at closing deals after a CRM as a potential opportunity. What percentage of leads move from opportunity to close on average? It should be the same for both boxes. Quarterly Leads Generated (c). Assume the same number of leads is generated. If you aren’t sure, use a simple number like 1,000. The model still works if the deal size and close ratio are directionally accurate On average, research suggests that Top Performers qualify about 50% of the leads they source, and about 25% are considered sales ready leads. If your organization has different levels of success for (d) and (e), use your own percentages here. Top Performing Use of Lead Nurturing Consists Of... Lead nurturing typically involves one, or ideally all, of the following: Value-added content. Lead nurturing is about engaging prospects with relevant content along the entire spectrum of the lead lifecycle: from lead to prospect to customer. For this reason, it demands a variety of different content strategies. Some content will be informational, some content will be technical, some content will be “salesy,” and some will be a combination of all of the above. Multi-channel communications. Know your target audience. What are the channels through which are they likely to be receptive to receiving value- added communications – email, direct mail, social media, blogging, webinars, etc. Drip-marketing & trigger- marketing tactics. With drip marketing, marketers between communications with prospects. But this is a static form of communication that doesn’t necessarily engage prospects at just the right time. Top Performers are 7x more likely than Everyone Else to use trigger marketing techniques that initiate communications based on prospect behavior – a click of a Lead scoring. Lead scoring is an automated way of aggregating prospect behavior to qualify and determine the propensity to buy. Top Performers are 9x more likely than Everyone Else to use marketing automation tools, which provide lead scoring and integration with CRM for automated escalation of the hottest leads.
  • 4. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 4 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. lead nurturing are easy to point out. According to Top Performers in a 2010 survey from Gleanster research, approximately 8% of the but not sales ready come back and purchase at a later time without any intervention from marketing. With lead nurturing, this number can be increased fourfold to as much as 20-25%. We will use 20% to be conservative, and this assumes your organization is truly developing quality content that is personalized by stage in the buying cycle. Aligning Lead Nurturing Campaigns to the Lead Lifecycle Each stage in the buying journey is unique. In fact, the traditional concept of a sales funnel is increasingly becoming obsolete because purchase decisions are rarely linear. Nurture marketing allows your organization to embrace each prospect’s uniqueness in the buying process and educate them at a customized pace. Depending on your organization’s objectives, different nurture marketing tactics can be the buying cycle. In some respects it’s like capturing different types of revenue with lead nurturing. Revenue from new unknown prospects (Leads) Revenue from known prospects who chose not to buy in the past (Prospects) Revenue from customers through cross-selling and up-selling (Customers) WITH LEAD NURTURING WITHOUT LEAD NURTURING Average Deal Size (a) Dollar Amount Dollar Amount Average Opportunity-to-Close Ratio (b) % % Quarterly Leads Generated (c) # of Leads # of Leads 50% are Qualified (d) c x 50% c x 50% 25% are Sales Acceptable (e) c x 25% c x 25% # of Closed Deals (f) e x b e x b # of Qualified Leads that buy later (g) d x 20%* d x 8% Tangible Revenue f x a f x a g x a g x a *279 Estimated opportunity cost of not Total Total + + - = Figure 2: Interactive Framework for Justifying Lead Nurturing *279 survey respondents to Q3 2010 “Capitalizing on Lead Nurturing” indicated average close ratio on nurtured leads is 25%.
  • 5. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 5 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Most organizations that leverage lead nurturing are heavily invested in campaigns and tactics for the front end leads), and rightfully so. Figure 2 shows the different types of lead nurturing campaigns relative to the lead lifecycle and the goals of each stage. Lead nurturing is a powerful tool for pulling opportunities into the pipeline. Content is used like bait to attract prospects, educate them, and qualify them based on their engagement across one or more channels. Generally, about 80% of nurture marketing efforts will target the lead stage of the lead lifecycle. At this stage the goal is to educate and build a relationship as a trusted advisor to a purchase decision. Prospects may not even know they have a challenge your products and services can solve. But exclusive focus on new customer acquisition and lead nurturing is also where most organizations fall short of realizing the full potential from lead nurturing. Research shows that Top Performers are 9x more likely than Everyone Else to automate lead nurturing campaigns for sales engaged leads that don’t buy in the short term. These fall under the Prospect category, and they typically plug holes in the pipeline that are hemorrhaging revenue opportunity. A Guide to Essential Lead Nurturing Metrics To effectively measure lead nurturing, organizations actually have to track about a dozen different metrics. That’s to measure an impact on revenue, a nurtured lead enters a variety of different stages in the lead lifecycle before becoming a paying customer. Figure 3 shows the different goals of each stage. Naturally, the metrics used to measure success are also unique to the stage in the lead lifecycle. As such, measuring lead nurturing is about tracking metrics that can provide insight into optimization of marketing and sales processes. LEADS Qualification Campaign Route prospects to sales or Awareness Campaign Accelerator Campaign Use prospect behavior to trigger Acquisition Campaign PROSPECTS Call-to-Action Campaign Drive prospects to sales Re-Engagement Campaign Stay in communication with leads CUSTOMERS Post-Purchase Up-selling, cross-selling, customer Goals: Conversion, Click- Throughs, Multi-Channel Interaction, Form Fill, Downloads Goals: Sales Acceptance, Engagement, Opportunity Creation, Contact with decision maker(s) & influencers Goals: Conversion, Click- Throughs, Sales or Service Engagement ? ! * LEAD LIFECYCLE Figure 3: The Seven Types of Lead Nurturing Campaigns
  • 6. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 6 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Marketing Metrics for Lead Nurturing Click-through Rate What does it tell us? Click-through rates are a measure of engagement in digital media on the website, email campaigns, landing pages, etc. This is a great way to ascertain how effective different lead nurturing messages are at engaging the right target audience. What data is required? What is the calculation? Click-through rates can be calculated within email marketing and marketing automation tools. The nice thing about marketing automation tools is that click-through rates can be captured across multiple channels in one centralized platform. The click-through rate is calculated by dividing the number of clicks by the total number of impressions. Conversion Rate What does it tell us? Conversion can be measured in tangible revenue or as a measure of engagement. In lead nurturing, many times the goal of a campaign isn’t a sale. Sometimes, lead nurturing campaigns are exclusively focused on education, and therefore conversion would be a measure of the number of times an asset was downloaded, or possibly visit duration on a critical webpage. What data is required? What is the calculation? There are many different types of conversion rates, and generally it’s best marketing automation and allow the tools to track things like number of pages visited, visit duration, asset downloads, etc. Lead Score What does it tell us? Lead scoring is a and the only way B2B marketers can qualify prospects in a structured way. Lead scoring assigns numeric scores to prospects based on behavior, activity, lead score tells marketers which higher propensity to purchase. Thresholds can be set to route high scoring leads directly to CRM from within marketing automation. What data is required? What is the calculation? Lead scoring methodologies can be as complicated as marketers desire. In general, each time a score is assigned to a lead, it should contribute toward qualifying the propensity to purchased based on the internally accepted percent (70%) of Top Performers report scoring methodologies from vendors and then tweak them over time to meet the unique needs of the business. What data is required? What is the calculation? Lead scores can be assigned based on a variety of criteria, and typically the calculation would happen within a marketing automation tool. Consider using detractor scores to reduce the lead score for prospects that don’t engage for long periods of time or display undesirable characteristics (such as a student or job seeker). What data is required? What is the calculation?
  • 7. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 7 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Marketing Qualified Lead (MQL) What does it tell us? The term became popular among B2B marketers about 5 years ago, thanks in large part therefore this metric is a measure of a prospect’s propensity to purchase. The and sales. Some organizations will lead interchangeably, and for all intents and purposes they are the same thing. It’s generally good practice not to have salespeople spending time qualifying opportunities, and the MQL are educating and qualifying leads before they are passed to sales. As Top Performers will add a subsequent Lead (SAL).” The Sales Accepted that forces sales to take ownership of the MQL prospect. This allows organizations to track the conversion from MQL to SAL and therefore determine if there are bottlenecks in the lead handoff from marketing to sales. Campaign Attribution What does it tell us? Campaign attribution tells marketers which and the number of leads generated. With campaign attribution, marketers are assigning a partial value to each interaction that drives a desired outcome. What data is required? In order to track campaign attribution, marketers need to be capable of tagging campaigns and assigning weights to each touch. (See sidebar “Tracking the Lead-to-Sale: A Note on Attribution.”) Sales Metrics for Lead Nurturing Average Deal Size What does it tell us? Average deal size helps marketers determine the impact that lead nurturing can have on the sales pipeline. This is especially powerful when applied to middle stage opportunities that don’t purchase. Lead nurturing plugs the holes in the pipeline and ensures that money spent identifying leads isn’t lost to competitors just because the prospect chooses not to take action in the short term. What data is required? What is the calculation? Total revenue and total number of opportunities, both available from within CRM. What data is required? What is the calculation? Total sales in dollars divided by the number of opportunities for a given period of time. Sales Cycle Time What does it tell us? Sales cycle time is a measure of how long the average to a closed sale in days. Monitoring the sales cycle over time after implementing lead nurturing can tell marketers if content is contributing to shorter sales cycles. Theoretically, a more educated sales cycles. Likewise, longer sales cycles might be an indication that buyers needs aren’t being addressed, or lead nurturing content isn’t targeting the right buyer or buyers within a target audience. Tracking the Lead-to-Sale: A Note on Attribution measuring lead nurturing is attribution. Frankly, that’s one of the most in marketing. How do you associate different marketing interactions with the ultimate metric of success, revenue? The value of lead nurturing programs is often understated because the most popular way of attributing credit to or “last-touch” methodologies. With this approach the campaign that generated the lead, or the most recent campaign to touch the lead before it became an opportunity, is assigned full credit for the revenue associated with the opportunity. But, as Top Performers can attest, lead nurturing is about engaging prospects across the entire lead lifecycle, so these methodologies fail to capture aggregate interactions. It’s therefore critical for marketers to embrace a “multi-touch” campaign attribution approach that recognizes and gives weight to multiple nurture campaign responses. This can be accomplished in one of two ways. The across all campaign interactions. As such, partial credit is assigned evenly to each campaign or engagement. The second approach assigns a heavier gives credit to other nurture campaigns.
  • 8. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 8 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. What data is required? What is the calculation? The accuracy of the sales cycle time is 100% contingent on how diligent salespeople are at updating opportunity status in CRM. What data is required? What is the calculation? Average number of days an opportunity in CRM takes to move from sales Sales Qualified-to-Close Ratio What does it tell us? The Sales convert to paying customers over a given period. This metric should be measured before and after lead nurturing to determine if lead nurturing has an impact on sales success. Eighty-two percent (82%) of Top Performers indicate this is a top three metric for measuring the impact of lead nurturing on the sales pipeline. What data is required? What is the calculation? The quantity of closed deals over a given time period. What is the calculation? Total number of closed opportunities divided by the total number of opportunities for a given period of time. Ongoing Reporting The aforementioned metrics and methodologies will help give visibility into the success of lead nurturing efforts. But marketers must also use the data to extract qualitative insights. Figure 4 shows how marketers can use lead nurturing performance to replicate current success in future strategy. Recommendations Establish priorities and stick to low-hanging fruit. For marketers that are new to lead nurturing, the biggest mistake you can make is to over-engineer nurture marketing programs. In fact, Top Performers consistently demonstrate that less complex campaigns generate the highest return. Naturally, the success of lead nurturing is largely contingent on the availability of content and the personalized nature of this content. But the easier it is to back into the attributes that contributed to a score, the more likely it is that sales will embrace the - Number of interactions - Number of nurture campaign interactions - Top content assets by closed won By Closed Won - Number of leads by first touch - Number of leads by channel - Number of leads by last touch By Lead Volume - Most compelling first touch content - Most compelling last touch content - Most popular content by lead stage By Content Figure 4: Reporting Requirements for Top Performers
  • 9. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 9 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Complex scores lead to questions from sales that marketing can’t answer; that’s bad news for a new lead nurturing initiative. Establish a baseline for benchmarking. Marketers need to benchmark and track performance over time. This is especially important during the initial launch of a lead nurturing program. Make sure you have documented baseline metrics for sales success, average leads generated, average deal size. This is the only way you will be capable of measuring a delta between life before and after lead nurturing. In addition, it’s critical to start with a common understanding the baseline for which initial programs change over time, but only if both sales and marketing are in alignment on the changes. A comprehensive approach. You don’t have a marketing problem and you don’t have a sales problem. You have a revenue problem, and solving it demands equally important contributions from marketing and sales. As such, it’s not just about tracking how many leads marketing generated, it’s about taking that measurement all the way to the closed sale. You should know exactly how much revenue can be attributed to marketing and how much marketing spend it took to generate it. Top Performers measure success based on marketing and sales performance. For this reason, marketers have to understand the average deal size, lead conversion, and the sales cycle time to really measure lead nurturing effectively. Standardize metrics. If possible, rely on technology to provide standardized measurement for key metrics. The only way to establish a benchmark is to consistently measure metrics in the same way over time. Before developing custom metrics, think long and hard about the business case for supporting these outside of a core system of record. Generally, changes in metric performance will alert marketing or sales of potential issues in the pipeline. So don’t complicate the process by calculating customized metrics in spreadsheets. This also consistency if there are changes to the organizational structure. Deep Dive Talking Points There are seven types of lead nurturing campaigns. There are three stages in the lead lifecycle: lead, prospect, and customer. approach. First and last touch undervalue lead nurturing interactions. According to Gleanster, lead nurturing delivers 4x higher engagement with prospects who are not ready to buy in the short term but still represent viable prospects. That means with the same spend and the same lead volume, your organization could quadruple revenue by plugging the holes in the pipeline with lead nurturing.
  • 10. Note: This document is intended for individual use. Electronic distribution via email or by post- ing on a personal website is in violation of the terms of use. 10 Entire content © 2013 Gleanster, LLC. All rights reserved. Unauthorized use or reproduction prohibited. Headquarters Gleanster, LLC 825 Chicago Avenue - Suite C Evanston, Illinois 60202 For customer support, please contact support@gleanster.com or +1 877.762.9727 For sales information, please contact sales@gleanster.com or +1 877.762.9726 Related Research Recently published research that may be of interest to senior industry practitioners include: Gleansight: Marketing Automation Deep Dive: Targeting B2B Buyers on Social Media Deep Dive: The New Rules of Digital Engagement Gleansight: Revenue Performance Management Deep Dive: Linking Inbound Marketing to Sales Results Deep Dive: 5 Marketing Automation Capabilities Top Performers Can’t Live Without The Gleanster website also features carefully vetted white papers on these and other topics as well as Success Stories that bring the research to life with real- world case studies. To download Gleanster content, or to view the future research agenda, please visit www.gleanster.com. About Gleanster Gleanster benchmarks best practices in technology-enabled business initia- tives, delivering actionable insights that allow companies to make smart business decisions and match their needs with vendor solutions. Gleanster research can be downloaded for free. All of it. For more information, please visit www.gleanster.com. Lead Author Ian Michiels, Principal Analyst