B2B Marketing ROI … and other Pointless Metrics

There, I said it.  Actually, those of you who know me have most likely heard me say B2B Marketing ROI is meaningless on more than a few occasions.   Don’t get me wrong… ROI can be useful, but really more so for companies with very short B2B sales cycles.   However, when the product you are selling is complex, with a long sales cycle, and many touches to influencers and decision makers, tracing ROI back to a specific marketing effort naturally becomes much more difficult to compute. 

What’s a B2B marketer to do… assign ROI to the first touch, the last touch, divide it amongst all the touches? 
The answer is none of the above. 

A better metric than “actual” ROI, is anticipated or “projected” ROI. To dial in on this metric you must have a lead grading schema in place and have a conservative estimate from sales on what the sale or conversion ratio will be on A leads vs B leads over the length of the typical sales cycle. 

With an agreed upon conversion ratio of A and B leads to actual sales, you can now project sales based on the number of A and B leads in the funnel.  Nurturing leads to the status of A or B takes some time, but arguably not as long as it takes to make the sale.   With some simple trending and response analysis, marketing can easily identify some common touches, sources, messaging and sequencing that converted A and B leads have in common.  This in turn should enable a B2B marketing team to adjust fire earlier and with a higher degree of confidence than waiting to analyze actual ROI among a much smaller sample size, and after a longer time span where more -- and harder to measure -- variables may contribute to sales and no-sales.

In a nutshell, if you have a long sales cycle. with multiple touches to multiple people at target companies, you’ll be much better served by focusing on the net number of A and B leads you can deliver to sales vs trying to compute actual marketing ROI on sales.   This concentration on cost per A and B lead brings into focus some other bogus metrics:

Cost Per Lead:  
Who cares... especially when the majority of leads are graded C or worse.  Cost per A and B quality lead is a much better measure of B2B marketing effectiveness.

Cost Per Click:
Most of you who are seeing the typical capture ratio of Google and other Banner sponsorships below 1% already know cost per click is worthless without knowing the capture ratio of A and B leads from these sources.

Response and Open Rates: 
Without the A and B lead qualifier, these rates could conceivable relate to D and F quality leads.

Average Sales Cycle:

This is meaningless if the sales team is sifting through leads of differing quality.   The average sales cycle should start when a truly “sales-ready” lead is delivered to sales.    Once this base-line is established, a better metric is average length of time from a “B” lead to an “A” lead.  Best-practice based lead nurturing combined with tailored alerts to the sales team should shorten the length of time it takes a B lead to become an A lead.  Continued triggering of alerts in the later stages of the sales cycle should also help accelerate the time to close a deal.

Average Annual Attrition Rate: 
Clients leave for a reason.  Know why each and every time so you can remedy the root cause.  Without breaking this down by the top causes, don’t expect to do anything about the average annual attrition rate.

Comments

[Ben Bradley]

I agree that measuring B2B lead generation can be pointless ... especially if you are trying to quantify the exact contribution of a single tactic to the overall lead generation mix.

However, the exercise of measuring something forces you to define the things that you value and expect from that thing.

It forces your team to reach an understanding of the metrics that are expected from each piece of creative or from each tactic you produce.

I think much of the stress about measurement stems from the idea that the measurement method needs to be bulletproof.

It doesn’t. If you execute a tactic and you realize you are measuring the wrong thing or if you are not measuring things that matter, recognize it quickly and adapt until you settle on a definition of the things that matter most.

I also think that different mixes of tactics can be measured. If we bump PR activity, do we get more or less leads? Does the overall quality of leads improve? What about direct mail?

What does our marketing engine need to to be hitting on all pistons? Tweaking the mix reveals how overlapping tactics impact each other.

It all comes back to simply caring enough to think about measurement that makes measurement valuable.

In other words, caring enough about your tactical mix to assign and validate measurement is often more important than the measurement itself.

Is this an exact science? Nope. Far from it. But is all this extra effort worth it? Absolutely.

[SFGreg]

Instead of cost per lead or number of leads, how about measuring success with a metric such as, How much progress did you make last month building new, multi-part lead nurturing campaigns that will begin to show a payoff in leads and revenue starting six months from now?