1. Thetive i efinideD GuMarketingMetrics &Analyticsmarketo.com

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Definitive Guide to Marketing Metrics and AnalyticsContentsWhy Should I Read the Definitive Guide Part 5: Program Measurement 37to Marketing Metrics and Analytics?3 Why Measuring Marketing Programs is Difficult 38 Method One: Single Attribution (First Touch / Last Touch) 40Part 1: Measurement Builds Respect and Accountability4 Method Two: Single Attribution withWhy Now Is The Time For Marketing Metrics7 Revenue Cycle Projections 41 Method Three: Attribute across Multiple ProgramsPart 2: Planning for Marketing ROI 9 and People44Step One: Establish Goals and ROI Estimates Up-Front11 Method Four: Test and Control Groups46Step Two: Design Programs to Be Measurable15 Method Five: Full Market Mix Modeling 48Step Three: Focus on the Decisions Program specific metrics what you shouldthat Improve Marketing16 measure and track 49 Conclusion: Program Measurement Applied 50Part 3: A Framework for Measurement 17Where Metrics Go Wrong19 Part 6: Marketing Forecasting 51The Right Metrics 21 Part 7: Dashboards55Part 4: Revenue Analytics 23Define the Revenue Cycle24 Part 8: Implementation People, Process,Revenue Cycle Metrics That Matter 29 and Technology59Revenue Performance Management Metrics33 People and Culture60 Process 62 Technology64 Conclusion65 Key Lessons to Improve your Performance, Profitability, and Credibility with Marketing Metrics and Analytics66 2011 Marketo, Inc. All rights reserved. 2 3. Definitive Guide to Marketing Metrics and AnalyticsWhy Should I Read the Definitive Guideto Marketing Metrics and Analytics?Do you know what profits a 10% increase This guide will help you do just that. Wein your marketing budget would generate?will help you answer key questions like:According to the Lenskold Groups 2010 B2B What are the most important marketing5 QUESTIONS TO GUIDE YOURLead Generation Marketing ROI Study, themetrics for me to use?MEASUREMENT INSIGHTmost common answer to this question is1. What are your specific objectives for marketing How can I measure my various marketingI Dont Know.investment and how will you connect yourprograms impact on revenue and profit?Forty-four percent (44%) of qualifiedinvestments to incremental revenue and profit? How can I best communicate marketingmarketers have no idea what a 10% budget2. What impact would a 10% change in yourresults with my executive team and board?increase could do for their companies. marketing budget (up or down) have on your Which personnel, procedural, and profits and margins over the next year?If you fit into this 44%, you will experiencecultural changes need to occur within my The next three years? Five?difficulty protecting your budget. In fact, youllorganization so I can implement marketinglikely find yourself asking the question the other3. Compared to relevant benchmarks (historical,measurement?way around: What will happen now that mycompetitive, marketplace), how effective are youbudget has been decreased by 10%? And many more at converting marketing investment into revenueYou cant expect your organization to place valueand profit growth?The bottom line of any business is the topon something youre unable to quantify. line: revenue and faster growth!4. Which are appropriate targets for improving revenue leverage (defined as dollars of profitSo lets get started. over dollars of marketing and sales spend) over the next few years? Which initiatives will get you there?5. What questions do you still need to answer with regard to your knowledge of the return on marketing investments? What are you going to do to answer them?(Source: MarketingNPV) 2011 Marketo, Inc. All rights reserved. 3 4. Definitive Guide to Marketing Metrics and AnalyticsPart 1: MeasurementBuilds Respect andAccountability 2011 Marketo, Inc. All rights reserved. 4 5. Definitive Guide to Marketing Metrics and AnalyticsPart 1: Measurement Builds Respectand AccountabilityMarketing suffers from a crisis of credibility. How much profit was made last quarterTypically, executives outside the marketing versus this quarter?department perceive that marketing exists How much revenue and profit do youCUT PROGRAMS TO BUILD CREDIBILITYsolely to support sales, or that it is an arts andforecast for the next quarter?According to Marketo CEO Phil Fernandez, the #1crafts function that throws parties and churnsout color brochures. Either way, marketing Why are you confident in the above answers? thing a marketer can to do to build credibility withoften does not command the respect it the CEO is to offer some cuts to marketing programs.deserves. Soft metrics like brand awareness, GRP, Show that you are de-funding things youimpressions, organic search rankings andpreviously did that either A) didnt work; B) werentWhat can marketers do so they are seenreach are important but only to the extentaligned with evolving company goals; or C) seemas part of a machine that drives revenuethat they quantifiably connect to hardless important now than other initiatives. This helpsand profits? How can marketers take moremetrics like pipeline, revenue, and profit. demonstrate a strong sense that you are managing acontrol over the revenue process, build the portfolio of investments, and that you are willing torespect of their organizational peers, andOf course, marketers must track and measurethe impact of all key marketing activities, make hard choices with company money.earn a seat at the revenue table?both hard and soft. But keep all but themost critical metrics internal to marketing.Use metrics that matter toBy speaking the same quantitative languagethe CEO and CFO as the CEOs and CFOs, marketers will betterIts no secret that CEOs and boards dontcommunicate marketings value and impact tocare about the open rate of your last emailthe executive suite.Seventy-six percent (76%) of B2B marketing professionals agreecampaign or your last press releases numberof views. See Part 4 for more on how to measure or strongly agree that their ability to track marketing ROI givesIn todays economy, CEOs and CFOsthe right revenue metrics.marketing more respect. Source: Forrester Researchcare about growing revenue and profits: How much faster are we growing nowversus last quarter? Last year? 2011 Marketo, Inc. All rights reserved. 5 6. Definitive Guide to Marketing Metrics and AnalyticsPart 1: Measurement Builds Respectand AccountabilityKnow the impact of each When you talk about marketing spending,Marketing has always been a grueling and competitive sport notmarketing investmentother executives think of costs and profitunlike running a marathon. With the changes in the buying process,If you cant confidently identify which parts ofloss. When you talk about future results, in media and technology, and managing expectations, its likeyour marketing truly deliver financial returns, they think of revenue and growth.running a marathon as the ground shifts beneath your feet. Whatmarketings impact and influence will continueto be limited across your company. This willTo formulate accurate forecasts, saleswas already difficult is becoming increasingly difficult. If youreand marketing must sit together at thegoing to do it without measurement, its like running a marathon,not only hurt marketings influence and revenue table.credibility; it can also prevent your company in an earthquake, blindfolded. David Raab, Author, Winning thefrom making the right strategic investments toSee Part 6 for more on Marketing Forecasting. Marketing Measurement Marathonimprove results over time.See Part 5 for more on measuring the impactMake hard business cases for spendingWith its forecast in place, marketing must thenof various marketing programs.make a hard business case for the resourcesit needs to deliver the results it has promised.Forecast results, not spendingThis requires knowing what it will take inForecasting is perhaps the single mostmoney, time, and effort to acquire newimportant thing marketers can do to changequalified leads and nurture those leads untilthe perception that marketing is a cost center. they are ready to talk with sales.In the same way that you cant drive quicklyMarketers who use this type of rigorousif you rely only on your rear-view mirror, youmethodology are able to frame their budgetscant be an effective marketer if you onlyin terms of investments, not costs, and arereport what has happened in the past. The better able to justify and defend their budgets.best marketers forecast the results they expectin the future and quantify their forecasts interms of leads, pipeline, and revenue. 2011 Marketo, Inc. All rights reserved. 6 7. Definitive Guide to Marketing Metrics and AnalyticsPart 1: Measurement Builds Respectand AccountabilityAs the function that owns the relationshipCEOs Grade MarketingWHY NOW IS THE TIME FOR with these early stage prospects, Marketing 67% of CEOs give their marketing departments a B or CMARKETING METRICS 20%now is responsible for a much greater portionof the revenue cycle than ever before.The way that prospects research and buysolutions today has been forever transformedBut with great power comes greatby the abundance of information available onresponsibility.Not sure the marketing programswebsites and social networks, and this in turn made a dierence, but they probablyEnter Marketing Metrics. had some impact even thoughfuels a significant change in the way marketingcontribution wasnt measuredand sales teams must work and workCEO ratings of marketings performance47%together to drive revenue.directly rise and fall with marketings abilityto quantify how their campaigns and programsBecause they have ready access to deliver value in line with company revenueinformation, buyers resist engaging with salesobjectives. It is more important than ever foruntil much later in the buying process. marketing to link the impact of its efforts andMarketing programs madeThis presents an incredible opportunity financial investments to revenue and profit, a dierence but contributionfor marketing to reinvent itself as a coreand establish a true process for marketing ROI wasnt measuredpart of the companys revenue engine. in their companies.35%70% of the buying process is now complete Marketing programs made an by the time a prospect is ready to engage withimpact and marketing was able to sales. SiriusDecisions, Inc. document their contributionSource: VisionEdge Marketing & Marketo 2010 MarketingPerformance Measurement and Management Survey of423 executives 2011 Marketo, Inc. All rights reserved. 7 8. Definitive Guide to Marketing Metrics and AnalyticsPart 1: Measurement Builds Respectand AccountabilityTHE 5 STAGES OF MARKETING ACCOUNTABILITY1. Denial 3. Confusion Inevitably, this will reinforce the perceptionMarketing is an art, not a science. It cant beI know I should measure marketing results,that marketing is a cost center, not a revenue-measured. The results will come; trust me! but I just dont know how.producing asset.At first, the CMO may deny the need to be The CMO knows that marketing accountabilityaccountable for results. Being stuck in thisis inevitable, but the path to achieve it5. Accountabilitystage often leads to marketings isolation from remains hidden. Basic metrics such as lead Revenue starts with marketing.other departments and executives. source tracking and cost-per-lead are put in At this stage, marketing truly finds its placeplace, but there is no holistic understandingin front of the revenue pipeline where2. Fear of how marketing activities are impacting keymarketing stops being a cost center andWhat if my marketing activities dont impact bottom line metrics. starts justifying marketing expenditures asthe bottom line? Will I lose my job?investments in revenue and growth. This isTaking on accountability can be scary,4. Self-Promotionwhen the CMO can act, and talk, like a trueespecially when you dont yet know howHey, come look at all these chartsC-level executive, measuring and forecastingwell (or poorly) your department is doing.and graphs! marketings impact on metrics that matter toMarketing accountability is a double-edged the CEO and CFO. This is when marketing trulyIn a desperate attempt to appear accountable,sword, shining a bright light on weakearns a seat at the revenue table.marketing measures everything that can beperformance as well as good performance.(easily) measured from website page viewsGetting to this final stage of marketingSome CMOs may be tempted to avoid to press release downloads to search engineaccountability is difficult for any organization.accountability just to avoid facing which rankings. These CMOs proudly display their It requires top-level commitment, discipline,category they are really in.results and claim marketing accountability.and investment in the right systems and tools.However, important as these metrics mayIt can also require a rethinking of marketingbe, they lack an explicit connection to hard incentives and compensation. The journeymetrics like pipeline, revenue, and profit. Themay not be easy, but the resultsin termsresult is a focus on soft marketing KPIs instead of peer respect and impact on profitsareof hard revenue growth, on short-term ROIclearly worth it for any marketing team.over long-term marketing accountability. 2011 Marketo, Inc. All rights reserved.8 9. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning forMarketing ROI 2011 Marketo, Inc. All rights reserved. 9 10. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROIMany marketers think of marketing ROI asThe fastest-growing companies measure Marketing ROI Management Processreporting on the outcome of their programs, ROI to find not just what works, but whatoften in the form of a set of reports they have works better. They focus on improving ROI, 1 Best Assumptionsto deliver monthly. But the best companiesnot just proving ROI.Process begins with ROIrecognize that reporting for reportings sakescenarios early in thePlanning for marketing ROI involvesplanning cycle to shapeis less important than the decisions thosethree main activities: objectives, strategiesROI Scenariosreports enable to improve profits. and tactics.1. Establishing targets and ROIThis is the difference between backwards- estimates up-frontlooking measurement and decision-focusedmanagement. 2. Designing programs to be measurable 2aObjectives Strategy Tactical Plan Impact & Measurements areContributionIts important to plan your programs with ROI 3. Focusing on the decisions that will prioritized rst andin mind from the outset. When you quantify improve marketing then planned concurrentthe outcome you expect from each marketing to campaign plans, so tests Measurement PlanOnly with discipline, planning, and aand variations can be Test Variations in Planinvestment, you can then determine exactly incorporated tohow you will measure the program againstclosed-loop process will you be able toimprove precision.those goals and position yourself to achieveimprove your marketing ROI. Measurementsthem.2b Measurements capture lift, diagnose weaknesses, and generate insight to improve eectiveness. 3 ROI Measurement ROI results guide changes to strategies and tactics in the next cycle of marketing, based on which have the History to Guide higher ROI potential. Next Campaign (Source: Lenskold Group) 2011 Marketo, Inc. All rights reserved.10 11. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEPONEESTABLISH GOALS AND Benefits of ROI goalsWith ROI goals in place, the CFO will see notROI ESTIMATES UP-FRONTonly the cost that goes out the door, but also SHOULD MARKETING HAVEexactly what benefit is expected to come fromTO JUSTIFY ITSELF?When planning any marketing investment, that cost. As a result, he or she will be muchyour first step is to quantify your expectedmore likely to support the investment. According to consultancy MarketingNPV, the twooutcomes. All too often, marketers planmost common questions asked by non-marketingprograms and commit their budgets without Dont worry too much about the fact that executives are:establishing a solid set of expectations aboutyou are making estimates. As long as they arewhat impact they expect the program toclearly labeled, the CFO will understand that1. Does our marketing generate any value forhave. This is a terrible habit, and is one of any plan requires numerous assumptions. shareholders?the underlying reasons why other executives,Just the fact that the marketer is walking 2. How do we know that marketing really works?especially CFOs, question marketing in the door with a spreadsheet of numbersestablishes that marketing is speaking the Unfortunately, these questions immediately putinvestments.CFOs language. That in itself is highly effective marketing on the defensive and inevitably causeThe solution is to assign up-front goals, for building credibility.marketers to conduct time-consuming and expensivebenchmarks and KPIs for each marketing analysis to justify their business function. This resultsprogram.Modeling your ROI goals will also help you to: in a significant insight opportunity cost since all the resources that could have been directed towardsThe first step of any program plan should be to Identify the key profit drivers that most the pursuit of true insight are instead diverted todefine your objectives and then pick measurable affect the model and ultimately your profits. proving that marketing works.metrics to support those goals. Imagine if each Create what if scenarios to see howPO came with an ROI plan with best case, worstchanging parameters may vary the results Most companies will find that profits increase whencase, and expected case scenario outcomes and impact profitability. constrained analytics resources are focused on thethat answered the basic (but critical) question of key decisions that will improve profits rather thanwhat do we expect will happen in exchange for Establish the targets you will use to comparejustifying marketings existence.this money we want to spend? actual results. 2011 Marketo, Inc. All rights reserved.11 12. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEPONEHow to build models for ROI goals Heres an example ROI calculation, courtesyNot every program will have a complete ROIof Lenskold Group. Note how it captures allcalculation. Some programs will have softer expenses including all variable costs on thegoals, such as number of attendees at anleft, and focused on incremental gross marginevent, but as always, the closer you can get to on the right.measuring profits and ROI, the better you willjustify the investment. Basic ROI CalculationEven the simplest ROI goals should include:MARKETING EXPENSES (EXCLUDING OFFER COSTS) MARKETING IMPACT QUANTITY How many incremental sales are generatedCampaign Development$25,000Target Reached 27,000 How much revenue each sale producesMass Media$100,000 % Convert to Sale2.2% The gross margin percentage The total marketing and sales investmentDirect Marketing$40,000Incremental Sales594Total Marketing Budget$165,000 Net Present Value per New Sale $875MARKETING STAFF EXPENSEIncremental Revenue$519,750Number of Staff Days6.25Average 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 InvestmentReturn (i.e., Net Profit)$29,693Return / Marketing InvestmentROI17.7%(Source: Lenskold Group) 2011 Marketo, Inc. All rights reserved.12 13. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEPONELenskold 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) 2011 Marketo, Inc. All rights reserved. 13 14. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEPONEUnderstand Best Case, Worst Case,and Risks ScenariosThe best plans show a range of targets, INCORPORATE ALLincluding expected case, best case, and worst RELEVANT EXPENSEScase scenarios. This lets you protect yourcredibility in case things go sour, and shows Often, marketing ROI models show ridiculously highan understanding of how changes to variousreturns because they dont incorporate all relevantassumptions might impact the results. variable and semi-variable costs. Examples include:It also shows that you understand the possible Staff costs within marketingrisks that would hurt your programs ROI. Its Travel expensesoften a good idea to run your assumptions and The cost of sales time spent following up on leadstargets by the most skeptical and pessimisticmember of your team. Let them find all theTake, for example, a program that generates a lotways the program could fail and then, where of leads but does not include the cost of the timepossible, put in place contingencies to managesales wastes on pursuing leads that dont convert.the risks. This may include things directly Its quite possible that a program that at first appearsrelated to the program, but it can also include profitable will show a negative ROI once thesebroad changes to the business environment expenses are included.and economy. By proactively identifyingand managing risks up-front, you lessen thelikelihood that other executives will shootbullets at your feet later on. 2011 Marketo, Inc. All rights reserved.14 15. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEPTWODESIGN PROGRAMS TO BE Data CollectionA key part of planning for measurement isMEASURABLEsimply tracking the appropriate attributes MEASUREMENT COSTS MONEY for all your marketing programs (and their SO SPEND WISELYThe best marketing programs havevariants). This can include target audience,intentional measurement strategies plannedmessage, channel, offer, investment level, and Exercise discernment.in advance. So as part of planning anyany other relevant attributes. While its possible to measure just about anythingprogram, you need to answer these threein marketing, it is impossible (and unprofitable!) toquestions:Most companies do not begin this process measure everything.early enough in their lifecycle, and they pay What will you measure?for it later. Even if you dont use the data Begin with the end in mind. When will you measure?right away, it will become invaluable down As Jim Lenskold says, Prioritize when and How will you measure? the road when you attempt any of the morewhat to measure based on the answers you needsophisticated approaches towards measuring to make decisions that will improve your profits.In almost every case, you will need toprogram effectiveness. These attributes canInvest in Marketing R&D.take specific steps to make your marketingbe stored in anything from your marketingThis is a term used by consultant Jim Sterneprograms measurable. This often includesautomation system to a simple spreadsheet(@jimsterne). Just like the overall corporation investssetting up test and control groups or varying hosted on a share drive what matters the in R&D to generate future profits, marketing shouldyour spending levels across markets tomost is that you start to build the history as do the same to generate similar insights to optimizemeasure relative impact. Without variance early as possible. future profits. In other words, sometimes it is OK toin your marketing, you may not be able torun a marketing program where the primary goal isuse modeling to tease apart the incrementalto learn whether something works, or how to makeimpact of your marketing programs andit work better. A good rule of thumb is that allocatingimprove your marketing precision and mix. It is more important to periodically capture 10% of your budget to testing and experimentationSee Section 5 for more on measuring ROIpotentially high-impact insights than to frequently is usually a wise investment.using test and control groups. measure less important outcomes simply for reporting purposes. Jim Lenskold, Lenskold Group 2011 Marketo, Inc. All rights reserved.15 16. Definitive Guide to Marketing Metrics and AnalyticsPart 2: Planning for Marketing ROISTEP THREEFOCUS ON THE DECISIONSYour highest-ROI decisions will often flowfrom strategic questions about offers,THAT IMPROVE MARKETINGmessages, target segments and geographies MARKETING REPORTING: JUST BECAUSEYoull deliver the best ROI and reap thenot simply pass/fail assessments of specific YOU CAN DOESNT MEAN YOU SHOULDprograms or tactics. You can always evolvehighest corollary benefits when you move past your mix of tactics, but even the best tacticsbackward-looking measurement to forward- Perhaps youve heard the adage that you canapplied across the wrong strategies wontlooking decisions. torture the data until it confesses? What this meansproduce a fraction of your desired results. is its important not to measure just what you can,This is the difference between marketingIn other words, marketers should focus but what you can ACT on. Think about where youmeasurement and marketing management. beyond what is and start measuring want to end up before you begin, and strategize fromIt is the difference between data, intelligence,what if. there. Ask yourself, What question am I trying toand knowledge. answer, and what would I do if the answer wereEach measurement should seek to augmentX or Y?An integral part of your planning process your understanding of how to make theis identifying up-front what decisions youprogram better and align it with yourneed to make to drive company profits, andcompanys strategic objectives. This way,then building your measurements to captureeven if you dont meet all of your programinformation that facilitates these decisions. goals, you can still figure out why and how toThis means you must measure things not just improve the program. This is almost alwaysbecause they are measurable but because better than launching a new program youthey will guide you towards the decisions dont yet know anything about.you need to make to improve companyprofitability.Isnt it time to swap your over-the-shoulderstance, which prevents you from movingforward efficiently, for strategic, objective-driven momentum? 2011 Marketo, Inc. All rights reserved. 16 17. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Frameworkfor Measurement 2011 Marketo, Inc. All rights reserved. 17 18. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Framework for MeasurementCEOs and boards dont care about 99% of There are many other areas of marketingthe metrics that marketers track but they metrics that are not addressed directly in thisdo care about revenue and profit growth.Guide. These include: CUSTOMER SATISFACTION AND NET PROMOTER SCORESThere are two primary categories of financial Customer Profitability: Lifetime value of anFor many companies, a key metric is their Net Promoter Score (NPS),metrics that directly affect revenue and profits: incremental customera customer loyalty metric based on customer answers to the question, Revenue Metrics: Marketings aggregateWeb Analytics: Measures Web visibility to how likely are you to refer us to friend or colleague? According toimpact on company revenue target audiences against potential audiences, answers on a 0-to-10 rating scale, customers are grouped into threeand compares against industry and competitorcategories: Marketing Program Performance Metrics:benchmarksPromoters (9-10)The incremental contribution of individualmarketing programsPublic Relations: Measures views and impact Enthusiastic customers who will fuel growth with repeat and referralof corporate communications initiatives business.Passives (7-8)Product Performance: ComparativelyCurrent customers susceptible to competitor offerings and thus have ameasures the total sales and margins ofneutral brand impact.individual productsDetractors (0-6)Brand Preference and Health: AssessesCustomers who voiced dissatisfaction and harmbrand preference in relation to preference forthe brand.competing brandsTo calculate a brands NPS, use the following equation:Sales Tool Usage: Measures which productNPS = [% of Promoters] [% of Detractors]marketing materials are being used the mostA companys Net Promoter Score has been shown to have positiveAnd many other areas correlations with faster growth and profits. Marketos own researchThis is not to imply that these metrics are not provides support for measuring customer satisfaction: high-growthimportant for marketers to track just thatcompanies are more likely than low-growth companies to incorporatethey are likely to be less relevant to financially- customer satisfaction into their marketing executives compensation.focused executives outside of marketing. 2011 Marketo, Inc. All rights reserved.18 19. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Framework for MeasurementWHERE METRICS GO WRONGMeasuring what is easy Activity, not resultsWhen it is difficult to measure revenue andMarketing activity is easy to see and measureThere are literally hundreds of marketing profit, marketers often end up using metrics (costs going out the door), but marketingmetrics to choose from, and almost allthat stand in for those numbers. This canresults are hard to measure. In contrast, salesof them measure something of value. The be OK in some situations, but it raises theactivity is hard to measure, but sales resultsproblem is that most of them relate very little question in the mind of fellow executives(revenue coming in) are easy to measure. Is itto the metrics that concern a CFO, CEO andwhether those metrics accurately reflect the any wonder, then, that sales tends to get theboard member. financial metrics they really want to know credit for revenue, but marketing is perceivedabout. This forces the marketer to justify as a cost center?Of course, its okay to track some of these the relationship and can put a strain onmetrics internally within your department marketings credibility. Efficiency instead of effectivenessif they will help you make better marketingIn a related point, Kathryn Roy of Precisiondecisions. But its best to avoid sharing themFocusing on quantity, not qualityThinking suggests paying attention to thewith other executives unless youve previouslyAccording to a 2010 Lenskold Group / emediadifference between effectiveness metricsestablished why they matter.Lead Generation Marketing ROI Study, the (doing the right things) and efficiency metricsnumber one metric used by lead generation(doing possibly the wrong things well).Vanity metricsmarketers is lead quantity, whereas barely halfFor example, having a packed event is noToo often, marketers rely on feel goodof marketers measure lead quality. Focusinggood if its full of all the wrong people.measurements to justify their marketing on quantity without also measuring quality Effectiveness convinces sales, finance andspend. Instead of pursuing metrics that can lead to programs that look good initiallysenior management that marketing deliversmeasure business outcomes and improve but dont deliver profits. (To take this idea to quantifiable value. Efficiency metrics are likelymarketing performance and profitability, they the extreme, the phone book is an abundant to produce questions from the CFO and otheropt for metrics that sound good and impress source of leads if you only measure quantity,financially-oriented executives; they will be nopeople. Some common examples includenot quality.)defense against efforts to prune your budgetpress release impressions, Facebook Likes, in difficult times.and names gathered at trade shows. 2011 Marketo, Inc. All rights reserved.19 20. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Framework for MeasurementCost metricsWhat went wrong here? The marketerThe worst kinds of metrics to use are cost performed well, but he made the mistakemetrics because they frame marketing asof not connecting his marketing results to FINANCIAL OUTCOMES OVER ACTIVITYa cost center. If you only talk about cost andbottom-line metrics that mattered to the CEO.budgets, then no doubt others will associate Look at the following (sanitized) letter from a CFO to a CMO for anBy framing his results in terms of costs, he illustration of why financial outcomes are more important than activity,your activities with cost, too. perpetuated the perception that marketingcost and quantity.Lets take a look at a real-life example: is a cost center. Within this context, its onlynatural that the CEO would reduce costs andWe seem to be purchasing GRPs and click-thrus at a lower cost than Recently, a marketer improved his leadmost other companies, but what value is a GRP to us? How do wereallocate the extra budget to a revenue quality and simultaneously reduced hisknow that GRPs have any value at all for us, separate from what others cost-per-lead to $10. Thrilled with hisgenerating department such as sales.are willing to pay for them? How much more/less would we sell if we results, he went to the CEO to ask forpurchased several hundred more/less GRPs? more money to spend on this highly I think we need to look beyond these efficiency metrics and find a successful program. way to compare all these options on the basis of effectiveness. We Did the marketer get his budget?need a way to reasonably relate our expenses to the actual impact No. The CEO decided the reduced lead costMARKETING CHAMPIONSthey have on the business, not just on the reach and frequency we create amongst prospective customers. Until we can do this, Im not meant marketing could deliver the same Marketers have to be clear about what marketing comfortable supporting further purchases of advertising exposure results with fewer dollars and so she cutproduces. Sales sells, but what does marketing either online or offline the marketing budget and used the extraproduce? You might answer brand awareness, funds to hire new sales people. It seems to me that, if we put some of our best minds on the challenge,leads, and sales tools. But these answers we could create a series of test markets using different levels ofdisempower the marketing function. The best advertising exposure (including none) in different markets which mightanswer is that marketing generates cash flow in actually give us some better sense of the payback on our marketingthe short term and identifies sources for future expenditures.cash flow in the long term. My experience tells me that we are not approaching our marketingRoy Young and Allen Weiss, MarketingProfs programs with enough emphasis on learning how to increase the payback, and are at best just getting better at spending less to achieve the same results. (Source: MarketingNPV) 2011 Marketo, Inc. All rights reserved. 20 21. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Framework for MeasurementTHE RIGHT METRICS The Time DimensionSet GoalsLenskold Group points out that there areAs discussed in Section 3, make sure you setIf activity, cost, and quantity arent thealso different types of metrics in each goals for each of the key metrics you chooseright metrics to use, what are? Anythingcategory, based on time:to track. Your goals will put your performancethat speaks to the CFOs areas of primary Past: How did we do?into context, and help you and your fellowconcern: revenue, margin, profit, cash flow,Present: How are we doing?executives see if your results are on par withROI, shareholder value in other words, your Future: How will we do? whats expected or better, or worse.companys ability to generate more profitsand faster growth than your competitors.These questions break into threecorresponding metric categories:This is what Roy Young and Allen Weissof MarketingProfs call speaking the financialBusiness Performance These are the most common reporting metrics thatlanguage of business.Metrics & KPIs you share with fellow executives, often on a dashboard.Financial Metrics How did we do last week? Last month? They are mostly BACKWARDS looking metrics.Most B2B marketers should focus on twoLast quarter?categories of financial metrics:Diagnostic Metrics These metrics deliver insight into your CURRENTWhat is working, and what can work better? performance, often by comparing against historical dataRevenue Metrics Marketings aggregatetrends and competitor and marketplace benchmarks.impact on company revenue Leading Indicators These metrics help you look FORWARD and forecastMarketing Program The incremental How will we be doing in the future?future results. (See Section 6, Forecasting.)Performance Metrics contribution of individualmarketing programs 2011 Marketo, Inc. All rights reserved.21 22. Definitive Guide to Marketing Metrics and AnalyticsPart 3: A Framework for MeasurementThe Right Metrics: Summary BUSINESS PERFORMANCEDIAGNOSTIC METRICSLEADING INDICATORSPAUL ALBRIGHT, MARKETOS CHIEF REVENUE METRICS & KPISPRESENT: WHAT FUTURE: HOW WILLOFFICER, SHARES HIS SECRETS FOR PAST: HOW DID WE DO?IS WORKING? WE BE DOING?MEASUREMENT SUCCESS:Revenue Metrics Aggregate impact Lead generation Conversion rate Size of prospect1. Choose no more five key metrics. Its hard toon company revenue versus targetsversus trend or database sizeput organizational focus on more than that, so Cycle timebenchmark Marketingchoose wisely. contribution forecast 2. Measure success versus goals for those metricsfor every campaign, every channel, every salesMarketing Program Incremental Investment Response rates Expected rep/region, every product, etc.Performance Metrics contribution of Pipeline contribution Lift over control contribution forecastindividual marketing Program ROI group 3. Show trends for those metrics over time thatprogramsway you can immediately see where you areimproving and where you are not.Profit Per Customer Lifetime value of an Average selling price Investment to Retention rates 4. Put on a dashboard for everyone to see so thereincremental customer acquire Products per is always a succinct view of what marketing is a customercustomer trying to achieve, and where you stand. Marginal cost to Net promoter scores serve 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. 2011 Marketo, Inc. All rights reserved.22 23. Definitive Guide to Marketing Metrics and AnalyticsPart 4: RevenueAnalytics 2011 Marketo, Inc. All rights reserved. 23 24. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsPerhaps the most important metrics fora prospects movement from one stage tobuilding marketings credibility are thethe next, they create the foundation for ametrics that show marketings aggregate comprehensive set of robust revenue metrics. A NEW BREED: REVENUE MARKETERSimpact on revenue.MethodologyTo thrive in todays changing marketplace, marketingSome old-fashioned marketers say that Defining the stages of the revenue cycle must begin to operate and sound more like sales.marketing isnt responsible for revenue. We requires a new revenue methodology.As demand generation agency The Pedowitz Groupdisagree. In todays online and social world,says, marketers must manage a predictable, reliableTraditional sales methodologies such as SPINmarketing is responsible for up to 70% offunnel with a plan that ultimately produces higherSelling and Miller Heiman provide standardthe entire buying process which meansvalue leads and maximizes revenue.benchmarks and best practices for the salesmarketing and sales need to rethink howfunction, and these sales methodologies form Todays successful marketer has evolved beyondthey work (and work together) to generatethe basis for the best sales analytics. At their the language of traditional marketing. The Pedowitzrevenue. This new way of working requirescore, these methodologies break the sales cycleGroup coined the term Revenue Marketernew metrics and analytics.into stages and allow the sales executive to in 2007 to describe this new breed of marketer.We call this new measurement processtrack movement through the stages which in Debbie Qaqish, Chief Revenue Marketing OfficerRevenue Cycle Analytics, and this new turn lets them answer key questions such asof The Pedowitz Group, says that these Revenueway of working Revenue Performance how long is the sales cycle? and how much Marketers use the language of business to describeManagement.pipeline coverage will help me hit my targetstheir contributions with metrics that measurefor this quarter? pipeline, opportunities, and revenue. They measureTraditionally, marketers have not appliedwhat matters to a CxO and talk about these metricsDEFINE THE REVENUE CYCLEthe same level of rigor to their portions of in terms their executive leadership can understand and evaluate.the revenue cycle. This is unfortunate, sinceThe first step in Revenue Cycle Analytics isit is the only way marketers will be ableAt any given moment, a Revenue Marketer knowsto define the stages of the revenue cycle,to understand how their activities movehow their key metrics stack up against their targets,starting with potential buyer awareness and prospects forward. and what they plan to do to improve their results.moving through marketing and sales to closedThat is why the foundation of Revenue Cyclebusiness and beyond. When marketing and Analytics rests in clearly defined stages andsales collaborate to formally define each stage,clear rules for how prospects move throughas well as the business rules that determinethe stages over time. 2011 Marketo, Inc. All rights reserved.24 25. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsExample: Marketos Revenue CycleDifferent companies will make different decisions about whatAWARENESSdefinitions best suit their revenue cycles, but as a case studyexample, here are Marketos definitions. The methodologybehind these definitions is in part responsible for Marketoshighly efficient revenue engine and fast growth.All NamesMarketingSTAGE DEFINITION EngagedAll Names This is the entry point for everyone. We have purposely called this stageNames because these individuals are not leads when they first enter thefunnel.Prospect &Engaged This definition applies to those who show real engagement, such as attending Recycleda webinar, downloading content from our website, or clicking an email thatwe send. At this stage, we filter out the names that havent engaged with usas a brand, such as those who simply threw business cards into our bowl atNurturinga trade show. Database MQL LeadSDRProspectThis stage refers to qualified prospects that could buy one day, but arent 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 is Sales SALLeadthe first metric that we report to fellow executives and the board.Opportunity CustomerLeadThese marketing-qualified leads are prospects that show enough behavioralSalesengagement or buying intent that we want to call them.SQLSales LeadThese leads have been qualified as sales-ready by a sales qualification rep.Opportunity The sales team has accepted these leads and added them to the pipeline asa deal they are actively working.CustomerWe have closed these deals and won new customer business. (These customersare then passed on to a new revenue cycle for upsell and retention.) 2011 Marketo, Inc. All rights reserved.25 26. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsThree Categories of StagesYour company may use only a few revenuestages, or you may model something moresophisticated like Marketos model but nomatter which specific stages you choose, thereare only three categories of stages:CATEGORYDEFINITION / TIMELINEEXAMPLEInventory StagesAn inventory stage is a holding pool where leads and Common examples of inventory stages include the prospectaccounts can sit for an unlimited amount of time until theyre pool, where leads are nurtured until they are sales-ready;ready to move to another stage.active opportunities are not yet committed to a certain timeline.Gate Stages A gate stage is a simple qualification check with no timeAssume your company only wants leads from companies ofdimension. $100+ million in revenue. In the gate stage, a lead will move forward if his/her company has more than $100 million in revenue. If not, the lead is disqualified.SLA StagesSLA stands for service level agreement. These stages denoteWhen a lead is deemed sales-ready, it can becomea defined time period in which a lead must be evaluateda marketing-qualified lead. The appropriate salesbefore moving forward or be eliminated from the process. representative has 14 days to contact the lead and choose to accept the lead, disqualify it, or recycle it back for further nurturing. If a lead stays in this stage for over 14 days, it becomes stale, which can trigger a process that alerts sales management or even reassigns the lead to a different sales rep. 2011 Marketo, Inc. All rights reserved.26 27. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsRevenue Stage Model Best PracticesDetoursDETOUR DISQUALIFIED INACTIVERECYCLED LOSTA best-practice revenue stage model is basedOf course, not all leads follow a linear STAGESon three fundamental principles:success path, so make sure your modelalso defines detour stages to captureSales resources are relatively expensive. To Definition NamesProspects QualifiedLost orleads that are not qualified, or that requireprovide the highest value, sales should not marked aswho are non-leads in deferreda few rounds of nurturing before theyreengage with prospects until prospects are not-in-profile responsiveneed of more opportunitiessales-ready.ready to engage with sales. Sales interactions over the last nurturing(ongoingshould start relatively late in the pipeline, Transition Rules 6 months nurturing)once leads are well qualified, and use lowerAs the final step in formulating your revenuecost channels such as marketing to developstage model, you need to define the businessrelationships with everyone else. rules that govern how and when yourprospects move from one stage to another.No lead left behind. Dont let potentialThis includes how your leads move from thecustomers end up in lead purgatory. traditional success path to various detourImplement SLA stages wherever possiblestages and back again. For example:to ensure your leads either flow forward orare recycled back to marketing. Keep your 1. A person may move from Engaged toinventory stages to a minimum perhaps just Prospect if their company reports annualone in marketing so prospective customersrevenue above $10 million and belongs todont sit idle.one of your target industries.A prospects journey from initial awareness 2. A Prospect may become a Lead when his/to customer is often non-linear. Sometimes her Lead Score exceeds 100 points.leads originally deemed sales-ready are not.3. A Prospect may become InactiveBecause no lead should ever remain stagnantif they dont respond to a campaign or visitin the system, these leads should be recycledyour website in more than six months.back to marketing for nurturing.4. An Inactive Lead may move back to Prospect status if they respond to a new program. 2011 Marketo, Inc. All rights reserved. 27 28. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsExample:Marketos Complete Revenue CycleBelow is Marketos final revenue cycle as BENEFITS BEYOND ANALYTICSshown in the Revenue Cycle Modeler. Youllnote that it includes the success path stage, A revenue cycle model creates a common language the entireas well as detours and transition rules.organization 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 prospects 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. 2011 Marketo, Inc. All rights reserved.28 29. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsREVENUE CYCLE METRICS METRICQUESTIONS IT WILL ANSWEREXAMPLESTHAT MATTERFlow (LeadHow many people entered each stageHow many new prospects were createdWith the model in place, marketers can beginGeneration) in a given period?last month, and how many marketing qualifiedto explore the four key metrics that matter:Are these trending up or down?leads did we pass last week?Flow, Balance, Conversion and Velocity.This is where critical insight can be gainedBalance (Lead How many people are in each How many active prospects do I have in measuring and optimizing marketings Counts) pipeline stage? since the size of my target prospect databaseaggregate impact on revenue.How many accounts?is a key leading indicator of future success?How does that vary by lead type?Are the balances going up or downover time?ConversionWhat is the conversion ratioWhich (if any) of my conversion ratesfrom stage to stage?are trending up or down?Which types of leads havethe best conversion rate?VelocityWhat is the average revenue cycle time? Do certain types of leads move faster throughHow does it break down by stage?the pipeline?How is their speed changing over time? 2011 Marketo, Inc. All rights reserved. 29 30. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsThe larger your flow in any givenstage, the more meaningful thesemetrics become.QUESTION: SHOULD METRICS COUNT PEOPLE,Companies that sell a lot of deals at lowerACCOUNTS OR DOLLARS?price points will find more significance in theirconversion metrics and flow than companies People are the easiest variables to track across thethat sell fewer deals of greater size. But evenentire revenue cycle, but the value of these metricscompanies in the latter scenario will find is limited because revenue usually comes frommeaningful flow and results data at the earlyaccounts, not individuals.stages of their funnel. In this case, digging into Accounts are relatively easy to track for later-stageyour earlier stages can serve as a valid proxy deals, but CRM systems such as salesforce.com makefor marketing ROI. it hard to track accounts for early-stage leads.For example, a company that closes onlyDollars are what we want, but it is difficult toseveral deals per quarter may find it more accurately track revenue until the sales cycle. Also,meaningful than a company closing many if your deal amounts are highly variable (or justdeals to measure marketings results onlarge), some of your marketing activities will showqualified leads generated rather thanwild profits while others will not, based simply onmeasuring closed business especially the whether a deal has closed. Its a bit like playingROI of specific programs.roulette. Given these pros and cons, most companies (including Marketo) find that a mix of these three approaches is best.Here is a screenshot of Marketos 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. 2011 Marketo, Inc. All rights reserved. 30 31. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsExample: Marketos MetricsOpportunities. As discussed above, ourUnderstanding the conversion rates andSDRs apply a very strict filter to what theyvelocities of each stage in your revenuequalify and pass onto the sales team. OurLEAD DEFINITIONS & CONVERSION RATES:cycle will help you better understand and SDRs only pass 7% of all Leads to our AEsAN INTIMATE RELATIONSHIPcommunicate your revenue cycle economics. as Sales Leads but a full 80% of what theypass gets converted to an Opportunity. There will always be a trade-off between how strictlyLets use Marketos actual revenue cycleIts typical for more than one lead to beyou define your leads and the conversion rates youmetrics to illustrate:attached to each Opportunity, so the resulting see as a result. At Marketo, we use behavioral leadPaid Names. As of early 2011, Marketo spendscombined conversion between number ofscoring to determine when a Prospect becomes a~$275,000 a month on various demand leads and number of opportunities is 4%. ThisLead that one of our Sales Development Representa-generation programs to produce 9,500 newmeans an incremental opportunity is worthtives (SDRs) should contact.paid Names each month.about $2,000 in terms of variable demand For Marketo, it is relatively inexpensive for an SDRgeneration investment. to call an incremental lead, but relatively expensiveProspects. About 40% of paid Namesultimately become Prospects, generating New Customers. Finally, Marketo wins about in opportunity cost if we miss out on a potentialof all our Prospects; inbound programs35% of all opportunities (the vast majority of deal. For this reason, Marketo is relatively loosegenerate the remaining . Our average the others are deferred or no decision), so an in what we call a Lead. At the same time, we dontinvestment per paid Prospect is $73, and theincremental customer is worth about $5,800 want to annoy potential customers by calling themaverage for all Prospects is $55. of marginal demand generation investment.too early in the buying cycle. So weve set our scoring thresholds such that about 20% of all newConversion of Prospects to Leads. Typically,This information is invaluable when it comes Prospects become Leads within a short timeframe,20% of our new Prospects become Leads in thetime to set and defend the marketing budget. and about 4% of the active Prospect databasefirst month, and the rest enter our nurturing At Marketo, we set the demand generation becomes a Lead every month.database. Slightly less than half of our Leadsbudget by working backwards from how manycustomers we want to close in future months. But while we incur a relatively low cost on SDRs, itscome from new Prospects, and the rest comeIt also allows us to answer precisely howmuch more expensive when our Account Executivesfrom the nurture database. On average,and when more (or less) budget will impact (AEs) call Sales Leads. Thats why Marketos SDRs4% of the nurture database becomes a Leadrevenue. apply a very strict filter to which Leads they qualifyeach month, and about 10% goes inactive, and pass on to the Sales Team. In fact, our SDRs passmeaning they havent done anything in six only 7% of their Leads to Sales but a full 80% ofmonths. About 40% of Prospects will become those Sales Leads convert to Opportunities.Leads over a two-year period. 2011 Marketo, Inc. All rights reserved.31 32. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsDrilling in by Lead TypeOther examples might include industry,LEAD SOURCE CONVERSION RATIOAVG TRANSITIONFLOWDifferent types of leads will move throughproduct line, or channel source. Drilling in(ALL TYPES) TIME (DAYS)the revenue stages differently; some will by lead type is a great way to make betterhave better conversion rates than others, marketing investment and mix decisions. Not Website 47.77%142465some will convert faster than others. Thatsonly can you parse the differences betweenyour conversion rates, velocities, and your Online Ad 13.87%291736why Revenue Cycle Analytics become evenmore powerful when you can drill into the investments required for each lead type;Trade Show Virtual11.67%541362metrics that matter (balance, flow, conversion, youll also be able to track what is trendingTrade Show14.49%37946velocity) by lead type. up and down.AppExchange 50.88%15464For example, if your leads for a certain source Important Lead Type Variablesor product are converting faster than others, Webinar 17.03%38418 A Lead Type is any specific category ofit may be a sign to invest more in that area. leads that may move through the revenueAlliance36.95%37313 cycle differently. Examples include: PPC_GS_US 43.48%13260 Lead source: Leads generated fromNot Available 26.32%4 234 pay-per-click will usually convert faster than leads from purchased lists. Sponsorship 5.44% 70229Partner 8.82% 55164 Company size: Leads from large enterprises may convert more slowly than SMB leads.Content Syndication 10.04%37133 Division: Whether your divisions are Web Direct30.83%44115 by geography, business unit or both, Organic Google44.84%24113 the leads from each division will likely behave differently.Web Referral51.63%40111Example of revenue cycle metrics by Lead Source. Here, we see Marketos 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. 2011 Marketo, Inc. All rights reserved.32 33. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsREVENUE PERFORMANCEWith an RPM mindset in place, companies With this in mind, here are some additional begin to realize that the most importantmetrics that effective RPM marketers can addMANAGEMENT METRICS marketing metrics are really about salesto their own dashboards: effectiveness. In other words, the mostRevenue Performance Management (RPM) - Average selling price important questions you can answer aboutis a strategy to optimize interactions with- Sales cycle times marketings results are:buyers across the revenue cycle to accelerate- Sales productivitypredictable revenue growth. Because RPM1. What effects are marketings investments - Win ratesis about transforming how marketing andhaving on sales effectiveness and- Time to ramp a new sales repsales work and work together it requires productivity?a new set of metrics that focus not on how 2. How are marketings activities loweringmarketing or sales is performing, but on the the total expense-to-revenue ratio foroverall effectiveness and efficiency of thesales and marketing combined (e.g. how isend-to-end revenue engine. marketing improving the net revenue engineThe best way to measure the overalleffectiveness)?effectiveness of your revenue engine is to When you no longer focus on marketingmeasure total revenue (or bookings, or gross in isolation, but rather on how marketingmargin) generated divided by the total spend impacts sales productivity, you will gainon marketing and sales. This metric, morea much more comprehensive view of yourthan any other, provides an accurate measure activities true ROI.of your revenue engines efficiency. (Total Revenue or Bookings)Revenue Engine Eectiveness =(Total Marketing and Sales Investment) 2011 Marketo, Inc. All rights reserved. 33 34. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsThe Big List of Revenue MetricsIncorporating all these together, heresa broad list of metrics you can choose fromto measure your impact on revenue.FLOW CONVERSION IMPACTINVESTMENT SALES AND RPMOTHER# of New Names % Name to Prospect % of Pipeline Contributed Investment per New Average Selling PriceBalance of Active Prospectsby MarketingNames in key inventory stages# Prospects% Prospect to Marketing- Value of Pipeline Investment per ProspectSales Cycle TimesBalance of Open Qualified Lead Contributed by MarketingOpportunities# Marketing Qualified% Marketing-Qualified% of Wins Contributed byInvestment per Marketing % Reps Making QuotaVelocity / Cycle Time forLeadsLead to Sales-Accepted Marketing Qualified LeadNew Name to Lead Lead# Sales Accepted Leads % Sales-Accepted Lead to Value of RevenueInvestment per Sales Time To Ramp a New Sales Velocity / Cycle Time for OpportunityContributed by MarketingAccepted LeadRepOpportunity to Win# Opportunities% Opportunity to Win Investment per RPM Efficiency = (TotalKey Awareness Metrics:OpportunityRevenue) / (Totalweb traffic, direct/branded Marketing + Salestraffic, social followers, etc. Investment)# WinsInvestment per Win Total Period Revenue vs Quota# Lost Discounts# ChurnPipeline Renewals / Retention 2011 Marketo, Inc. All rights reserved.34 35. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsVariants of Each Metric TRACKING METHOD BENEFITEach metric on the previous table will havemultiple variants depending on how you sliceBy week, month and quarterA regular cadence helps keepand dice them, each of which will frame youroperational focus.metrics in a different context to help youmake better decisions.Trends over timeLooking at your data over timeFor example, you may look at the number helps you see if youre improving.of Marketing-Qualified Leads and conversionrate from Prospect to Lead over time versus Versus goalsThe best marketers set goals (weekly, monthly,goals for each geographic region. and/or quarterly) for all key metrics, andalways track results AND results versus goals.It can be costly and unwieldy to look at toomany variants too frequently, so pick the Versus benchmarks Compare results (e.g. conversion rates) versusnumber of metrics to track in keeping withsimilar companies, as well as versus your ownyour organizations needs.companys historical results.By source Many companies look at lead flow andopportunity creation by source (e.g. salescreated vs. marketing created).By channel, product, region, etc. The more complex your business, the moreimportant it is to track your key metrics on amore granular level. 2011 Marketo, Inc. All rights reserved.35 36. Definitive Guide to Marketing Metrics and AnalyticsPart 4: Revenue AnalyticsExample: Marketos Key RevenueHere are some of the key metrics we track onLead to Opp %Metrics a monthly basis. We track Actual, Target, andSize of Target Prospect DatabaseAt Marketo, we track five key metrics versusActual / Target %. We also track the 12-monthgoals on a weekly basis, and 30 key metrics trend for all these variants over time. Size of Open Opportunity Pipelineversus goals on a monthly/quarterly basis.All Website TrafficDeferred or Lost Opps Branded Traffic Net-Add OppsHere are the key metrics Marketo tracks on (Direct + Marketo Keyword)Won Oppsa weekly basis, as well as the key variants: Blog SubscribersDollar Value1. New Prospects: New Since Last Week, New Facebook Monthly Users Total Demand Generation Month-To-Date, % On-TargetTotal New Prospects Programs Investment2. New Leads: New Since Last Week,Demand Gen Investment Per Prospect New Month-To-Date, % On-Target Total New Leads Demand Gen Investment Per OpportunityNew Target Active Leads3. New Opportunities: New Since Last Week,Target Latent Leads Total Marketing Investment New Month-To-Date, % On-Target Inbound Leads (All Programs + All Headcount)SMB Leads WestTotal Marketing Investment4. Size of Target Prospect Database:Per Opportunity Size today plus trend over 12 months SMB Leads EastEnterprise LeadsTotal Bookings5. Size of Open Opportunity Pipeline: International Leads SMB Size today plus trend over 12 months EnterpriseTotal New Opportunities6. New Business Closed: Month-To-Date,Marketing/SDR OppsChannel vs Quota, % On-TargetSales Outbound Opps InternationalReferral Opps Install Base7. Upsell Business Closed: Month-To-Date, vs Quota, % On-Target SMB Opps West Average Selling PriceSMB Opps East8. Renewals Business Closed: Month-To-Date, Enterprise Opps Average Discount vs Quota, % On-TargetInternational OppsRetention / Churn 2011 Marketo, Inc. All rights reserved. 36 37. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program Measurement 2011 Marketo, Inc. All rights reserved. 37 38. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementWHY MEASURING MARKETING larger companies or more complex purchases,such a committee can involve 21 or morePROGRAMS IS DIFFICULT influencers. Different marketing programs affect DONT GO OVERBOARD ON PROGRAMeach individual differently, so it is a challenge to MEASUREMENTIts easy to ask the question, What kind ofknow which programs have the most impact.results do my programs deliver? However,Marketing measurement should not be aboutdetermining the answer can be very difficult. Extraneous variables. In many cases, factors proving ROI, but improving ROI. Jim Lenskold pointsSome of the key challenges to marketing outside marketings control can significantlyout that marketers tend to overemphasize theirprogram measurement are:impact program results from macro-economic assessments of media and marketing channels, sincetrends to the weather to the quality of thethese align to the budget allocation process and tendKnowing when to measure. The money yousales reps. If revenues increased because theto be visible to the CFO and other executives.invest today will have an uncertain impact at aneconomy improved, can marketers claim theiruncertain point in the future. Last months trade programs delivered better ROI? In the end, the revenue metrics in Part 4 areshow may deliver results next month or perhaps usually more important than program effectivenessMeasuring the contribution that a givenmeasurement.not for two years, but marketers need to decide marketing program has on revenue andwhere to invest their budgets today.profits has been the holy grail of marketingmeasurement ever since John WanamakerMultiple touches. Conventional marketingfamously remarked, Half of the moneywisdom says at least seven touches are needed I spend on advertising is wasted; the troublein order to convert a cold lead into a sale.is, I dont know which half.Whether or not this is the correct number everymarketer knows it takes multiple touches to Perhaps the most common question marketerscreate a customer. This fact makes it difficult toask is, Did this program (trade show, email blast)allocate revenue to any specific touch. deliver results?Multiple influencers. According toThis section is all about how marketers canMarketingSherpa, the average buying committee answer this challenging question and buildfor a five-figure purchase at a mid-sized a sensible framework for measuring thecompany comprises six people. In the case ofeffectiveness of their decisions. 2011 Marketo, Inc. All rights reserved.38 39. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMethods to Measure Marketing Program ROIEach sequential method on this list will giveHow lead generation marketersJust because measuring marketing ROI is hardyou a more accurate view into your customermeasure marketing programs:doesnt mean its impossible. Fortunately,value data but this additional insight comesvarious methods exist to give companies with a corollary rise in cost and complexity. As ainsight into their various programs levels ofresult, most organizations begin the process ofeffectiveness:marketing program measurement with the firstand second methods and begin to experiment 45%with more approaches as they move up the Single Attributionmaturity curve.LESS ACCURATE LESS COST 20%No tracking1. Single Attribution (First Touch / Last Touch)2. Single Attribution with Revenue Cycle Projection21% Attribute Across3. Attribute across Multiple Programs and People Multiple Programs and People 11%4. Test and Control Groups Test and Control5. Full Market Mix ModelingGroupsINCREASED INCREASED 3%INSIGHT COMPLEXITYMarket Mix Modeling (Source: The Lenskold Group / eMedia Lead Generation Marketing ROI study) 2011 Marketo, Inc. All rights reserved.39 40. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program Measurement PROS AND CONS OF SINGLE ATTRIBUTION (FIRST TOUCH / LAST TOUCH) Pros ConsMETHOD ONE Relatively easy implementation and low costDoesnt account for the influence ofsubsequent touches so insights aredirectional at best Provides good insight into the earlySINGLE ATTRIBUTION The most common methodology for tracking thestages of the revenue cycleAttributes too much credit to lead results of marketing programs is to assign all the(FIRST TOUCH / LAST TOUCH) value to the first (or last) program that touched Works well when the majoritygeneration programs and not enoughto nurturing touches or contributions the deal. This usually means allocating the of investments are made in leadfrom sales generation instead of lead nurturing deal to the source of the first person from thatHard to account for quality until the deal company, or to the key person.Gives straightforward insight intocloses; can be skewed by a particularly investment per lead metricslarge deal or long sales cycle Program Analyzer SINGLEDEFINITIONEXAMPLE New Analyzer Settings Print PDF ATTRIBUTION Default First Touch First touch attribution If a company held Program Analyzer Standard ReportsNewAnalyzer SettingsFilter: Driver: Chris, Shonal | Location: San Francisco, New York Print PDF DefaultLead ReportsFilter: Driver: Chris, Shonal | Location: San Francisco, New York Settingsallocates all the value a webinar and to the FIRST programgenerated a Lead thatStandard ReportsX Axis Lead ReportsLeads by Campaign Settings2,000,00,000X Axis that touched theclosed a deal one yearLeads by CampaignG"4.$2,000,00,000Leads by Month Leads by Month G"4.$ deal. Typically this is later, that company Email ReportsEmail Reports Campaign ReportsFrom: 2500To: 8000From: 2500To: 8000 the Lead Source.would give revenue Company Reports Program: Webinar Y AxisCampaign Reports Cost $53,000 Pipeline Dollars Web Page ReportsPipeline Contribution: $10,000 S2)6*)$T"66%#4$Program: WebinarY AxisCompany Reports credit to the initialRevenue Cycle AnalyticsContributing Leads: 45 Tags From: 1000 To: 4500 Example Reports Location: San FranciscoCost $53,000 Pipeline DollarsWeb Page ReportsS2)6*)$T"66%#4$Pipeline Contribution: $10,000 webinar. My Models Program: WebinarBubble Size Analyzers Cost $53,000 M)37)#4$ Revenue Cycle Analytics Pipeline Contribution: $500,000Contributing Leads: 45Success Path AnalyzerContributing Leads: 45Comparison Analyzer Tags From: 400TagsTo: 600 From: 1000 To: 4500Example Reports Last touch attributionIf a Lead becomes Driver: ChrisLocation: San FranciscoOpportunity AnalyzerProgram Analyzer Location: New YorkColor Last TouchMy ModelsProgram: WebinarBubble Size gives revenue credita Prospect afterN-,,)44$M)37)#4$0Contribution AnalyzerAnalyzersBatting Average Analyz 0 Cost $53,000200,000M)37)#4$ 20,3)$ to the LAST program watching a productFrom: 400 To: 6000 Pipeline Contribution: $500,000Success Path AnalyzerContributing Leads: 45Comparison Analyzer Tags Driver: ChrisFrom: 400 To: 600that touched the lead demo, that demoOpportunity Analyzer Location: New YorkColor before the key action would receive revenueProgram AnalyzerN-,,)44$M)37)#4$ was taken.credit, even though a0Contribution Analyzer 0 200,000 sales rep had nurturedBatting Average Analyz 20,3)$ From: 400 To: 6000 the Lead in several other ways. 2011 Marketo, Inc. All rights reserved. 40 41. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD TWOSINGLE ATTRIBUTION WITH Solution: revenue cycle projectionsBy adding revenue cycle projections toREVENUE CYCLE PROJECTIONS a first touch single attribution, you can gain PROS AND CONS OF SINGLE ATTRIBUTIONAn obvious disadvantage of first and lastdeeper insight into the long-term impactsWITH REVENUE CYCLE PROJECTIONof your programs. For example, instead oftouch attribution is that todays marketing waiting to see the actual results of a trade ProsConsinvestments may not pay off for quite someshow, this approach looks at what impacttime, so the ROI of your current marketingthe trade show had at the top of the revenue Focuses on revenue impact Attributes value to leadprograms remains in limbo. of programs, not just top sources without accountingcycle and embellishes that view by estimatingfor the influence of other of the funnelApproaches to marketing ROI measurementsthe trade shows long-term impact based on marketing touchesthat do not properly account for the time-to- historical conversion metrics. Uses estimates to quantify the future value of todays Uses past performance toinvestment payoff can lead to decisions thatIn the example model on the next page, Trade estimate future results, investmentsbias towards short-term gains over building Show 1 occurred a year ago and shows a so cannot incorporatetrue long-term value. This applies across allUses lead quality, notfairly good picture of its returns. In contrast, underlying changesindustries, but its impact is especially acute injust quantity, to evaluateTrade Show 2 just happened last week. With programsRequires that estimatescompanies with considered-purchase products the basic first touch single attribution model,must eventually be backedand long revenue cycles.Trade Show 2 looks as if it has delivered very up with actual resultspoor results. But this is not an apples-to-apples comparison. 2011 Marketo, Inc. All rights reserved. 41 42. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD TWOPROGRAM INVESTMENTDATEALL TOUCHED PROSPECTS LEADSOPPSWINSPIPELINEREVENUETrade Show 1 $18,000Last Year 901 560 207175 $421,082$117,903Trade Show 2 $12,000Last Week 1,012 517 21 1 0 $15,946 $However, 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.PROGRAM INVESTMENTDATEALL TOUCHED PROSPECTS EST. LEADS EST. OPPS EST. WINS EST. PIPELINE EST. REVENUETrade Show 1 $18,000Last Year 901 560 209217 $590,510$161,214Trade Show 2 $12,000Last Week 1,012 517 221187 $663,221$258,656Think 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? 2011 Marketo, Inc. All rights reserved. 42 43. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD TWOMarketo Case Study ExampleMarketo relies mostly on Single Attribution withRevenue Cycle Projection to internally assess its KEY INSIGHTS: COLUMN DEFINITIONS:program results. Below is a summary of someof our recent program results:Inbound leads are by far the highest quality, fastest Sources above the line are programs with variablemoving, and most likely to convert to opportunities.demand generation program investments. ThoseSOURCE PROSPECTS INVESTMENT % LEAD VELOCITY LEAD TO This reflects the fact that our website does notbelow the line are Sources with fixed investments PER PROSPECT(DAYS) OPP INDEX require registration for early-stage content but does only.for buying-oriented content, so any Prospect whoProspects show the total flow (number) of newTrade Show Virtual 3,793 $25.44 17%81 1.0 actually does register on the website is likely to beProspects from each Source.later in their buying process.3rd Party Email toInvestment per Prospect lists the average variableOn the other hand, we meet prospects at everyPromote Content3,302 $34.65 18%43 0.5 investment per Prospect from that Source.stage in the buying process with paid programs.% Lead shows the likelihood that a Prospect fromTrade Show 2,703 $221.3023%61 1.9 Taking all the costs and conversion rates intothat Source will convert to a lead over a 12-monthaccount, virtual trade shows are the best performingtime period.Paid Webinar 1,760 $68.50 21%60 1.0 source; followed by PPC, paid webinars, and usingthird-party email lists to promote our content. Velocity shows the average time it takes a ProspectPay per Click Search 990 $158.1045%42 1.4 from that Source to convert to a Lead.In-person trade shows are not a cost-effective wayto generate new Leads (though they can be useful to Lead to Opp Index shows the relative likelihoodContent Syndication536 $82.84 12%59 0.3 accelerate movement from existing leads). that a Lead from that Source will convert to anOpportunity. (For example, Leads from the websiteOther Paid 208 $187.5013%93 1.3 Content syndication tends to generate very earlyare 2.6 times more likely to turn into Opportunitiesstage Prospects that do not convert.than leads from a virtual trade show.)Website2,87158%27 2.6Sales Prospecting1,88826%46 2.2Partner Co-Marketing 90317%1021.1Other Inbound370100% 19 9.0 2011 Marketo, Inc. All rights reserved. 43 44. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD THREEATTRIBUTE ACROSS MULTIPLE By Time: You may want to weight some touchesover others based on when they occurred inPROGRAMS AND PEOPLE relation to the action that delivered value. This EXAMPLE OF ATTRIBUTING ACROSSassumption is especially true for programs that MULTIPLE PROGRAMS AND PEOPLEThis approach recognizes that it takes multiple happen immediately before the key behavior.touches from multiple people to close a deal, For example, the fact the prospect attended lastAssume a deal worth $100,000 recently closed.and attempts to measure the contribution of weeks webinar may have more to do with themThree people were involved in the deal:each individual touch.becoming a lead than the white paper they Person A attended Trade Show 1 and Seminar 2.How to Track and Analyze Allocationsdownloaded and trade show they attended12 months ago.Person B attended Trade Show 1 only.First things first. Start with the action you areanalyzing (pipeline creation, closed revenue, By Role: You may give more weight to programs Person C was sent Direct Mail 1 and clicked toetc.) and work backwards to identify each that touched the key decision maker than thosethe website.significant touch that affected all of the contacts affecting other influencers. Just be sure yourIn this scenario, you might give $50K credit to Tradeassociated with that particular deal but make weighting matches your business realities a Show 1, $25K to Seminar 2, and $25K to Direct Mail 1.sure you account for only the touches thatCEO shouldnt be weighted more heavily thanoccurred before the action was taken. You willa Manager if he or she has little impact on thetrack each touch and contact person from here.deal.Once you compile a comprehensive list, youBy Program Type: Some marketers will chooseneed to allocate portions of the resulting deal to weight certain types of touches more heavilyPROS AND CONS OF ATTRIBUTION ACROSS MULTIPLE PROGRAMS AND PEOPLEto each one including count, pipeline, revenue, than others, based on the level of engagement.ProsConsprofit, and so on. This is where things can get For example, attending a two-hour seminar maytricky, so refer to our best practice guidelines: Incorporates nurturing touches as well as leadRequires assumptions that can add bias to thehave more impact than a simple website visit. generationanalysisAllocation MethodologiesHowever, be careful not to give more weight tomore expensive programs just because they costEspecially useful for long revenue cycles withImportant to find any possible hiddenBefore you allocate your revenues acrossmany touchescontributors, including online and sales activitymultiple programs and people, you need to more that opens you up to other executivesdecide how to weight each touch point if at all.questioning your assumptions. Focuses on all contacts associated with a deal, Lacks insight into synergy of tactics, nonot just the firstcorrelations or connectionsRisk of over-crediting low impact touch points,especially if you weight all touches equally 2011 Marketo, Inc. All rights reserved. 44 45. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD THREEThe first step in attribution across multipleall the relevant contacts associated with anprograms and people is to track all theopportunity. Once you have that, you need tosignificant touches including programs,allocate the value of the opportunity to each WHEN YOU ASSUME YOU MAKE AN ASS OUTonline activity, sales activity, etc. that affectof the touches. OF U AND ME Assumptions may be necessary when using multi-touch attribution, but they inherently add a subjective element to any ROI analysis. So noAccount Analyzer Publish Settings Add more people matter what allocation assumptions you make, beNew Analyzer Actions PrintPDF to this opportunity sure you can defend them in front of your executive Against Score or Against thelike a consultantDefault leadership and board otherwise you risk hurting Model as the LINE dimension View: Score Mode Account: Acme IncStandard ReportsStar = Role in OptyAcme Inc the credibility of the entire analysis.Lead ReportsAccount Analyzer ActivityInterestingLeads by Campaign Edit me and clone me Logged Joe Smith (8)MomentNancy Jones (12)Leads by Month80Phil McCloud (4)Email ReportsFrank Johnston (3)Campaign Reports70Freddie Rainbow (1)Company ReportsHarold Scotsman (0)Web Page Reports60Jamal Tucker (0)Revenue Cycle AnalyticsExample Reports 50My ModelsChecking box includesAnalyzers 40Optytheir history these Success Path AnalyzerCreated are people attached Comparison Analyzer30to the account but notProgram : Webinar Opportunity Analyzer Cost per Lead: $21the opty20Success: ? Program Analyzer Contribution Analyzer Ability to right click on10Web Activity a name and add a role Batting Average Analyz to an opty right here Time Axis (By first touch for any lead checked to last)This is a screenshot of the Marketo Influencer Analyzer. You cansee every time an opportunity touches a contact. 2011 Marketo, Inc. All rights reserved. 45 46. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD FOURTEST AND CONTROL GROUPS Putting it to practice 2500With test and control groups, you need toA great way to measure the true impactapply the program or treatment that you2000of a particular marketing program is to testwant to measure to one component of yourtarget buyer group, and not to another Outcome Unitsthe effectiveness of that initiative against a 1500well-formed control group by comparing thehomogeneous part of that group. All other Control group adjustedtwo groups results. Of course, this means youfactors being equal, youll be able to attributeto treatment group sizeneed to plan your programs to be testable any difference in buyer behavior between the 1000 Baseline includesfrom the get-go.two groups to the particular program. all other marketingand non-marketingAlmost anything can be measured using Say, for example, that you want to measure 500proper test design, but its prohibitivelythe impact of one of your brand advertisingexpensive to test everything. campaigns on target awareness. One potential 0approach would be to split your market into 1 23 4567 89 10 1112two equal geographic parts, and spend twice Time Periodas much on one group than the other. Youcan compare the behaviors of these two Baseline Campaignmarket segments to analyze your campaignseffectiveness did you experience moreSource: Lenskold Groupgrowth 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. 2011 Marketo, Inc. All rights reserved.46 47. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD FOURTest design The importance of statisticalThe outcome metric (what you measure) can significancebe anything: revenue, profit, leads, search You dont need to go overboard, but ANOTHER OPTION: PRE-POST TESTINGtraffic, conversion rates, average selling price, you do need to make sure the differenceetc. or all of them. This is good in situations between your control and test groups is A common, much less rigorous form of testing iswhere it may be hard to see the impact of the statistically significant in comparison withto compare your results before your marketingprogram on things like revenue. average standard deviations. Eighty percent program to your results after or to project whatconfidence should be good enough were notthe outcomes WOULD have looked like without theYou can also test almost anything, including: touch, based on historical trends.talking about drug testing or other things thatPrograms and tactics. Did that particular require 99% confidence.webinar have an impact? Pro: This approach doesnt give all the credit to theFor more on testing statistics, see Marketos marketing touch since it assumes you would haveMessages. Which message and/or copy The Ultimate Guide to Test Statistics.some existing sales without it. No one wants to beresonated the most with you target audience?the brunt of the joke that says, If results are up,marketing gets credit. If results are down, it mustContact frequency. How often should webe something else.send an email?Spending levels. What happens if we doublePROS AND CONS OF TEST AND CONTROL GROUPSCons: Its difficult to account for seasonal or cyclicalinvestment in display advertising?ProsConseffects. Pre-Post testing doesnt have a rigorouscontrol group in which all other factors are the same.Its also possible to measure combinationsMore sophisticated and analytical Focused on specific tactics cant Other factors such as the economy, sales initiatives,of touches rather than just single touches.reveals the true impact of a marketingreport on effectiveness of all programs and other marketing programs can still influenceThis is a great way to test lead nurturingprogram the results.tacks allowing you to test and measure theAlmost everything can be tested, buteffectiveness of one entire lead nurturingCan measure almost any impact onits prohibitively expensive to testalmost anything with the right test everythingPre-post testing can give you directional informationtrack versus another rather than individualabout program effectiveness, but since it cantemails, etc. Should you want to test multiple Relatively low cost if you can design a Only works when youve incorporated eliminate non-marketing factors, its an estimatecampaigns at one time, you can also use decent control groupvariance to support programat best.multivariate testing methodologies. measurement 2011 Marketo, Inc. All rights reserved. 47 48. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementMETHOD FIVEFULL MARKET MIX MODELING Search advertising gets creditfor 3x5=$15MMarket Mix Modeling (MMM) shows how Display advertising gets creditPROS AND CONS OF MARKET MIX MODELINGfor 2x5=$10Msales volume outcomes are dependent on Pros Cons Trade shows receive creditvarious independent marketing touchesfor 1.5x10=$15Mand other non-marketing factors by using Very accurateNeeds lots of data; canstatistical techniques, such as regression. Onlybe costly to collect all the3% of B2B marketers currently use this model(MMM)aking it your own Measures the impact of allrequired historical dataAs you might imagine after seeing this programs and all externalto measure marketing ROI.factors as wellRequires sophisticatedexample, the selection of your independentHeres a sample statistical equationvariables can be a complicated affair andGives insight into program analytical skills(albeit an extremely simplified example): arguably involves as much art as it does effectiveness and efficiency Focus on short-termscience. Youre likely to find that youll expend sales changes canCompany X makes $165M in revenue. the most of your resources both in time andCompany X spends: undervalue longer-termmoney in collecting your data, not analyzing it.brand building activities $5M on search advertising. $5M on display advertising.Regardless, make sure you drill down to $10M on trade shows. the science of your own MMM equation byincorporating all factors that might impactCompany Xs marketing mix model your output. Possible factors include:might have an equation like this:Sales=125M+3.0*h+2.0*Display+1.5*Trade Show Pricing Promotion/advertisingThis equation shows that, without ProductMarketing, Company X would have Placemade $125M in sales. And of the $40M in Distributionrevenue generated by marketing: Sales Competitive moves The economy And so on 2011 Marketo, Inc. All rights reserved.48 49. Definitive Guide to Marketing Metrics and AnalyticsPart 5: Program MeasurementPROGRAM-SPECIFIC METRICS WHAT Email MetricsUnsubscribe rate Communications Metrics No of press releases Direct Mail Eyes OnYOU SHOULD MEASURE AND TRACKBounce rateNo of interviewsDelivery RateOpen r