Which Marketing Metrics Matter?

The ability to measure is a sure sign of a quality organization. As marketing technology permits access more data, the gap between excellent marketing organizations and those deficient will widen — defined, in part, between those that measure well and those that do not.

To have a bigger impact on the business, marketing executives must learn which metrics matter – and to whom.  When marketers get swamped with data, they often report the wrong things to the wrong people. As one CEO told me, “The day I care about how many clicks our Web site gets is the day I lose my job!”

Three Levels of Metrics
IDC’s Hierarchy of Marketing Metrics describes the business context of what marketing measures
and reports. It parses metrics into three categories that correspond to the types of decisions made at various organizational levels and highlights the links between them. The three categories are:

  • Corporate-level metrics: Used at the highest level of the company to manage company productivity and performance as a whole.
  • Operational-level metrics: Used to manage marketing resources and asset productivity, forecast the performance results of core marketing processes, and diagnose the “red” areas on the quarterly business review (QBR) charts.
  • Execution-level metrics: Root metrics produced by marketing tactics; used to manage and optimize the marketing tactics and to coalesce to produce operational-level metrics.

Managing the Business vs. Managing Programs
Magic happens when marketing executives grasp the critical difference between operational-level metrics and execution-level metrics. Both are critical, but for different reasons. Execution-level metrics measure the results of marketing programs. They are used for optimization (did we increase conversion rates?), for testing (did emails with this color outperform?), and for customer behavior analysis (what offer should come next?).  Execution-level metrics are also those that form the basis for operational-level metrics.

Operational-level metrics map the inner workings of marketing into the language of business. Each major function in a company (finance, marketing, HR, R&D) is a specialty area with its own private language. Converting each function into “business speak” by using metrics ensures that the company executives can collaborate to run the business as a whole.

Making connections between the inner workings of marketing as described by execution-level metrics and the operational metrics needed to run the business is hard. Calculating an operational-level metric requires inputs from multiple execution-level metrics, sometimes as many as 30! However, this mapping is the only way to tie the tactics of marketing to things that matter to the corporation’s productivity (profits) and performance (revenue and market share).

Data offers an opportunity for marketing to have a greater impact on the company’s goals and therefore greater power within the organization. To realize this opportunity, marketing leaders must invest in the skills, discipline, and tools needed to master data at both the execution level and the operational level.

 

8 Essential KPI’s for the Intersection of Marketing and Sales

Conversations between sales and marketing improve when marketing generates data on the state of joint processes such as lead management.  But companies who are serious about orchestrating sales and marketing in a modern go-to-marketing model need more than these execution-level metrics. At the intersection of sales and marketing, senior executives need operational-level investment, resource allocation, and performance metrics.

Tech marketers have done a great job of growing the range of measurement dashboards within their management tool box.  These reports provide data about process execution and are primarily driven from automation such as CRM, email marketing, and web analytics. The data in these reports can answer important questions such as how many leads were produced and what really happened to them? This data can be extremely useful when talking to sales.  Replacing hearsay, gut feelings, and assumptions with accurate data results in a much more credible and actionable conversation.

Operational Insight Drives Strategy
 

While this kind of data is valuable at an execution level, it isn’t the kind that drives strategic decisions. Senior management needs to know how to invest their most powerful resources – money and people – to get the best results. For this task, they need operational key performance indicators (KPIs) that answer questions such as what are my people really doing and where is my money deployed. Just as important, they need context around this data in order to understand its meaning and highlight what to change.

Comparison benchmarks serve as excellent insight into the meaning of operational-level KPIs. IDC has produced such operational-level scorecards for many years for each function separately – for marketing (IDC’s Marketing Performance Scorecard) and for sales (IDC’s Sales Productivity Scorecard). These scorecards are based on detailed investment data from over 100 tech companies. IDC parses leaders from laggards, mines for best practice nuggets, and combines this information with insights drawn from scores of interviews, interactions, surveys and the IDC teams’ deep practitioner experience.

Introducing the Customer Creation Scorecard: Operational KPI’s for the Intersection of Sales and Marketing
 

However, operational benchmarks have been lacking for companies who are serious about orchestrating the collaboration between sales and marketing within a more modern go-to-market model.  For this initiative, senior executives need to look at the joint investments in sales and marketing.

Recently, IDC introduced the Customer Creation Scorecard – eight operational KPI’s leading companies should add to their dashboard. The eight are organized into three categories: investment, staff efficiency, and productivity levers.

Here are the aggregate level benchmarks for your 2012-2013 planning processes:

  1. Investment: Sales + marketing budget ratio = 10.6% of revenue is spent on sales and marketing combined
  2. Investment: Sales to marketing ratio = 4:1
  3. Investment: Marketing investment per total sales headcount = $40K to $70K
  4. Staff efficiency: Quota bearing headcount to field marketing ratio = 32:1
  5. Staff efficiency: Program to people KPI = 27% of all sales and marketing investment is spent on programs and the remainder on people
  6. Productivity levers: Operations staff percentage = 4.7% of all sales and marketing staff are in sales operations or marketing operations roles
  7. Productivity levers:  Sales enablement score = 47 out of 100 is the index that IDC has developed for the technology industry based upon detailed quantitative and qualitative research
  8. Productivity levers:  Lead management score = 52 out of 100 is the index that IDC has developed for the technology industry based upon detailed quantitative and qualitative research

IDC finds that these benchmarks vary significantly depending on attributes such as go-to-market model, company size, and industry sector.   IDC’s also provides guidance around these KPI’s.  For example, IDC recommends that companies measure sales and marketing costs jointly to better control overall expenses (this includes “shadow” marketing investments where sales teams use their own funds to conduct marketing activities).

For more information on the Customer Creation Scorecard, IDC insight on what your KPI ranges should be and what to do about it contact me or anyone on IDC’s Executive Advisory Group team.