Those of us who have spent our careers in the financial world have been working with a quandary for many years: It’s very important to invest in marketing, but only in the marketing that works. And, as most marketing experts will tell you, “You only really know if it works after you spend the money.” A sharp CFO will then come back with “Show me how you will measure that, so we don’t just spend the money and then hope we did well.” You can see how this back-and-forth debate can go on endlessly, between the two critical support functions backing every company’s CEO.
The good news: everyone knows, including the CFO, that marketing drives sales and sales drives the company’s bottom line. As an old friend of mine was fond of saying: Nothing happens until you sell something. Actually, one thing happens before you sell something: you create prospective buyers.
The bad news: everyone knows, including the CMO, that companies fail every year by spending themselves into the ground trying to create a new market or grow an existing market, and going at it the wrong way, with the wrong product or to the wrong market, which is discovered after the wrong way ends in the collapse of the company.
There has to be a better way. And today, happily, there is, thanks to the advances of technology and the prolific use of online marketing techniques to drive virtually every company’s marketing strategy. Today we have options that didn’t exist when we launched Your CFO for Rent 35 years ago, thanks to the increasing capability of companies to capture data in a timeframe that enables informed decision making, including redirecting test marketing efforts, reinforcing successful initiatives on the fly, and cutting programs midstream if they are proving fruitless. The trick is picking and using the most effective KPIs to capture, measure and review the most relevant data.
The job of the executive management team is to ensure that the right tools are put in place to do that, avoiding the strategies of the past in which everyone hoped the CMO’s plan was a good one, and waited anxiously for the results at the end of the day. Here are a few proven KPIs for your consideration:
- Website traffic growth from period to period – whether supporting brand awareness, outreach, or product recognition, this metric is the most basic strategy for scaling a business, creating new opportunities to convert visitors into customers.
- Traffic-to-Lead conversion rate – how much website traffic converts to leads that express interest in buying something, best tracked as a percentage of website traffic visits. This measures your ability to build trust between you and your visitors, so they become prospects when they’re ready to go shopping. Call it your Marketing Qualified Leads metric, or MQL.
- Marketing Qualified Leads to Sales Qualified Leads, or SQL – this percentage captures the transition from aware and curious (MQL) to significant interest in your product offering (SQL), even if they’re not yet ready to commit. These are the leads that get passed to your sales team, who will try to convert them into sales.
- SQL to committed sales – this one doesn’t need a label, only a number, the percentage of SQLs that become closed sales. And finally…
- Marketing cost per sales dollar – the KPI that measures how much money you spent to get a new customer, calculated by all the costs of the first 4 steps, divided by the number of new customers captured. Ultimately translated into the marketing cost per dollar of monthly sales.
I wish we’d had the ability to track this kind of information without the painful manual data collection 35 years ago. The concept was there but the implementation wasn’t easy to sell or carry out. But we have it today, and we know that because, as you know…
We are Your CFO for Rent.