Successfully reported this slideshow.
Apr 25, 2013
2© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsContentsWhy Should I Read the Definitive Guideto Marketing Metrics and Analytics? 3Part 1: Measurement Builds Respect and Accountability 4Why Now Is The Time For Marketing Metrics 7Part 2: Planning for Marketing ROI 9Step One: Establish Goals and ROI Estimates Up-Front 11Step Two: Design Programs to Be Measurable 15Step Three: Focus on the Decisionsthat Improve Marketing 16Part 3: A Framework for Measurement 17Where Metrics Go Wrong 19The Right Metrics 21Part 4: Revenue Analytics 23Define the Revenue Cycle 24Revenue Cycle Metrics That Matter 29Revenue Performance Management Metrics 33Part 5: Program Measurement 37Why Measuring Marketing Programs is Difficult 38Method One: Single Attribution (First Touch / Last Touch) 40Method Two: Single Attribution withRevenue Cycle Projections 41Method Three: Attribute across Multiple Programsand People 44Method Four: Test and Control Groups 46Method Five: Full Market Mix Modeling 48Program specific metrics – what you shouldmeasure and track 49Conclusion: Program Measurement Applied 50Part 6: Marketing Forecasting 51Part 7: Dashboards 55 Part 8: Implementation • People, Process,and Technology 59People and Culture 60Process 62Technology 64Conclusion 65Key Lessons to Improve your Performance, Profitability,and Credibility with Marketing Metrics and Analytics 66
3© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsWhyShouldIReadtheDefinitiveGuidetoMarketingMetricsandAnalytics?Do you know what profits a 10% increasein your marketing budget would generate?According to the Lenskold Group’s 2010 B2BLead Generation Marketing ROI Study, themost common answer to this question is“I Don’t Know.”Forty-four percent (44%) of qualifiedmarketers have no idea what a 10% budgetincrease could do for their companies.Ifyoufitintothis44%,youwillexperiencedifficultyprotectingyourbudget.Infact,you’lllikelyfindyourselfaskingthequestiontheotherwayaround:“Whatwillhappennowthatmybudgethasbeendecreasedby10%?”Youcan’texpectyourorganizationtoplacevalueonsomethingyou’reunabletoquantify.This guide will help you do just that. Wewill help you answer key questions like:• What are the most important marketingmetrics for me to use?• How can I measure my various marketingprograms’ impact on revenue and profit?• How can I best communicate marketingresults with my executive team and board?• Which personnel, procedural, andcultural changes need to occur within myorganization so I can implement marketingmeasurement?• And many more…The bottom line of any business is the topline: revenue and faster growth!So let’s get started.5 QUESTIONS TO GUIDE YOURMEASUREMENT INSIGHT1. What are your specific objectives for marketinginvestment and how will you connect yourinvestments to incremental revenue and profit?2. What impact would a 10% change in yourmarketing budget (up or down) have on yourprofits and margins over the next year?The next three years? Five?3. Compared to relevant benchmarks (historical,competitive, marketplace), how effective are youat converting marketing investment into revenueand profit growth?4. Which are appropriate targets for improvingrevenue leverage (defined as dollars of profitover dollars of marketing and sales spend) overthe next few years? Which initiatives will get youthere?5. What questions do you still need to answerwith regard to your knowledge of the returnon marketing investments? What are you goingto do to answer them?(Source: MarketingNPV)
4© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart1:MeasurementBuildsRespectandAccountability
5© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart1:MeasurementBuildsRespectandAccountabilityMarketing suffers from a crisis of credibility.Typically, executives outside the marketingdepartment perceive that marketing existssolely to support sales, or that it is an arts andcrafts function that throws parties and churnsout color brochures. Either way, marketingoften does not command the respect itdeserves.What can marketers do so they are seenas part of a machine that drives revenueand profits? How can marketers take morecontrol over the revenue process, build therespect of their organizational peers, andearn a seat at the revenue table?Use metrics that matter tothe CEO and CFOIt’s no secret that CEOs and boards don’tcare about the open rate of your last emailcampaign or your last press release’s numberof views.In today’s economy, CEOs and CFOscare about growing revenue and profits:• How much faster are we growing nowversus last quarter? Last year?• How much profit was made last quarterversus this quarter?• How much revenue and profit do youforecast for the next quarter?• Why are you confident in the above answers?Soft metrics like brand awareness, GRP,impressions, organic search rankings andreach are important – but only to the extentthat they quantifiably connect to hardmetrics like pipeline, revenue, and profit.Of course, marketers must track and measurethe impact of all key marketing activities,both hard and soft. But keep all but themost critical metrics internal to marketing.By speaking the same quantitative languageas the CEOs and CFOs, marketers will bettercommunicate marketing’s value and impact tothe executive suite.See Part 4 for more on how to measurethe right revenue metrics.CUT PROGRAMS TO BUILD CREDIBILITYAccording to Marketo CEO Phil Fernandez, the #1thing a marketer can to do to build credibility withthe CEO is to offer some cuts to marketing programs.Show that you are “de-funding” things youpreviously did that either A) didn’t work; B) weren’taligned with evolving company goals; or C) seemless important now than other initiatives. This helpsdemonstrate a strong sense that you are managing aportfolio of investments, and that you are willing tomake hard choices with company money.Seventy-six percent (76%) of B2B marketing professionals agreeor strongly agree that their “ability to track marketing ROI givesmarketing more respect.” Source: Forrester Research
6© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsKnow the impact of eachmarketing investmentIf you can’t confidently identify which parts ofyour marketing truly deliver financial returns,marketing’s impact and influence will continueto be limited across your company. This willnot only hurt marketing’s influence andcredibility; it can also prevent your companyfrom making the right strategic investments toimprove results over time.See Part 5 for more on measuring the impactof various marketing programs.Forecast results, not spendingForecasting is perhaps the single mostimportant thing marketers can do to changethe perception that marketing is a cost center.In the same way that you can’t drive quicklyif you rely only on your rear-view mirror, youcan’t be an effective marketer if you onlyreport what has happened in the past. Thebest marketers forecast the results they expectin the future – and quantify their forecasts interms of leads, pipeline, and revenue.When you talk about marketing spending,other executives think of costs and profitloss. When you talk about future results,they think of revenue and growth.To formulate accurate forecasts, salesand marketing must sit together at therevenue table.See Part 6 for more on Marketing Forecasting.Make hard business cases for spendingWith its forecast in place, marketing must thenmake a hard business case for the resourcesit needs to deliver the results it has promised.This requires knowing what it will take – inmoney, time, and effort – to acquire newqualified leads and nurture those leads untilthey are ready to talk with sales.Marketers who use this type of rigorousmethodology are able to frame their budgetsin terms of investments, not costs, and arebetter able to justify and defend their budgets.Part1:MeasurementBuildsRespectandAccountability“Marketing has always been a grueling and competitive sport – notunlike running a marathon. With the changes in the buying process,in media and technology, and managing expectations, it’s likerunning a marathon as the ground shifts beneath your feet. Whatwas already difficult is becoming increasingly difficult. If you’regoing to do it without measurement, it’s like running a marathon,in an earthquake, blindfolded.” David Raab, Author, Winning theMarketing Measurement Marathon
7© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsWHY NOW IS THE TIME FORMARKETING METRICSThe way that prospects research and buysolutions today has been forever transformedby the abundance of information available onwebsites and social networks, and this in turnfuels a significant change in the way marketingand sales teams must work – and worktogether – to drive revenue.Because they have ready access toinformation, buyers resist engaging with salesuntil much later in the buying process.This presents an incredible opportunityfor marketing to reinvent itself as a corepart of the company’s revenue engine.As the function that “owns” the relationshipwith these early stage prospects, Marketingnow is responsible for a much greater portionof the revenue cycle than ever before.But with great power comes greatresponsibility.Enter Marketing Metrics.CEO ratings of marketing’s performancedirectly rise and fall with marketing’s abilityto quantify how their campaigns and programsdeliver value in line with company revenueobjectives. It is more important than ever formarketing to link the impact of its efforts andfinancial investments to revenue and profit,and establish a true process for marketing ROIin their companies.Part1:MeasurementBuildsRespectandAccountabilityMarketingprogramsmadeanimpactandmarketingwasabletodocumenttheircontribution20%47%67%ofCEOsgivetheirmarketingdepartmentsaBorCCEOsGradeMarketingNotsurethemarketingprogramsmadeadiﬀerence,buttheyprobablyhadsomeimpacteventhoughcontributionwasn’tmeasuredMarketingprogramsmadeadiﬀerencebutcontributionwasn’tmeasured35%Source: VisionEdge Marketing Marketo 2010 MarketingPerformance Measurement and Management Survey of423 executives“70% of the buying process is now completeby the time a prospect is ready to engage withsales.” SiriusDecisions, Inc.
8© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart1:MeasurementBuildsRespectandAccountability1. Denial“Marketing is an art, not a science. It can’t bemeasured. The results will come; trust me!”At first, the CMO may deny the need to beaccountable for results. Being stuck in thisstage often leads to marketing’s isolation fromother departments and executives.2. Fear “What if my marketing activities don’t impactthe bottom line? Will I lose my job?”Taking on accountability can be scary,especially when you don’t yet know howwell (or poorly) your department is doing.Marketing accountability is a double-edgedsword, shining a bright light on weakperformance as well as good performance.Some CMOs may be tempted to avoidaccountability just to avoid facing whichcategory they are really in.3. Confusion“I know I should measure marketing results,but I just don’t know how.”The CMO knows that marketing accountabilityis inevitable, but the path to achieve itremains hidden. Basic metrics such as leadsource tracking and cost-per-lead are put inplace, but there is no holistic understandingof how marketing activities are impacting keybottom line metrics.4. Self-Promotion“Hey, come look at all these chartsand graphs!”In a desperate attempt to appear accountable,marketing measures everything that can be(easily) measured — from website page viewsto press release downloads to search enginerankings. These CMOs proudly display theirresults and claim marketing accountability.However, important as these metrics maybe, they lack an explicit connection to hardmetrics like pipeline, revenue, and profit. Theresult is a focus on soft marketing KPIs insteadof hard revenue growth, on short-term ROIover long-term marketing accountability.Inevitably, this will reinforce the perceptionthat marketing is a cost center, not a revenue-producing asset.5. Accountability“Revenue starts with marketing.”At this stage, marketing truly finds its placein front of the revenue pipeline – wheremarketing stops being a cost center andstarts justifying marketing expenditures asinvestments in revenue and growth. This iswhen the CMO can act, and talk, like a trueC-level executive, measuring and forecastingmarketing’s impact on metrics that matter tothe CEO and CFO. This is when marketing trulyearns a seat at the revenue table.Getting to this final stage of marketingaccountability is difficult for any organization.It requires top-level commitment, discipline,and investment in the right systems and tools.It can also require a rethinking of marketingincentives and compensation. The journeymay not be easy, but the results—in termsof peer respect and impact on profits—areclearly worth it for any marketing team.THE 5 STAGES OF MARKETING ACCOUNTABILITY
9© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart2:PlanningforMarketingROI
10© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart2:PlanningforMarketingROIMany marketers think of marketing ROI asreporting on the outcome of their programs,often in the form of a set of reports they haveto deliver monthly. But the best companiesrecognize that reporting for reporting’s sakeis less important than the decisions thosereports enable to improve profits.This is the difference between backwards-looking measurement and decision-focusedmanagement.It’s important to plan your programs with ROIin mind from the outset. When you quantifythe outcome you expect from each marketinginvestment, you can then determine exactlyhow you will measure the program againstthose goals and position yourself to achievethem.The fastest-growing companies measureROI to find not just what works, but whatworks better. They focus on “improving ROI,”not just “proving ROI.”Planning for marketing ROI involvesthree main activities:1. Establishing targets and ROIestimates up-front2. Designing programs to be measurable3. Focusing on the decisions that willimprove marketingOnly with discipline, planning, and aclosed-loop process will you be able toimprove your marketing ROI.MarketingROIManagementProcessProcessbeginswithROIscenariosearlyintheplanningcycletoshapeobjectives,strategiesandtactics.Measurementsareprioritizedﬁrstandthenplannedconcurrenttocampaignplans,sotestsandvariationscanbeincorporatedtoimproveprecision.Measurementscapturelift,diagnoseweaknesses,andgenerateinsighttoimproveeﬀectiveness.ROIresultsguidechangestostrategiesandtacticsinthenextcycleofmarketing,basedonwhichhavethehigherROIpotential.12a2b3BestAssumptionsMeasurementPlanTestVariationsinPlanROIScenariosObjectives Strategy TacticalPlan ImpactContributionMeasurementsROIMeasurementHistorytoGuideNextCampaign(Source: Lenskold Group)
11© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsSHOULD MARKETING HAVETO JUSTIFY ITSELF?According to consultancy MarketingNPV, the twomost common questions asked by non-marketingexecutives are:1. “Does our marketing generate any value forshareholders?”2. “How do we know that marketing really works?”Unfortunately, these questions immediately putmarketing on the defensive and inevitably causemarketers to conduct time-consuming and expensiveanalysis to justify their business function. This resultsin a significant “insight opportunity cost” since allthe resources that could have been directed towardsthe pursuit of true insight are instead diverted to“proving” that marketing works.Most companies will find that profits increase whenconstrained analytics resources are focused on thekey decisions that will improve profits rather thanjustifying marketing’s existence.ESTABLISH GOALS ANDROI ESTIMATES UP-FRONTWhen planning any marketing investment,your first step is to quantify your expectedoutcomes. All too often, marketers planprograms and commit their budgets withoutestablishing a solid set of expectations aboutwhat impact they expect the program tohave. This is a terrible habit, and is one ofthe underlying reasons why other executives,especially CFOs, question marketinginvestments.The solution is to assign up-front goals,benchmarks and KPIs for each marketingprogram.The first step of any program plan should be todefine your objectives and then pick measurablemetrics to support those goals. Imagine if eachPO came with an ROI plan – with best case, worstcase, and expected case scenario outcomes –that answered the basic (but critical) question of“what do we expect will happen in exchange forthis money we want to spend?”Benefits of ROI goalsWith ROI goals in place, the CFO will see notonly the cost that goes out the door, but alsoexactly what benefit is expected to come fromthat cost. As a result, he or she will be muchmore likely to support the investment.Don’t worry too much about the fact thatyou are making estimates. As long as they areclearly labeled, the CFO will understand thatany plan requires numerous assumptions.Just the fact that the marketer is walkingin the door with a spreadsheet of numbersestablishes that marketing is speaking theCFO’s language. That in itself is highly effectivefor building credibility.Modeling your ROI goals will also help you to:• Identify the key profit drivers that mostaffect the model and ultimately your profits.• Create “what if” scenarios to see howchanging parameters may vary the resultsand impact profitability.• Establish the targets you will use to compareactual results.Part2:PlanningforMarketingROISTEPONE
12© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsHow to build models for ROI goalsNot every program will have a complete ROIcalculation. Some programs will have softergoals, such as number of attendees at anevent, but as always, the closer you can get tomeasuring profits and ROI, the better you willjustify the investment.Even the simplest ROI goals should include:• How many incremental sales are generated• How much revenue each sale produces• The gross margin percentage• The total marketing and sales investmentHere’s an example ROI calculation, courtesyof Lenskold Group. Note how it captures allexpenses including all variable costs on theleft, and focused on incremental gross marginon the right.Basic ROI CalculationPart2:PlanningforMarketingROI(Source: Lenskold Group)STEPONEMARKETING EXPENSES (EXCLUDING OFFER COSTS) MARKETING IMPACT QUANTITYCampaign Development $25,000 Target Reached 27,000Mass Media $100,000 % Convert to Sale 2.2%Direct Marketing $40,000 Incremental Sales 594Total Marketing Budget $165,000 Net Present Value per New Sale $875MARKETING STAFF EXPENSE Incremental Revenue $519,750Number of Staff Days 6.25Average Daily Rate $450 Average Gross Margin % 38.0%Total Staff Expense $2,813 Profit from Incremental Sales $197,505Total Marketing Investment $167,813 Incremental Gross Margin $197,505Gross Margin – Marketing Investment Return (i.e., Net Profit) $29,693Return / Marketing Investment ROI 17.7%
13© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsLenskold Group provides excellent toolsfor managing marketing ROI, including anonline Lead Generation ROI planning tool.This and other tools are available for freefrom the Lenskold Group website (http://www.lenskold.com/tools/LeadGenTool.html).(Source: Lenskold Group ‘CMO Guide to Marketing’)Part2:PlanningforMarketingROISTEPONE
14© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart2:PlanningforMarketingROIUnderstand Best Case, Worst Case,and Risks ScenariosThe best plans show a range of targets,including expected case, best case, and worstcase scenarios. This lets you protect yourcredibility in case things go sour, and showsan understanding of how changes to variousassumptions might impact the results.It also shows that you understand the possiblerisks that would hurt your program’s ROI. It’soften a good idea to run your assumptions andtargets by the most skeptical and pessimisticmember of your team. Let them find all theways the program could fail – and then, wherepossible, put in place contingencies to managethe risks. This may include things directlyrelated to the program, but it can also includebroad changes to the business environmentand economy. By proactively identifyingand managing risks up-front, you lessen thelikelihood that other executives will shootbullets at your feet later on.STEPONEINCORPORATE ALLRELEVANT EXPENSESOften, marketing ROI models show ridiculously highreturns because they don’t incorporate all relevantvariable and semi-variable costs. Examples include:• Staff costs within marketing• Travel expenses• The cost of sales’ time spent following up on leadsTake, for example, a program that generates a lotof leads but does not include the cost of the timesales wastes on pursuing leads that don’t convert.It’s quite possible that a program that at first appearsprofitable will show a negative ROI once theseexpenses are included.
15© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsDESIGN PROGRAMS TO BEMEASURABLEThe best marketing programs haveintentional measurement strategies plannedin advance. So as part of planning anyprogram, you need to answer these threequestions:• What will you measure?• When will you measure?• How will you measure?In almost every case, you will need totake specific steps to make your marketingprograms measurable. This often includessetting up test and control groups or varyingyour spending levels across markets tomeasure relative impact. Without variancein your marketing, you may not be able touse modeling to tease apart the incrementalimpact of your marketing programs andimprove your marketing precision and mix.See Section 5 for more on measuring ROIusing test and control groups.Data CollectionA key part of planning for measurement issimply tracking the appropriate attributesfor all your marketing programs (and theirvariants). This can include target audience,message, channel, offer, investment level, andany other relevant attributes.Most companies do not begin this processearly enough in their lifecycle, and they payfor it later. Even if you don’t use the dataright away, it will become invaluable downthe road when you attempt any of the moresophisticated approaches towards measuringprogram effectiveness. These attributes canbe stored in anything from your marketingautomation system to a simple spreadsheethosted on a share drive – what matters themost is that you start to build the history asearly as possible.Part2:PlanningforMarketingROI“ It is more important to periodically capturepotentially high-impact insights than to frequentlymeasure less important outcomes simply forreporting purposes.” Jim Lenskold, Lenskold GroupMEASUREMENT COSTS MONEY –SO SPEND WISELYExercise discernment.While it’s possible to measure just about anythingin marketing, it is impossible (and unprofitable!) tomeasure everything.Begin with the end in mind.As Jim Lenskold says, “Prioritize when andwhat to measure based on the answers you needto make decisions that will improve your profits.”Invest in Marketing RD.This is a term used by consultant Jim Sterne(@jimsterne). Just like the overall corporation investsin RD to generate future profits, marketing shoulddo the same to generate similar insights to optimizefuture profits. In other words, sometimes it is OK torun a marketing program where the primary goal isto learn whether something works, or how to makeit work better. A good rule of thumb is that allocating10% of your budget to testing and experimentationis usually a wise investment.STEPTWO
16© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsFOCUS ON THE DECISIONSTHAT IMPROVE MARKETINGYou’ll deliver the best ROI and reap thehighest corollary benefits when you move pastbackward-looking measurement to forward-looking decisions.This is the difference between marketingmeasurement and marketing management.It is the difference between data, intelligence,and knowledge.An integral part of your planning processis identifying up-front what decisions youneed to make to drive company profits, andthen building your measurements to captureinformation that facilitates these decisions.This means you must measure things not justbecause they are measurable – but becausethey will guide you towards the decisionsyou need to make to improve companyprofitability.Isn’t it time to swap your over-the-shoulderstance, which prevents you from movingforward efficiently, for strategic, objective-driven momentum?Your highest-ROI decisions will often flowfrom strategic questions about offers,messages, target segments and geographies –not simply “pass/fail” assessments of specificprograms or tactics. You can always evolveyour mix of tactics, but even the best tacticsapplied across the wrong strategies won’tproduce a fraction of your desired results.In other words, marketers should focusbeyond “what is” and start measuring“what if.”Each measurement should seek to augmentyour understanding of how to make theprogram better and align it with yourcompany’s strategic objectives. This way,even if you don’t meet all of your programgoals, you can still figure out why and how toimprove the program. This is almost alwaysbetter than launching a new program youdon’t yet know anything about.Part2:PlanningforMarketingROIMARKETING REPORTING: JUST BECAUSEYOU CAN DOESN’T MEAN YOU SHOULDPerhaps you’ve heard the adage that you cantorture the data until it confesses? What this meansis it’s important not to measure just what you can,but what you can ACT on. Think about where youwant to end up before you begin, and strategize fromthere. Ask yourself, “What question am I trying toanswer, and what would I do if the answer wereX or Y?”STEPTHREE
17© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart3:AFrameworkforMeasurement
18© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart3:AFrameworkforMeasurementCEOs and boards don’t care about 99% ofthe metrics that marketers track – but theydo care about revenue and profit growth.There are two primary categories of financialmetrics that directly affect revenue and profits:• Revenue Metrics: Marketing’s aggregateimpact on company revenue• Marketing Program Performance Metrics:The incremental contribution of individualmarketing programsThere are many other areas of marketingmetrics that are not addressed directly in thisGuide. These include:Customer Profitability: Lifetime value of anincremental customerWeb Analytics: Measures Web visibility totarget audiences against potential audiences,and compares against industry and competitorbenchmarksPublic Relations: Measures views and impactof corporate communications initiativesProduct Performance: Comparativelymeasures the total sales and margins ofindividual productsBrand Preference and Health: Assessesbrand preference in relation to preference forcompeting brandsSales Tool Usage: Measures which productmarketing materials are being used the mostAnd many other areas…This is not to imply that these metrics are notimportant for marketers to track – just thatthey are likely to be less relevant to financially-focused executives outside of marketing.CUSTOMER SATISFACTION AND NET PROMOTER SCORESFor many companies, a key metric is their Net Promoter Score (NPS),a customer loyalty metric based on customer answers to the question,“how likely are you to refer us to friend or colleague?” According toanswers on a 0-to-10 rating scale, customers are grouped into threecategories:Promoters (9-10)Enthusiastic customers who will fuel growth with repeat and referralbusiness.Passives (7-8)Current customers susceptible to competitor offerings and thus have aneutral brand impact.Detractors (0-6)Customers who voiced dissatisfaction and harmthe brand.To calculate a brand’s NPS, use the following equation:NPS = [% of Promoters] – [% of Detractors]A company’s Net Promoter Score has been shown to have positivecorrelations with faster growth and profits. Marketo’s own researchprovides support for measuring customer satisfaction: high-growthcompanies are more likely than low-growth companies to incorporatecustomer satisfaction into their marketing executives’ compensation.
19© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart3:AFrameworkforMeasurementWHERE METRICS GO WRONGThere are literally hundreds of marketingmetrics to choose from, and almost allof them measure something of value. Theproblem is that most of them relate very littleto the metrics that concern a CFO, CEO andboard member.Of course, it’s okay to track some of thesemetrics internally within your departmentif they will help you make better marketingdecisions. But it’s best to avoid sharing themwith other executives unless you’ve previouslyestablished why they matter.Vanity metricsToo often, marketers rely on “feel good”measurements to justify their marketingspend. Instead of pursuing metrics thatmeasure business outcomes and improvemarketing performance and profitability, theyopt for metrics that sound good and impresspeople. Some common examples includepress release impressions, Facebook “Likes”,and names gathered at trade shows.Measuring what is easyWhen it is difficult to measure revenue andprofit, marketers often end up using metricsthat stand in for those numbers. This canbe OK in some situations, but it raises thequestion in the mind of fellow executiveswhether those metrics accurately reflect thefinancial metrics they really want to knowabout. This forces the marketer to justifythe relationship and can put a strain onmarketing’s credibility.Focusing on quantity, not qualityAccording to a 2010 Lenskold Group / emediaLead Generation Marketing ROI Study, thenumber one metric used by lead generationmarketers is lead quantity, whereas barely halfof marketers measure lead quality. Focusingon quantity without also measuring qualitycan lead to programs that look good initiallybut don’t deliver profits. (To take this idea tothe extreme, the phone book is an abundantsource of “leads” if you only measure quantity,not quality.)Activity, not resultsMarketing activity is easy to see and measure(costs going out the door), but marketingresults are hard to measure. In contrast, salesactivity is hard to measure, but sales results(revenue coming in) are easy to measure. Is itany wonder, then, that sales tends to get thecredit for revenue, but marketing is perceivedas a cost center?Efficiency instead of effectivenessIn a related point, Kathryn Roy of PrecisionThinking suggests paying attention to thedifference between effectiveness metrics(doing the right things) and efficiency metrics(doing – possibly the wrong – things well).For example, having a packed event is nogood if it’s full of all the wrong people.Effectiveness convinces sales, finance andsenior management that marketing deliversquantifiable value. Efficiency metrics are likelyto produce questions from the CFO and otherfinancially-oriented executives; they will be nodefense against efforts to prune your budgetin difficult times.
20© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart3:AFrameworkforMeasurementCost metricsThe worst kinds of metrics to use are “costmetrics” because they frame marketing asa cost center. If you only talk about cost andbudgets, then no doubt others will associateyour activities with cost, too.Let’s take a look at a real-life example:Recently, a marketer improved his leadquality and simultaneously reduced hiscost-per-lead to $10. Thrilled with hisresults, he went to the CEO to ask formore money to spend on this highlysuccessful program.Did the marketer get his budget?No. The CEO decided the reduced lead costmeant marketing could deliver the sameresults with fewer dollars – and so she cutthe marketing budget and used the extrafunds to hire new sales people.What went wrong here? The marketerperformed well, but he made the mistakeof not connecting his marketing results tobottom-line metrics that mattered to the CEO.By framing his results in terms of costs, heperpetuated the perception that marketingis a cost center. Within this context, it’s onlynatural that the CEO would reduce costs andreallocate the extra budget to a “revenuegenerating” department such as sales.FINANCIAL OUTCOMES OVER ACTIVITYLook at the following (sanitized) letter from a CFO to a CMO for anillustration of why financial outcomes are more important than activity,cost and quantity.“We seem to be purchasing GRPs and click-thrus at a lower cost thanmost other companies, but what value is a GRP to us? How do weknow that GRPs have any value at all for us, separate from what othersare willing to pay for them? How much more/less would we sell if wepurchased several hundred more/less GRPs?I think we need to look beyond these efficiency metrics and find away to compare all these options on the basis of effectiveness. Weneed a way to reasonably relate our expenses to the actual impactthey have on the business, not just on the reach and frequency wecreate amongst prospective customers. Until we can do this, I’m notcomfortable supporting further purchases of advertising exposureeither online or offline…It seems to me that, if we put some of our best minds on the challenge,we could create a series of test markets using different levels ofadvertising exposure (including none) in different markets which mightactually give us some better sense of the payback on our marketingexpenditures.My experience tells me that we are not approaching our marketingprograms with enough emphasis on learning how to increase thepayback, and are at best just getting better at spending less to achievethe same results.“(Source: MarketingNPV)MARKETING CHAMPIONS“Marketers have to be clear about what marketingproduces. Sales sells, but what does marketingproduce? You might answer brand awareness,leads, and sales tools. But these answersdisempower the marketing function. The bestanswer is that marketing generates cash flow inthe short term and identifies sources for futurecash flow in the long term.”Roy Young and Allen Weiss, MarketingProfs
21© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsTHE RIGHT METRICSIf activity, cost, and quantity aren’t theright metrics to use, what are? Anythingthat speaks to the CFO’s areas of primaryconcern: revenue, margin, profit, cash flow,ROI, shareholder value – in other words, yourcompany’s ability to generate more profitsand faster growth than your competitors.This is what Roy Young and Allen Weissof MarketingProfs call “speaking the financiallanguage of business.”Financial MetricsMost B2B marketers should focus on twocategories of financial metrics:The Time DimensionLenskold Group points out that there arealso different types of metrics in eachcategory, based on time:Past: How did we do?Present: How are we doing?Future: How will we do?These questions break into threecorresponding metric categories:Part3:AFrameworkforMeasurementMarketing’s aggregateimpact on company revenueThe incrementalcontribution of individualmarketing programsRevenue MetricsMarketing ProgramPerformance MetricsBusiness PerformanceMetrics KPIsHow did we do last week? Last month?Last quarter? Diagnostic MetricsWhat is working, and what can work better?Leading IndicatorsHow will we be doing in the future?These are the most common reporting metrics thatyou share with fellow executives, often on a dashboard.They are mostly BACKWARDS looking metrics.These metrics deliver insight into your CURRENTperformance, often by comparing against historical datatrends and competitor and marketplace benchmarks.These metrics help you look FORWARD and forecastfuture results. (See Section 6, Forecasting.)Set GoalsAs discussed in Section 3, make sure you setgoals for each of the key metrics you chooseto track. Your goals will put your performanceinto context, and help you and your fellowexecutives see if your results are on par withwhat’s expected – or better, or worse.
22© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsRevenue MetricsMarketing ProgramPerformance MetricsProfit Per Customer Aggregate impacton company revenueIncrementalcontribution ofindividual marketingprogramsLifetime value of anincremental customerBUSINESS PERFORMANCEMETRICS KPISPAST: HOW DID WE DO?• Lead generationversus targets• Cycle time• Investment• Pipeline contribution• Program ROI• Average selling priceDIAGNOSTIC METRICSPRESENT: WHATIS WORKING?• Conversion rateversus trend orbenchmark• Response rates• Lift over controlgroup • Investment toacquirea customer• Marginal cost toserveLEADING INDICATORSFUTURE: HOW WILLWE BE DOING?• Size of prospectdatabase size• Marketingcontribution forecast• Expectedcontribution forecast• Retention rates• Products percustomer• Net promoter scoresThe Right Metrics: SummaryPart3:AFrameworkforMeasurementPAUL ALBRIGHT, MARKETO’S CHIEF REVENUEOFFICER, SHARES HIS SECRETS FORMEASUREMENT SUCCESS:1. Choose no more five key metrics. It’s hard toput organizational focus on more than that, sochoose wisely.2. Measure success versus goals for those metricsfor every campaign, every channel, every salesrep/region, every product, etc.3. Show trends for those metrics over time – thatway you can immediately see where you areimproving and where you are not.4. Put on a dashboard for everyone to see so thereis always a succinct view of what marketing istrying to achieve, and where you stand.5. Have recognition systems tied to goals. Makesure top contributors get recognition – give thembadges they can put on the desks or cube.6. Rinse and repeat. The best performing companiestrack results weekly, monthly, and quarterly– so they can improve just as often.
23© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalytics
24© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsPerhaps the most important metrics forbuilding marketing’s credibility are themetrics that show marketing’s aggregateimpact on revenue.Some old-fashioned marketers say thatmarketing isn’t responsible for revenue. Wedisagree. In today’s online and social world,marketing is responsible for up to 70% ofthe entire buying process – which meansmarketing and sales need to rethink howthey work (and work together) to generaterevenue. This new way of working requiresnew metrics and analytics.We call this new measurement process‘Revenue Cycle Analytics’, and this newway of working ‘Revenue PerformanceManagement’.DEFINE THE REVENUE CYCLEThe first step in Revenue Cycle Analytics isto define the stages of the revenue cycle,starting with potential buyer awareness andmoving through marketing and sales to closedbusiness and beyond. When marketing andsales collaborate to formally define each stage,as well as the business rules that determinea prospect’s movement from one stage tothe next, they create the foundation for acomprehensive set of robust revenue metrics.MethodologyDefining the stages of the revenue cyclerequires a new revenue methodology.Traditional sales methodologies such as SPINSelling and Miller Heiman provide standardbenchmarks and best practices for the salesfunction, and these sales methodologies formthe basis for the best sales analytics. At theircore, these methodologies break the sales cycleinto stages and allow the sales executive totrack movement through the stages – which inturn lets them answer key questions such as“how long is the sales cycle?” and “how muchpipeline coverage will help me hit my targetsfor this quarter?”Traditionally, marketers have not appliedthe same level of rigor to their portions ofthe revenue cycle. This is unfortunate, sinceit is the only way marketers will be ableto understand how their activities moveprospects forward.That is why the foundation of Revenue CycleAnalytics rests in clearly defined stages andclear rules for how prospects move throughthe stages over time.A NEW BREED: REVENUE MARKETERS™To thrive in today’s changing marketplace, marketingmust begin to operate and sound more like sales.As demand generation agency The Pedowitz Groupsays, marketers must “manage a predictable, reliablefunnel with a plan that ultimately produces highervalue leads and maximizes revenue.”Today’s successful marketer has evolved beyondthe language of traditional marketing. The PedowitzGroup coined the term “Revenue Marketer™”in 2007 to describe this new breed of marketer.Debbie Qaqish, Chief Revenue Marketing Officerof The Pedowitz Group, says that these RevenueMarketers™ use the language of business to describetheir contributions with metrics that measurepipeline, opportunities, and revenue. They measurewhat matters to a CxO – and talk about these metricsin terms their executive leadership can understandand evaluate.At any given moment, a Revenue Marketer™ knowshow their key metrics stack up against their targets,and what they plan to do to improve their results.
25© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsSTAGE All Names EngagedProspectLead Sales LeadOpportunityCustomerPart4:RevenueAnalyticsAll NamesProspect RecycledLeadAWARENESSEngagedOpportunityCustomerSalesLeadMQLSALSQLNurturingDatabaseMarketingSDRSalesDEFINITIONThis is the entry point for everyone. We have purposely called this stage“Names” because these individuals are not leads when they first enter thefunnel.This definition applies to those who show real engagement, such as attendinga webinar, downloading content from our website, or clicking an email thatwe send. At this stage, we filter out the names that haven’t engaged with usas a brand, such as those who simply threw business cards into our bowl ata trade show.This stage refers to qualified prospects that could buy one day, but aren’t yetready for engagement with sales. “Qualified” denotes the right kind of personat the right kind of company, as determined by our “fit” scoring rules. This isthe first metric that we report to fellow executives and the board.These marketing-qualified leads are prospects that show enough behavioralengagement or buying intent that we want to call them.These leads have been qualified as “sales-ready” by a sales qualification rep.The sales team has accepted these leads and added them to the pipeline asa deal they are actively working.We have closed these deals and won new customer business. (These customersare then passed on to a new revenue cycle for upsell and retention.)Example: Marketo’s Revenue CycleDifferent companies will make different decisions about whatdefinitions best suit their revenue cycles, but as a case studyexample, here are Marketo’s definitions. The methodologybehind these definitions is in part responsible for Marketo’shighly efficient revenue engine and fast growth.
26© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsThree Categories of StagesYour company may use only a few revenuestages, or you may model something moresophisticated like Marketo’s model – but nomatter which specific stages you choose, thereare only three categories of stages:CATEGORY Inventory StagesGate StagesSLA StagesDEFINITION / TIMELINE An inventory stage is a “holding pool” where leads andaccounts can sit for an unlimited amount of time until they’reready to move to another stage. A gate stage is a simple qualification check with no timedimension.SLA stands for “service level agreement”. These stages denotea defined time period in which a lead must be evaluatedbefore moving forward or be eliminated from the process.EXAMPLECommon examples of inventory stages include the prospectpool, where leads are nurtured until they are sales-ready;active opportunities are not yet committedto a certain timeline.Assume your company only wants leads from companies of$100+ million in revenue. In the gate stage, a lead will moveforward if his/her company has more than $100 million inrevenue. If not, the lead is disqualified.When a lead is deemed “sales-ready,” it can becomea “marketing-qualified lead.” The appropriate salesrepresentative has 14 days to contact the lead and chooseto accept the lead, disqualify it, or recycle it back for furthernurturing. If a lead stays in this stage for over 14 days, itbecomes “stale,” which can trigger a process that alertssales management or even reassigns the lead to a differentsales rep.
27© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsRevenue Stage Model Best PracticesA best-practice revenue stage model is basedon three fundamental principles:Sales resources are relatively expensive. Toprovide the highest value, sales should notengage with prospects until prospects areready to engage with sales. Sales interactionsshould start relatively late in the pipeline,once leads are well qualified, and use lowercost channels such as marketing to developrelationships with everyone else.No lead left behind. Don’t let potentialcustomers end up in “lead purgatory.”Implement SLA stages wherever possibleto ensure your leads either flow forward orare recycled back to marketing. Keep yourinventory stages to a minimum – perhaps justone in marketing – so prospective customersdon’t sit idle.A prospect’s journey from initial awarenessto customer is often non-linear. Sometimesleads originally deemed “sales-ready” are not.Because no lead should ever remain stagnantin the system, these leads should be recycledback to marketing for nurturing.DetoursOf course, not all leads follow a linearsuccess path, so make sure your modelalso defines “detour stages” to captureleads that are not qualified, or that requirea few rounds of nurturing before they’resales-ready.Transition RulesAs the final step in formulating your revenuestage model, you need to define the businessrules that govern how and when yourprospects move from one stage to another.This includes how your leads move from thetraditional success path to various detourstages and back again. For example:1. A person may move from Engaged toProspect if their company reports annualrevenue above $10 million and belongs toone of your target industries.2. A Prospect may become a Lead when his/her Lead Score exceeds 100 points.3. A Prospect may become Inactiveif they don’t respond to a campaign or visityour website in more than six months.4. An Inactive Lead may move backto Prospect status if they respond toa new program.Part4:RevenueAnalyticsDETOURSTAGESDefinition DISQUALIFIEDNamesmarked asnot-in-profileINACTIVEProspectswho are non-responsiveover the last6 monthsRECYCLEDQualifiedleads inneed of morenurturingLOSTLost ordeferredopportunities(ongoingnurturing)
28© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsExample:Marketo’s Complete Revenue CycleBelow is Marketo’s final revenue cycle asshown in the Revenue Cycle Modeler. You’llnote that it includes the success path stage,as well as detours and transition rules.BENEFITS BEYOND ANALYTICSA revenue cycle model creates a common language the entireorganization can use to measure results, understand the status ofany prospective customer, and define the actions required from eachdepartment. Based on this, Sales and Marketing can better coordinatetheir activities and ensure alignment throughout the revenue cycle.A revenue stage model also provides operational benefits that improvelead management processes. A revenue stage model can help you:Customize lead nurturing based on each prospect’s location in the cycleand automatically move prospects between nurturing tracks as theymove through the funnel.Adjust lead scoring rules and sales alerts by stage. For example, youmight be interested if an early-stage prospect visits your pricing page,but expect it from a late stage opportunity.Trigger campaigns and sales actions as prospects transition from stageto stage.Define service level agreements for how long a lead can stay in certainstages, and automatically send alerts and trigger campaigns when leadsgo stale. For example, you can reassign a lead if no sales action is takenwithin a specific time.
29© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsREVENUE CYCLE METRICSTHAT MATTERWith the model in place, marketers can beginto explore the four key “metrics that matter”:Flow, Balance, Conversion and Velocity.This is where critical insight can be gainedin measuring and optimizing marketing’saggregate impact on revenue.Part4:RevenueAnalyticsMETRIC Flow (LeadGeneration)Balance (LeadCounts)ConversionVelocityQUESTIONS IT WILL ANSWER How many people entered each stagein a given period?Are these trending up or down?How many people are in eachpipeline stage?How many accounts?How does that vary by lead type?Are the balances going up or downover time?What is the conversion ratiofrom stage to stage?Which types of leads havethe best conversion rate?What is the average “revenue cycle” time?How does it break down by stage?EXAMPLESHow many new prospects were createdlast month, and how many marketing qualifiedleads did we pass last week?How many active prospects do I have –since the size of my target prospect databaseis a key leading indicator of future success?Which (if any) of my conversion ratesare trending up or down?Do certain types of leads move faster throughthe pipeline?How is their speed changing over time?
30© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsThe larger your flow in any givenstage, the more meaningful thesemetrics become.Companies that sell a lot of deals at lowerprice points will find more significance in theirconversion metrics and flow than companiesthat sell fewer deals of greater size. But evencompanies in the latter scenario will findmeaningful flow and results data at the earlystages of their funnel. In this case, digging intoyour earlier stages can serve as a valid proxyfor marketing ROI.For example, a company that closes onlyseveral deals per quarter may find it moremeaningful than a company closing manydeals to measure marketing’s results onqualified leads generated rather thanmeasuring closed business – especially theROI of specific programs.Part4:RevenueAnalyticsHere is a screenshot of Marketo’s Revenue Cycle Analytics Dashboard. Note the ability to see the metrics thatmatter: balance, flow, conversion, and velocity. The ability to track how all those metrics are trending over timegives critical insight into trends versus historical benchmarks, and drilling down into performance by lead source,business unit, geography, etc. helps to understand the aggregate revenue impact of each lead type.QUESTION: SHOULD METRICS COUNT PEOPLE,ACCOUNTS OR DOLLARS?People are the easiest variables to track across theentire revenue cycle, but the value of these metricsis limited because revenue usually comes fromaccounts, not individuals.Accounts are relatively easy to track for later-stagedeals, but CRM systems such as salesforce.com makeit hard to track accounts for early-stage leads.Dollars are what we want, but it is difficult toaccurately track revenue until the sales cycle. Also,if your deal amounts are highly variable (or justlarge), some of your marketing activities will showwild profits while others will not, based simply onwhether a deal has closed. It’s a bit like playingroulette.Given these pros and cons, most companies(including Marketo) find that a mix of these threeapproaches is best.
31© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsExample: Marketo’s MetricsUnderstanding the conversion rates andvelocities of each stage in your revenuecycle will help you better understand – andcommunicate – your revenue cycle economics.Let’s use Marketo’s actual revenue cyclemetrics to illustrate:Paid Names. As of early 2011, Marketo spends~$275,000 a month on various demandgeneration programs to produce 9,500 newpaid Names each month.Prospects. About 40% of paid Namesultimately become Prospects, generating ¾of all our Prospects; inbound programsgenerate the remaining ¼. Our averageinvestment per paid Prospect is $73, and theaverage for all Prospects is $55.Conversion of Prospects to Leads. Typically,20% of our new Prospects become Leads in thefirst month, and the rest enter our nurturingdatabase. Slightly less than half of our Leadscome from new Prospects, and the rest comefrom the nurture database. On average,4% of the nurture database becomes a Leadeach month, and about 10% goes “inactive,”meaning they haven’t done anything in sixmonths. About 40% of Prospects will becomeLeads over a two-year period.Opportunities. As discussed above, ourSDRs apply a very strict filter to what theyqualify and pass onto the sales team. OurSDRs only pass 7% of all Leads to our AEsas Sales Leads – but a full 80% of what theypass gets converted to an Opportunity.It’s typical for more than one lead to beattached to each Opportunity, so the resultingcombined conversion between number ofleads and number of opportunities is 4%. Thismeans an incremental opportunity is worthabout $2,000 in terms of variable demandgeneration investment.New Customers. Finally, Marketo wins about35% of all opportunities (the vast majority ofthe others are deferred or no decision), so anincremental customer is worth about $5,800of marginal demand generation investment.This information is invaluable when it comestime to set and defend the marketing budget.At Marketo, we set the demand generationbudget by working backwards from how manycustomers we want to close in future months.It also allows us to answer precisely howand when more (or less) budget will impactrevenue.LEAD DEFINITIONS CONVERSION RATES:AN INTIMATE RELATIONSHIPThere will always be a trade-off between how strictlyyou define your leads and the conversion rates yousee as a result. At Marketo, we use behavioral leadscoring to determine when a Prospect becomes aLead that one of our Sales Development Representa-tives (SDRs) should contact.For Marketo, it is relatively inexpensive for an SDRto call an incremental lead, but relatively expensivein opportunity cost if we miss out on a potentialdeal. For this reason, Marketo is relatively loosein what we call a Lead. At the same time, we don’twant to annoy potential customers by calling themtoo early in the buying cycle. So we’ve set ourscoring thresholds such that about 20% of all newProspects become Leads within a short timeframe,and about 4% of the active Prospect databasebecomes a Lead every month.But while we incur a relatively low cost on SDRs, it’smuch more expensive when our Account Executives(AEs) call Sales Leads. That’s why Marketo’s SDRsapply a very strict filter to which Leads they qualifyand pass on to the Sales Team. In fact, our SDRs passonly 7% of their Leads to Sales – but a full 80% ofthose Sales Leads convert to Opportunities.
32© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsDrilling in by Lead TypeDifferent types of leads will move throughthe revenue stages differently; some willhave better conversion rates than others,some will convert faster than others. That’swhy Revenue Cycle Analytics become evenmore powerful when you can drill into themetrics that matter (balance, flow, conversion,velocity) by lead type.Important Lead Type VariablesA Lead Type is any specific category ofleads that may move through the revenuecycle differently. Examples include:Lead source: Leads generated frompay-per-click will usually convert fasterthan leads from purchased lists.Company size: Leads from large enterprisesmay convert more slowly than SMB leads.Division: Whether your divisions areby geography, business unit or both,the leads from each division will likelybehave differently.Other examples might include industry,product line, or channel source. Drilling inby lead type is a great way to make bettermarketing investment and mix decisions. Notonly can you parse the differences betweenyour conversion rates, velocities, and yourinvestments required for each lead type;you’ll also be able to track what is trendingup and down.For example, if your leads for a certain sourceor product are converting faster than others,it may be a sign to invest more in that area.Part4:RevenueAnalyticsExample of revenue cycle metrics by Lead Source. Here, we see Marketo’s Prospect to Lead conversion rates,flows, and velocities by lead source. This shows that Prospects from the AppExchange and Website are thehighest quality and are most likely to convert to Leads; Prospects from PPC tend to convert the fastest; andProspects from Sponsorships, Partners, Virtual Trade Shows, and Content Syndication convert at the slowest rate.LEAD SOURCE CONVERSION RATIO(ALL TYPES)AVG TRANSITIONTIME (DAYS)FLOWWebsite 47.77% 14 2465Online Ad 13.87% 29 1736Trade Show – Virtual 11.67% 54 1362Trade Show 14.49% 37 946AppExchange 50.88% 15 464Webinar 17.03% 38 418Alliance 36.95% 37 313PPC_GS_US 43.48% 13 260Not Available 26.32% 4 234Sponsorship 5.44% 70 229Partner 8.82% 55 164Content Syndication 10.04% 37 133Web Direct 30.83% 44 115Organic – Google 44.84% 24 113Web Referral 51.63% 40 111
33© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsREVENUE PERFORMANCEMANAGEMENT METRICSRevenue Performance Management (RPM)is a strategy to optimize interactions withbuyers across the revenue cycle to acceleratepredictable revenue growth. Because RPMis about transforming how marketing andsales work – and work together – it requiresa new set of metrics that focus not on howmarketing or sales is performing, but on theoverall effectiveness and efficiency of theend-to-end revenue engine.The best way to measure the overalleffectiveness of your revenue engine is tomeasure total revenue (or bookings, or grossmargin) generated divided by the total spendon marketing and sales. This metric, morethan any other, provides an accurate measureof your revenue engine’s efficiency.With an RPM mindset in place, companiesbegin to realize that the most importantmarketing metrics are really about saleseffectiveness. In other words, the mostimportant questions you can answer aboutmarketing’s results are:1. What effects are marketing’s investmentshaving on sales’ effectiveness andproductivity?2. How are marketing’s activities loweringthe total expense-to-revenue ratio forsales and marketing combined (e.g. how ismarketing improving the net revenue engineeffectiveness)?When you no longer focus on marketingin isolation, but rather on how marketingimpacts sales productivity, you will gaina much more comprehensive view of youractivities’ true ROI.With this in mind, here are some additionalmetrics that effective RPM marketers can addto their own dashboards:- Average selling price- Sales cycle times- Sales productivity- Win rates- Time to ramp a new sales repRevenue Engine Eﬀectiveness =(Total Marketing and Sales Investment)(Total Revenue or Bookings)
34© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsThe Big List of Revenue MetricsIncorporating all these together, here’sa broad list of metrics you can choose fromto measure your impact on revenue.FLOW CONVERSION IMPACT INVESTMENT SALES AND RPM OTHER# of New Names % Name to Prospect % of Pipeline Contributedby MarketingInvestment per NewNamesAverage Selling Price Balance of Active Prospectsin key inventory stages# Prospects % Prospect to Marketing-Qualified LeadValue of PipelineContributed by MarketingInvestment per Prospect Sales Cycle Times Balance of OpenOpportunities# Marketing QualifiedLeads% Marketing-QualifiedLead to Sales-AcceptedLead% of Wins Contributed byMarketingInvestment per MarketingQualified Lead% Reps Making Quota Velocity / Cycle Time forNew Name to Lead# Sales Accepted Leads % Sales-Accepted Lead toOpportunityValue of RevenueContributed by MarketingInvestment per SalesAccepted LeadTime To Ramp a New SalesRepVelocity / Cycle Time forOpportunity to Win# Opportunities % Opportunity to Win Investment perOpportunityRPM Efficiency = (TotalRevenue) / (TotalMarketing + SalesInvestment)Key “Awareness” Metrics:web traffic, direct/brandedtraffic, social followers, etc.# Wins Investment per Win Total Period Revenuevs Quota# Lost Discounts# Churn PipelineRenewals / Retention
35© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsVariants of Each MetricEach metric on the previous table will havemultiple variants depending on how you sliceand dice them, each of which will frame yourmetrics in a different context to help youmake better decisions.For example, you may look at the numberof Marketing-Qualified Leads and conversionrate from Prospect to Lead over time versusgoals for each geographic region.It can be costly and unwieldy to look at toomany variants too frequently, so pick thenumber of metrics to track in keeping withyour organization’s needs.TRACKING METHODBy week, month and quarterTrends over timeVersus goalsVersus benchmarksBy sourceBy channel, product, region, etc.BENEFITA regular cadence helps keepoperational focus.Looking at your data over timehelps you see if you’re improving.The best marketers set goals (weekly, monthly,and/or quarterly) for all key metrics, andalways track results AND results versus goals.Compare results (e.g. conversion rates) versussimilar companies, as well as versus your owncompany’s historical results.Many companies look at lead flow andopportunity creation by source (e.g. salescreated vs. marketing created).The more complex your business, the moreimportant it is to track your key metrics on amore granular level.
36© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart4:RevenueAnalyticsExample: Marketo’s Key RevenueMetricsAt Marketo, we track five key metrics versusgoals on a weekly basis, and 30 key metricsversus goals on a monthly/quarterly basis.Here are the key metrics Marketo tracks ona weekly basis, as well as the key variants:1. New Prospects: New Since Last Week, NewMonth-To-Date, % On-Target2. New Leads: New Since Last Week,New Month-To-Date, % On-Target3. New Opportunities: New Since Last Week,New Month-To-Date, % On-Target4. Size of Target Prospect Database:Size today plus trend over 12 months5. Size of Open Opportunity Pipeline:Size today plus trend over 12 months6. New Business Closed: Month-To-Date,vs Quota, % On-Target7. Upsell Business Closed: Month-To-Date, vsQuota, % On-Target8. Renewals Business Closed: Month-To-Date,vs Quota, % On-TargetHere are some of the key metrics we track ona monthly basis. We track Actual, Target, andActual / Target %. We also track the 12-monthtrend for all these variants over time. All Website Traffic Branded Traffic (Direct + “Marketo” Keyword) Blog Subscribers Facebook Monthly Users Total New Prospects Total New Leads New Target Active Leads Target Latent Leads Inbound Leads SMB Leads • West SMB Leads • East Enterprise Leads International Leads Total New Opportunities Marketing/SDR Opps Sales Outbound Opps Referral Opps SMB Opps • West SMB Opps • East Enterprise Opps International Opps Lead to Opp % Size of Target Prospect Database Size of Open Opportunity Pipeline Deferred or Lost Opps Net-Add Opps Won Opps Dollar Value Total Demand Generation Programs Investment Demand Gen Investment Per Prospect Demand Gen Investment Per Opportunity Total Marketing Investment (All Programs + All Headcount) Total Marketing InvestmentPer Opportunity Total Bookings SMB Enterprise Channel International Install Base Average Selling Price Average Discount Retention / Churn
37© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurement
38© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementDON’T GO OVERBOARD ON PROGRAMMEASUREMENTMarketing measurement should not be aboutproving ROI, but improving ROI. Jim Lenskold pointsout that marketers tend to overemphasize theirassessments of media and marketing channels, sincethese align to the budget allocation process and tendto be visible to the CFO and other executives.In the end, the revenue metrics in Part 4 areusually more important than program effectivenessmeasurement.WHY MEASURING MARKETINGPROGRAMS IS DIFFICULTIt’s easy to ask the question, “What kind ofresults do my programs deliver?” However,determining the answer can be very difficult.Some of the key challenges to marketingprogram measurement are:Knowing when to measure. The money youinvest today will have an uncertain impact at anuncertain point in the future. Last month’s tradeshow may deliver results next month or perhapsnot for two years, but marketers need to decidewhere to invest their budgets today.Multiple touches. Conventional marketingwisdom says at least seven touches are neededin order to convert a cold lead into a sale.Whether or not this is the correct number everymarketer knows it takes multiple touches tocreate a customer. This fact makes it difficult toallocate revenue to any specific touch.Multiple influencers. According toMarketingSherpa, the average buying committeefor a five-figure purchase at a mid-sizedcompany comprises six people. In the case oflarger companies or more complex purchases,such a committee can involve 21 or moreinfluencers. Different marketing programs affecteach individual differently, so it is a challenge toknow which programs have the most impact.Extraneous variables. In many cases, factorsoutside marketing’s control can significantlyimpact program results – from macro-economictrends to the weather to the quality of thesales reps. If revenues increased because theeconomy improved, can marketers claim theirprograms delivered better ROI?Measuring the contribution that a givenmarketing program has on revenue andprofits has been the holy grail of marketingmeasurement ever since John Wanamakerfamously remarked, “Half of the moneyI spend on advertising is wasted; the troubleis, I don’t know which half.”Perhaps the most common question marketersask is, “Did this program (trade show, email blast)deliver results?”This section is all about how marketers cananswer this challenging question – and builda sensible framework for measuring theeffectiveness of their decisions.
39© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementMethods to Measure Marketing Program ROIJust because measuring marketing ROI is harddoesn’t mean it’s impossible. Fortunately,various methods exist to give companiesinsight into their various programs’ levels ofeffectiveness:Each sequential method on this list will giveyou a more accurate view into your customervalue data – but this additional insight comeswith a corollary rise in cost and complexity. As aresult, most organizations begin the process ofmarketing program measurement with the firstand second methods and begin to experimentwith more approaches as they move up thematurity curve.LESS ACCURATE LESS COST1. Single Attribution (First Touch / Last Touch)2. Single Attribution with Revenue Cycle Projection3. Attribute across Multiple Programs and People4. Test and Control Groups5. Full Market Mix ModelingINCREASEDINSIGHTINCREASEDCOMPLEXITYHow lead generation marketersmeasure marketing programs:3%Market Mix Modeling45%Single Attribution21%Attribute AcrossMultiple Programsand People20%No tracking11%Test andControlGroups(Source: The Lenskold Group /eMedia Lead Generation Marketing ROI study)
40© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsMETHODONEPart5:ProgramMeasurementSINGLE ATTRIBUTION(FIRST TOUCH / LAST TOUCH)The most common methodology for tracking theresults of marketing programs is to assign all thevalue to the first (or last) program that touchedthe deal. This usually means allocating thedeal to the source of the first person from thatcompany, or to the key person.SINGLEATTRIBUTIONDEFINITION EXAMPLEFirst Touch First touch attributionallocates all the valueto the FIRST programthat touched thedeal. Typically this isthe Lead Source.If a company helda webinar andgenerated a Lead thatclosed a deal one yearlater, that companywould give revenuecredit to the initialwebinar.Last Touch Last touch attributiongives revenue creditto the LAST programthat touched the leadbefore the key actionwas taken.If a Lead becomesa Prospect afterwatching a productdemo, that demowould receive revenuecredit, even though asales rep had nurturedthe Lead in severalother ways.PROS AND CONS OF SINGLE ATTRIBUTION(FIRST TOUCH / LAST TOUCH) ProsRelatively easy implementation andlow costProvides good insight into the earlystages of the revenue cycleWorks well when the majorityof investments are made in leadgeneration instead of lead nurturingGives straightforward insight into“investment per” lead metrics ConsDoesn’t account for the influence ofsubsequent touches– so insights aredirectional at bestAttributes too much credit to leadgeneration programs and not enoughto nurturing touches or contributionsfrom salesHard to account for quality until the dealcloses; can be skewed by a particularlylarge deal or long sales cycleAnalyzer SettingsNewProgram Analyzer0 200,000PipelineDollars20,3)$02,000,00,000Program: WebinarCost $53,000Pipeline Contribution: $10,000Contributing Leads: 45TagsLocation: San FranciscoProgram: WebinarCost $53,000Pipeline Contribution: $500,000Contributing Leads: 45TagsDriver: ChrisLocation: New YorkFilter: Driver: Chris, Shonal | Location: San Francisco, New YorkPrint PDFDefaultStandard ReportsLead ReportsLeads by CampaignLeads by MonthEmail ReportsCampaign ReportsCompany ReportsWeb Page ReportsRevenue Cycle AnalyticsExample ReportsMy ModelsAnalyzersSuccess Path AnalyzerComparison AnalyzerOpportunity AnalyzerProgram AnalyzerContribution AnalyzerBatting Average AnalyzG4.$From: 2500 To: 8000From: 1000 To: 4500From: 400 To: 600From: 400 To: 6000X AxisS2)6*)$T66%#4$Y AxisM)37)#4$Bubble SizeN-,,)44$M)37)#4$ColorSettingsAnalyzer SettingsNewProgram Analyzer0 200,000PipelineDollars20,3)$02,000,00,000Program: WebinarCost $53,000Pipeline Contribution: $10,000Contributing Leads: 45TagsLocation: San FranciscoProgram: WebinarCost $53,000Pipeline Contribution: $500,000Contributing Leads: 45TagsDriver: ChrisLocation: New YorkFilter: Driver: Chris, Shonal | Location: San Francisco, New YorkPrint PDFDefaultStandard ReportsLead ReportsLeads by CampaignLeads by MonthEmail ReportsCampaign ReportsCompany ReportsWeb Page ReportsRevenue Cycle AnalyticsExample ReportsMy ModelsAnalyzersSuccess Path AnalyzerComparison AnalyzerOpportunity AnalyzerProgram AnalyzerContribution AnalyzerBatting Average AnalyzG4.$From: 2500 To: 8000From: 1000 To: 4500From: 400 To: 600From: 400 To: 6000X AxisS2)6*)$T66%#4$Y AxisM)37)#4$Bubble SizeN-,,)44$M)37)#4$ColorSettings
41© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementSINGLE ATTRIBUTION WITHREVENUE CYCLE PROJECTIONSAn obvious disadvantage of first and lasttouch attribution is that today’s marketinginvestments may not pay off for quite sometime, so the ROI of your current marketingprograms remains in limbo.Approaches to marketing ROI measurementsthat do not properly account for the time-to-investment payoff can lead to decisions thatbias towards short-term gains over buildingtrue long-term value. This applies across allindustries, but its impact is especially acute incompanies with considered-purchase productsand long revenue cycles.Solution: revenue cycle projectionsBy adding revenue cycle projections toa first touch single attribution, you can gaindeeper insight into the long-term impactsof your programs. For example, instead ofwaiting to see the actual results of a tradeshow, this approach looks at what impactthe trade show had at the top of the revenuecycle and embellishes that view by estimatingthe trade show’s long-term impact based onhistorical conversion metrics.In the example model on the next page, TradeShow 1 occurred a year ago and shows afairly good picture of its returns. In contrast,Trade Show 2 just happened last week. Withthe basic first touch single attribution model,Trade Show 2 looks as if it has delivered verypoor results. But this is not an apples-to-apples comparison.METHODTWOPROS AND CONS OF SINGLE ATTRIBUTIONWITH REVENUE CYCLE PROJECTIONProsFocuses on revenue impactof programs, not just topof the funnelUses estimates to quantifythe future value of today’sinvestmentsUses lead quality, notjust quantity, to evaluateprograms ConsAttributes value to leadsources without accountingfor the influence of othermarketing touchesUses past performance toestimate future results,so cannot incorporateunderlying changesRequires that estimatesmust eventually be backedup with actual results
42© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsHowever, when we apply revenue cycleunderstanding of how leads from similar tradeshows have converted over time to the abovemodel, we are able to estimate what the totalfuture impact of the trade showwill be.Think of it this way. When discussinga recent marketing program, would you rathersay, “The event was great; 500 people stoppedby the booth,” or “The event was great; 500people stopped by the booth, and we expectto add an incremental $600,000 to pipelineover the next 12 months as a result?”Part5:ProgramMeasurementPROGRAM INVESTMENT DATE ALL TOUCHED PROSPECTS LEADS OPPS WINS PIPELINE REVENUETrade Show 1 $18,000 Last Year 901 560 207 17 5 $421,082 $117,903Trade Show 2 $12,000 Last Week 1,012 517 21 1 0 $15,946 $ –PROGRAM INVESTMENT DATE ALL TOUCHED PROSPECTS EST. LEADS EST. OPPS EST. WINS EST. PIPELINE EST. REVENUETrade Show 1 $18,000 Last Year 901 560 209 21 7 $590,510 $161,214Trade Show 2 $12,000 Last Week 1,012 517 221 18 7 $663,221 $258,656METHODTWO
43© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementMarketo Case Study ExampleMarketo relies mostly on Single Attribution withRevenue Cycle Projection to internally assess itsprogram results. Below is a summary of someof our recent program results:COLUMN DEFINITIONS:Sources above the line are programs with variabledemand generation program investments. Thosebelow the line are Sources with fixed investmentsonly.Prospects show the total flow (number) of newProspects from each Source.Investment per Prospect lists the average variableinvestment per Prospect from that Source.% Lead shows the likelihood that a Prospect fromthat Source will convert to a lead over a 12-monthtime period.Velocity shows the average time it takes a Prospectfrom that Source to convert to a Lead.Lead to Opp Index shows the relative likelihoodthat a Lead from that Source will convert to anOpportunity. (For example, Leads from the websiteare 2.6 times more likely to turn into Opportunitiesthan leads from a virtual trade show.)KEY INSIGHTS:Inbound leads are by far the highest quality, fastestmoving, and most likely to convert to opportunities.This reflects the fact that our website does notrequire registration for early-stage content but doesfor buying-oriented content, so any Prospect whoactually does register on the website is likely to belater in their buying process.On the other hand, we meet prospects at everystage in the buying process with paid programs.Taking all the costs and conversion rates intoaccount, virtual trade shows are the best performingsource; followed by PPC, paid webinars, and usingthird-party email lists to promote our content.In-person trade shows are not a cost-effective wayto generate new Leads (though they can be useful toaccelerate movement from existing leads).Content syndication tends to generate very earlystage Prospects that do not convert.SOURCE PROSPECTS INVESTMENT % LEAD VELOCITY LEAD TO PER PROSPECT (DAYS) OPP INDEXTrade Show – Virtual 3,793 $25.44 17% 81 1.03rd Party Email toPromote Content 3,302 $34.65 18% 43 0.5Trade Show 2,703 $221.30 23% 61 1.9Paid Webinar 1,760 $68.50 21% 60 1.0Pay per Click Search 990 $158.10 45% 42 1.4Content Syndication 536 $82.84 12% 59 0.3Other Paid 208 $187.50 13% 93 1.3Website 2,871 58% 27 2.6Sales Prospecting 1,888 26% 46 2.2Partner Co-Marketing 903 17% 102 1.1Other Inbound 370 100% 19 9.0METHODTWO
44© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsATTRIBUTE ACROSS MULTIPLEPROGRAMS AND PEOPLEThis approach recognizes that it takes multipletouches from multiple people to close a deal,and attempts to measure the contribution ofeach individual touch.How to Track and Analyze AllocationsFirst things first. Start with the action you areanalyzing (pipeline creation, closed revenue,etc.) and work backwards to identify eachsignificant touch that affected all of the contactsassociated with that particular deal – but makesure you account for only the touches thatoccurred before the action was taken. You willtrack each touch and contact person from here.Once you compile a comprehensive list, youneed to allocate portions of the resulting dealto each one – including count, pipeline, revenue,profit, and so on. This is where things can gettricky, so refer to our best practice guidelines:Allocation MethodologiesBefore you allocate your revenues acrossmultiple programs and people, you need todecide how to weight each touch point – if at all.By Time: You may want to weight some touchesover others based on when they occurred inrelation to the action that delivered value. Thisassumption is especially true for programs thathappen immediately before the key behavior.For example, the fact the prospect attended lastweek’s webinar may have more to do with thembecoming a lead than the white paper theydownloaded and trade show they attended12 months ago.By Role: You may give more weight to programsthat touched the key decision maker than thoseaffecting other influencers. Just be sure yourweighting matches your business realities – aCEO shouldn’t be weighted more heavily thana Manager if he or she has little impact on thedeal.By Program Type: Some marketers will chooseto weight certain types of touches more heavilythan others, based on the level of engagement.For example, attending a two-hour seminar mayhave more impact than a simple website visit.However, be careful not to give more weight tomore expensive programs just because they costmore – that opens you up to other executivesquestioning your assumptions.Part5:ProgramMeasurementPROS AND CONS OF ATTRIBUTION ACROSS MULTIPLE PROGRAMS AND PEOPLEProsIncorporates nurturing touches as well as leadgenerationEspecially useful for long revenue cycles withmany touchesFocuses on all contacts associated with a deal,not just the first ConsRequires assumptions that can add bias to theanalysisImportant to find any possible “hidden”contributors, including online and sales activityLacks insight into synergy of tactics, nocorrelations or connectionsRisk of over-crediting low impact touch points,especially if you weight all touches equallyMETHODTHREEEXAMPLE OF ATTRIBUTING ACROSSMULTIPLE PROGRAMS AND PEOPLEAssume a deal worth $100,000 recently closed.Three people were involved in the deal:Person A attended Trade Show 1 and Seminar 2.Person B attended Trade Show 1 only.Person C was sent Direct Mail 1 and clicked tothe website.In this scenario, you might give $50K credit to TradeShow 1, $25K to Seminar 2, and $25K to Direct Mail 1.
45© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementAccount AnalyzerEdit me and clone meAnalyzer ActionsNewAccount Analyzer Publish SettingsView: Score Mode Account: Acme IncAcme IncJoe Smith (8)Nancy Jones (12)Phil McCloud (4)Frank Johnston (3)Freddie Rainbow (1)Harold Scotsman (0)Jamal Tucker (0)Add more peopleto this opportunitylike a consultantChecking box includestheir history – theseare people attachedto the account but notthe optyTime Axis (By first touch for any lead “checked” to last)8070605040302010Program : WebinarCost per Lead: $21Success: ?Web ActivityInterestingMomentStar = Role in OptyAbility to right click ona name and add a roleto an opty right hereActivityLoggedOptyCreatedPrint PDFDefaultStandard ReportsLead ReportsLeads by CampaignLeads by MonthEmail ReportsCampaign ReportsCompany ReportsWeb Page ReportsRevenue Cycle AnalyticsExample ReportsMy ModelsAnalyzersSuccess Path AnalyzerComparison AnalyzerOpportunity AnalyzerProgram AnalyzerContribution AnalyzerBatting Average AnalyzAgainst Score or Against theModel as the LINE dimensionThe first step in attribution across multipleprograms and people is to track all thesignificant touches – including programs,online activity, sales activity, etc. – that affectall the relevant contacts associated with anopportunity. Once you have that, you need toallocate the value of the opportunity to eachof the touches.METHODTHREEWHEN YOU ASSUME YOU MAKE AN ASS OUTOF U AND MEAssumptions may be necessary when usingmulti-touch attribution, but they inherently adda subjective element to any ROI analysis. So nomatter what allocation assumptions you make, besure you can defend them in front of your executiveleadership and board – otherwise you risk hurtingthe credibility of the entire analysis.This is a screenshot of the Marketo Influencer Analyzer. You cansee every time an opportunity touches a contact.
46© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementTEST AND CONTROL GROUPSA great way to measure the true impactof a particular marketing program is to testthe effectiveness of that initiative against awell-formed control group by comparing thetwo groups’ results. Of course, this means youneed to plan your programs to be testablefrom the get-go.Almost anything can be measured usingproper test design, but it’s prohibitivelyexpensive to test everything.Putting it to practiceWith test and control groups, you need toapply the program or treatment that youwant to measure to one component of yourtarget buyer group, and not to anotherhomogeneous part of that group. All otherfactors being equal, you’ll be able to attributeany difference in buyer behavior between thetwo groups to the particular program.Say, for example, that you want to measurethe impact of one of your brand advertisingcampaigns on target awareness. One potentialapproach would be to split your market intotwo equal geographic parts, and spend twiceas much on one group than the other. Youcan compare the behaviors of these twomarket segments to analyze your campaignseffectiveness – did you experience moregrowth in direct and branded search from thegeography with more spending? Assumingall other marketing and sales influencers onthese two groups were the same, you cancredit any difference in traffic growth to yourbrand advertising spend.Source: Lenskold GroupMETHODFOURBaselineincludesallothermarketingandnon-marketing25002000150010005000 1 2 3 4 5 6 7 8 9 10 11 12ControlgroupadjustedtotreatmentgroupsizeOutcomeUnitsTimePeriodBaseline Campaign
47© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementTest designThe outcome metric (what you measure) canbe anything: revenue, profit, leads, searchtraffic, conversion rates, average selling price,etc. – or all of them. This is good in situationswhere it may be hard to see the impact of theprogram on things like revenue.You can also test almost anything, including:Programs and tactics. Did that particularwebinar have an impact?Messages. Which message and/or copyresonated the most with you target audience?Contact frequency. How often should wesend an email?Spending levels. What happens if we doubleinvestment in display advertising?It’s also possible to measure combinationsof touches rather than just single touches.This is a great way to test lead nurturingtacks – allowing you to test and measure theeffectiveness of one entire lead nurturingtrack versus another rather than individualemails, etc. Should you want to test multiplecampaigns at one time, you can also usemultivariate testing methodologies.The importance of statisticalsignificanceYou don’t need to go overboard, butyou do need to make sure the differencebetween your control and test groups isstatistically significant in comparison withaverage standard deviations. Eighty percentconfidence should be good enough – we’re nottalking about drug testing or other things thatrequire 99% confidence.For more on testing statistics, see Marketo’sThe Ultimate Guide to Test Statistics.ANOTHER OPTION: PRE-POST TESTINGA common, much less rigorous form of testing isto compare your results before your marketingprogram to your results after – or to project whatthe outcomes WOULD have looked like without thetouch, based on historical trends.Pro: This approach doesn’t give all the credit to themarketing touch since it assumes you would havesome existing sales without it. No one wants to bethe brunt of the joke that says, “If results are up,marketing gets credit. If results are down, it mustbe something else.”Cons: It’s difficult to account for seasonal or cyclicaleffects. Pre-Post testing doesn’t have a rigorouscontrol group in which all other factors are the same.Other factors – such as the economy, sales initiatives,and other marketing programs – can still influencethe results.Pre-post testing can give you directional informationabout program effectiveness, but since it can’teliminate non-marketing factors, it’s an estimateat best.PROS AND CONS OF TEST AND CONTROL GROUPSProsMore sophisticated and analytical –reveals the true impact of a marketingprogramCan measure almost any impact onalmost anything with the right testRelatively low cost if you can design adecent control groupConsFocused on specific tactics – can’treport on effectiveness of all programsAlmost everything can be tested, butit’s prohibitively expensive to testeverythingOnly works when you’ve incorporatedvariance to support programmeasurementMETHODFOUR
48© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementFULL MARKET MIX MODELINGMarket Mix Modeling (MMM) shows howsales volume outcomes are dependent onvarious independent marketing touchesand other non-marketing factors by usingstatistical techniques, such as regression. Only3% of B2B marketers currently use this modelto measure marketing ROI.Here’s a sample statistical equation(albeit an extremely simplified example):Company X makes $165M in revenue.Company X spends:$5M on search advertising.$5M on display advertising.$10M on trade shows.Company X’s marketing mix modelmight have an equation like this:Sales=125M+3.0*ℎ+2.0*Display+1.5*Trade ShowThis equation shows that, withoutMarketing, Company X would havemade $125M in sales. And of the $40M inrevenue generated by marketing:• Search advertising gets creditfor 3x5=$15M• Display advertising gets creditfor 2x5=$10M• Trade shows receive creditfor 1.5x10=$15M(MMM)aking it your ownAs you might imagine after seeing thisexample, the selection of your independentvariables can be a complicated affair – andarguably involves as much art as it doesscience. You’re likely to find that you’ll expendthe most of your resources – both in time andmoney – in collecting your data, not analyzing it.Regardless, make sure you drill down tothe science of your own MMM equation byincorporating all factors that might impactyour output. Possible factors include:• Pricing• Promotion/advertising• Product• Place• Distribution• Sales• Competitive moves• The economy• And so on…PROS AND CONS OF MARKET MIX MODELINGProsVery accurateMeasures the impact of allprograms – and all externalfactors as wellGives insight into programeffectiveness and efficiencyConsNeeds lots of data; canbe costly to collect all therequired historical dataRequires sophisticatedanalytical skillsFocus on short-termsales changes canundervalue longer-termbrand building activitiesMETHODFIVE
49© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementPROGRAM-SPECIFIC METRICS – WHATYOU SHOULD MEASURE AND TRACKWhile CMOs should be using methodslike attribution and market mix modelingto determine program effectiveness andcontribution, campaign- and program-specificmetrics should not be ignored. While lessrelevant to the CEO, these will be earlyindicators of market changes, and will helptrack growth so program managers can ensureproper campaign mix.This list may represent only some of theprograms you run; it’s important to captureinformation across your marketing mix. Hereare a few metrics you may want to track ona regular basis, organized by program type:Email Metrics Unsubscribe rateBounce rateOpen rateClick-through rateWebinar Metrics Attendee rateDrop-off rateEngagement rateEvent MetricsRegistrationAttendeesSatisfactionSocial Media MetricsGross viewsConnectionsMentionsActivityEngagementConversionsSentimentCommunications MetricsNo of press releasesNo of interviewsNo of press eventsVolume of coverageShare of voiceWebsite MetricsViews/VisitorsUnique ViewsBacklinksConversionsBlog MetricsPostsSubscribersViews/VisitorsUnique visitorsSocial sharesOnline AdImpressionsCost Per Click (CPC)Cost Per Thousand Views (CPM)Cost Per Conversion (CPCCost Per Action (CPA)Direct MailEyes OnDelivery RateResponse RateCost Per ConversionCustomer MetricsChurn RateCustomer Lifetime ValueShare of WalletCustomer Engagement
50© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart5:ProgramMeasurementCONCLUSION: PROGRAMMEASUREMENT APPLIEDIt is no small task to maneuver through thevarious program measurement models andmethodologies that are available to you – andif you’re among the 20% of B2B marketerswho don’t yet measure the ROI of theirmarketing programs, then getting starting mayseem like a daunting prospect. But before youget too overwhelmed, remember that:You’re not alone on the learning curve.According to a recent MMA/Forrester/ANAstudy, 87% of senior marketers did not feelconfident in their ability to impact the salesforecast of their programs. Said differently,this means you have the ability to snaga competitive advantage over 87% ofyour competition!Quality trumps quantity. You’ll benefityour company and improve your marketingprograms more with a few fine-tunedmeasurements than a handful of inaccurate,inconclusive metrics. Start in small, bite-sizedchunks, and go from there.What you put in is what you’ll get out.When you strategically invest your time andfinancial resources in developing a marketingmeasurement model, you position yourselffor future success. You’ll optimize youroverall program mix and prune individualtop-performing programs to increase companysales, profits and market share. Who doesn’twant that kind of reputation?
51© 2011 Marketo, Inc. All rights reserved.Definitive Guide to Marketing Metrics and AnalyticsPart6:MarketingForecasting