Essential Metrics for B-to-B Direct Marketing
Measurement is a hot topic for marketers today. Everyone is under pressure to demonstrate results, deliver value to their firms and justify budgets.
Fortunately, direct marketers always have been measurement-oriented. Our philosophical roots are in metrics and ROI. We set up all our campaigns to be measurable, and we test incessantly—at least on the consumer side.
But in B-to-B, DMers have more trouble with measurement, due often to the transaction’s complexity and the sales cycle’s length. Salespeople don’t want to be bothered reporting back to marketing about sales results. And when selling through channel partners, resellers or retailers, sales figures frequently are unavailable anyway.
Even more challenging to B-to-B marketers is the problem of multiple touches. A campaign might involved five e-mails, three letters, a Webinar, an executive conference invitation, a golf outing and four sales calls. How can you ever determine which touches were essential to the sale, or which had the most impact? It’s a rare firm that has the patience and discipline to set up controlled experiments to test all the variables involved. Despite these difficulties, business DMers muddle through with fortitude and enthusiasm, thanks to a focus on a few key metrics that are fairly simple to gather and analyze. Well…not simple, exactly. But at least straightforward.
For B-to-B marketers who are selling directly to retain current customers, the metrics are very similar to those used by consumer DMers: cost per order, average order size, lifetime value and so forth. The differences appear most dramatically in lead generation.
Response Rate
For direct marketers, response rates are fairly easy to capture through a variety of media by using a key code, a unique landing page or an 800 number.
The problem with using response rates as a metric is that they doesn’t tell you much about a campaign’s effectiveness. There are simply too many variables involved: list, offer, creative—you know the drill. So when your bosses focus excessively on response, it’s your job to explain what a relatively meaningless variable it is, and direct them to more useful metrics like cost per lead.
Cost per Lead
Perhaps the most fundamental metric in business marketing communications, cost per lead is calculated by dividing campaign cost by the number of leads resulting from the campaign. Sounds easy, right? If only. The conundrum is the denominator: Should you divide by campaign inquiries or qualified leads?
In B-to-B lead generation the true test of a marketing campaign’s worth is if it provides the sales organization with qualified leads. It’s these leads that improve sales force productivity, reduce cold calling, and increase the amount of time salespeople can spend in front of prospects who are actually in the market. So for some marketers, dividing by the number of qualified leads is very meaningful.
For others, however, it’s important to assess campaign results on the front end. This helps you understand your ability to get prospects to express an initial interest in your product or service.
The bottom line? Either approach is valid. Just make sure you’re being consistent over time, so you can compare campaigns, keep an eye on trends, and avoid the problem of comparing apples and oranges. You also can keep track of two metrics, cost per inquiry and cost per qualified lead.
Inquiry-to-Lead Conversion Rate
The rate by which inquiries convert to qualified leads is a function of two factors: the quality of the initial inquiry and the precision of the qualification criteria. This latter factor is likely to be fairly stable over time. Qualification criteria are developed in concert with sales management, and define the characteristics of a prospect that will allow the sales force to work the lead effectively.
But as a marketer, your life is run by how good that first inquiry happens to be. Are you working with a new list? Is the offer too generous? Any number of variables can affect the quality of campaign inquiries. The conversion rate becomes an early warning signal that refinements may be needed. Just don’t forget that you also may need some tweaks in the qualification criteria, especially as you shift among products and audiences.
Lead-to-Sales Conversion Rate
At this point, the sales force is on the hook to close business and convert your leads to revenue. At what rate will they do it? Here’s where the life of a B-to-B direct marketer becomes dicey. If the lead-to-sales rate declines, who’s responsible? Is sales falling down on the job, or did marketing deliver inferior leads? This metric can shed some light on this age-old debate.
Metrics Across the Sales Pipeline
Hugh Macfarlane, author of “The Leaky Funnel: Earn More Customers by Aligning Sales and Marketing to the Way Businesses Buy,” identifies additional metrics that marketers may consider tracking. These kick in after the lead has been passed to sales, and provide more insight into the lead’s ability to drive revenue.
Sales-qualified leads. The percent of leads a sales organization is willing to accept and work on. Despite marketing’s best effort to ensure a lead is qualified before passing it on to sales, some will be deemed unworthy of sales attention. A typical reason for sales rejection: “We were already in that account.”
First meetings. The percentage of sales-qualified leads that result in a meeting or similar concrete action.
Proposals. Sales needs to make an offer that can be accepted or rejected. What percent of your first meetings resulted in some sort of proposal being made?
Closed deals. The percentage of sales offers that were accepted or closed.
Proxy Metrics
In many B-to-B environments, the revenue payoff can take months, even years. What if you need to assess campaign productivity before the sales cycle has ended?
Consider applying proxy metrics to your campaign results. National Semiconductor’s senior manager of Web business marketing Robert Reneau assigns an estimated dollar value to each interim campaign outcome, long before the activity results in a sale. When a customer downloads a piece of collateral, for example, National credits the campaign with $1,000. A product sample request? That’s $5,000. A lead entered into the sales force automation system earns $50,000.
These numbers may seem arbitrary, but over time National has found that they correlate with actual sales results. For managers, proxy metrics allow early comparison of campaign productivity by product or business unit, and mid-course corrections where needed.
Ruth P. Stevens ([email protected]) consults on customer acquisition and retention, and teaches marketing to graduate students at Columbia Business School. She is the author of “The DMA Lead Generation Handbook” and “Trade Show and Event Marketing.”
