As marketers, we often find ourselves in the position of validating our existence. “What has marketing done for the business? How much sales growth is the result of marketing efforts? Is marketing investing in the right initiatives?” So we dig into the numbers, hoping to find the insights we need to assure ourselves—and our team, sales colleagues, and maybe even the CEO—that we are on the right track. The trouble is that we are all drowning in a sea of marketing and sales data (thanks in part to the Martech boom that began in 2011) without clear direction on which calculations matter most. And of course none of us—especially those of us in startup mode—have an unlimited amount of time to devote to daily marketing analytics.
I’ve had the interesting opportunity to reflect on meaningful metrics both from my position as VP of Marketing at a large enterprise software company and most recently as a marketing consultant. My work as a consultant has allowed me to step back and really analyze what clients need to know about their own performance to continually improve.
This post aims to share what I’ve found to be the most critical marketing metrics to track for your business. I’ve divided the list into metrics for marketing leaders vs metrics that matter most to your CEO. Yes, they are different. The insights you need to run your marketing team effectively can be quite different from the information your C-suite is requesting from you.
A few caveats before we get started:
- The metrics shared here are intended for B2B SAAS companies, but could potentially be applied to other business models.
- Every business is different. There will undoubtably be unique metrics you need to track based on your market, sales model, organizational maturity, etc. that can and should be added or substituted for the KPIs I list here.
- This list is not inclusive of every granular metric most marketers will want to track on a weekly—even daily—basis for specific channels like social media, Google Ads, email, etc. Rather, this list is intended to uncover strategic metrics that will drive decision making and investment.
Now let’s dive into the metrics that matter.
Metrics for Marketing Leaders
- Organic Traffic Percentage. This is such a simple metric to calculate but one I find to be incredibly important when assessing the health of your website—the cornerstone of your marketing efforts. To calculate, divide the number of sessions from organic traffic by the total number of sessions in the same time period, and then multiple by 100. This KPI is an important indicator of how well your SEO strategy is working—including content, keywords, and technical site performance. I recommend measuring your organic traffic percentage at least monthly. Based on research conducted by HubSpot, the benchmark for B2B companies is 33%.
- Cost per Lead by Source. Every marketer should know how much they are spending to acquire leads from each of their sources—i.e. organic search, paid search, email marketing, trade shows, etc. You can calculate this KPI by dividing your marketing budget per source by the number of marketing-sourced leads produced in the same time period per source. This metric combines Leads by Source and Cost per Lead to reveal which marketing channels are producing the highest volume of leads at the lowest cost to the business—which can help instruct future spending. There are limitations to this metric. It will not tell you the long-term impact of these leads on pipeline, or if one source produces higher converting leads than another. But it will give you a sense of lead volume and cost across your different marketing channels. I recommend measuring this metric at least quarterly.
- Marketing Sourced Pipeline by Source. This metric is a good companion to Cost per Lead by Source and will help address some of the previous metric’s limitations. To calculate, map all pipeline sourced by a marketing activity to its source. If you have well-integrated marketing automation and CRM systems in place, this should be an easy report to run. If not, this calculation will have to be done manually and may be time consuming depending on the volume/velocity of your open leads. Marketing Sourced Pipeline by Source tells you which marketing channels are producing the greatest revenue potential among open opportunities that first engaged with the business through a marketing activity. Compare this KPI to Cost per Lead by Source for contradictions that can yield insights. For example, your Google Ads campaigns might be yielding a high volume of leads at a low per-lead cost, but if these leads aren’t converting into sourced pipeline, you may want to shift dollars into activities that yield more revenue potential. I recommend measuring this metric at least quarterly.
- Lead to Customer Conversion Rate. This metric is a good indicator of the quality of leads marketing is sending to sales. When conversion rates drop, it may be time to evaluate demand generation campaigns or put a lead scoring system in place. To calculate, divide the number of marketing sourced customers by the number of all Marketing Qualified Leads (MQLs) during a given time period. I recommend working closely with Sales to determine how you want to measure conversion rates for products with longer sales cycles that won’t convert within the quarter. This metric can also be misleading if a large wave of leads is produced in the last week of the quarter that will not have time to convert—making your conversion rate look low. To address both of these potential issues, measure rolling cohorts over time based on average sales cycle, rather than by strict fiscal-year quarters. Benchmarks vary by industry, but most reports put the B2B Lead to Customer Conversion Rate around 5-7%.
- Sales Lift from Upgrade Campaigns. While I’ve largely concentrated on demand generation metrics in the list above, this metric measures marketing’s impact on the existing customer base. To calculate, run a report on the revenue resulting from customer participation in a marketing upgrade campaign activity (such as a webinar) by any contact on the account within a 90-day period. This KPI measures the impact of marketing campaigns on driving existing customers to upgrade to a new pricing tier, adding additional seats, or licensing additional products. I recommend testing the impact of your upgrade campaign by running an A/B test with a control group. You can get more sophisticated with your multi-variant testing over time.
Marketing Metrics for CEOs
- Marketing Sourced Customer Percentage. This ratio shows what percentage of your new business is driven by marketing efforts. To calculate, divide the number of new customers that originated from a marketing activity by the total number of customers won in the same time period. I recommend measuring quarterly. Based on HubSpot research, benchmarks for a B2B inside sales model range anywhere from 40-80%.
- Marketing Sourced Revenue. This metric is calculated as the revenue generated by new customers that originated from a marketing activity divided by the total new revenue in the same time period. Like the Marketing Sourced Customer Percentage above, this ratio also shows marketing’s contribution to the business—by comparing these companion metrics, you can get a better picture of both marketing and sales performance. For example, if the marketing-sourced revenue ratio is less than the customer percentage ratio, then the leads originating from marketing activities are less profitable than those originating from sales—or vise versa if the ratio is greater. This is valuable information to a Chief Revenue Officer who is trying to determine how funding across departments should be allocated. I recommend measuring this metric at least quarterly.
- Time to Payback Customer Acquisition Cost (CAC). First, let’s start with the CAC. The CAC is calculated as all sales and marketing program costs and staff compensation divided by the number of new customers in that same time period. The CAC is one of the most common and critical metrics used by Boards or acquiring companies to determine go-to-market efficiency. You may want to break it out by marketing and sales to reveal discrepancies. Now to calculate the Time to Payback CAC, simply divide the CAC by the average monthly revenue per month of a new customer—which will give you the number of months required to achieve payback. The Time to Payback CAC measures the amount of time needed to recover customer acquisition investment and become profitable. I recommend measuring this metric at least quarterly. Based on HubSpot research, the benchmark is 12 months.
- Customer Lifetime Value (CLV). I have seen CLV equations that require a PhD in mathematics. How you calculate CLV will depend on your business model. At the end of the day, you’re just trying to understand what an average customer is worth to you over the entire extent of your relationship with that customer. To keep calculations simple, multiple the revenue expected from a customer over a 12-month period by the gross margin percentage, and then divide by the percent churn expected in the same time period. The value in knowing your CLV is amplified by comparing it to your CAC. A CLV:CAC ratio that’s too low may mean poor sales & marketing ROI; a CLV:CAC ratio that’s too high may mean you are not spending enough on sales & marketing. I recommend measuring this metric at least annually. Benchmarks vary greatly based on average deal size, gross margin, and churn rate.
- Marketing ROI. Again, there are many ways to calculate ROI, but a good option for SAAS companies is to subtract the CAC from the CLV, and then divide by the CAC. Simply put, this metric tells you what you should expect to receive in return for every dollar you invest in marketing and sales. I recommend measuring this metric at least annually. Most benchmark reports put this metric at a 5:1 ratio for return vs investment.
Wrap Up & Next Steps
I hope this post helped inspire your next data analysis or meeting with the C-suite. The power of metrics—either these I’ve listed here or your own curated list—is that objective data helps marketing prove our value to the business and continually improve our own performance.
Any metrics I missed above that inspire your marketing strategy? Please share your thoughts by commenting below or sending me an email at email@example.com. I look forward to hearing from you!