Wednesday, January 20, 2010

CEOs and Marketing Metrics

CEOs may not be involved in the day to day challenges of the marketing department, but they can strongly influence its evolution through the questions that they ask and the metrics that they track, both in the marketing and sales teams. Done well, this structure and encouragement can facilitate a transition to a buyer-centered, efficient marketing and sales organization. Done poorly, however, the structure and metrics that a CEO imposes on his or her team can prevent the needed transitions from taking place.

High Level Framework

At the executive team and board levels, CEOs should measure marketing on objective, standard metrics around marketing’s ability to create, nurture, and qualify sales-ready buyers. By looking at Marketing’s ability to manage the top end of the revenue funnel through balance sheet and income statement metrics, CEOs will instill the discipline of defining the stages of the buying process, measuring leads against these stages, and facilitating buyers’ movement through each stage by carefully targeted campaigning.

Similarly, CEOs must work to have Sales and Marketing present their views of revenue projections, and the needed investments, in a coordinated fashion. The hand-off of a lead from Marketing to Sales should be based upon a mutually agreed-upon definition, and thus should enable a common view of the entire funnel from the earliest stages of awareness to the final closure of a deal. With this in place, and with an understanding of the conversion times and percentages between each two stages, there is an ability to see potential revenue shortfalls well in advance and adjust investment across the entire Sales and Marketing spectrum accordingly.

Conflicting Metrics

Without this coordinated focus, it is easy for conflicting metrics to develop. For example, if a Marketing team is focusing on only handing highly qualified leads to Sales, they will naturally reduce the number of leads that are passed. If, however, the Sales team is managed and measured based on activity metrics such as the number of calls per day, they will resist the reduction in lead volume from Marketing, even though the lead quality is significantly higher.

In measuring Marketing, CEOs encourage the right behavior when they think in terms of the buyers’ buying process:

- How is awareness of your solution category first developed?

- How do buyers educate themselves, and is that education process something you should be a part of?

- When prospective buyers understand a business challenge or opportunity and seek to solve it, do they discover your company?

- How are solutions selected and validated in your category?
What criteria are used, and how have we educated buyer on why to select us?

These questions focus marketing on understanding and facilitating buyers throughout the entire buying process.

What this may mean, however, is that Marketing focuses more on processes that continuously nurture prospective buyers, continually allow your solutions to be found, and gradually establish buying criteria that allow your solution to be selected. This can often reduce the number of large, one-off campaigns that attract significant internal attention, but may do far less to engage with buyers, as they are timed and targeted based on the company’s needs and schedules rather than those of the buyers.

Results in Terms of Buyers

CEOs that ask Marketing for results that are defined in terms of the prospective buyers – such as the movement of prospects between one stage of their buying process and the next – allow Marketing to better focus on campaigns that facilitate buyers. While large one-off campaigns can at times be useful, they often attract a disproportionate amount of internal attention due to their higher internal visibility. CEOs that avoid the temptation to only ask for and look at large one-off campaigns are guiding Marketing teams in a direction that is more focused on the needs of buyers.

Driving a Marketing team to look at hard metrics for their campaigns, and to take responsibility for those metrics has some interesting repercussions. A marketing team can commit to revenue metrics, delivery of objectively qualified leads, and to managing an overall healthy and predictable revenue pipeline. With this responsibility and measurement, however, comes the associated ability to associate compensation with directly measurable performance. CEOs should not be afraid to challenge long-held beliefs on compensation levels between Sale and Marketing. Even institutions such as Presidents’ Club, long the purview of Sales, should be opened up to anyone in the Marketing organization performing sufficiently well against objectively defined metrics.

CEOs that set the right framework and structure for their Marketing and Sales teams can drive an evolution of performance. However, simple actions and metrics, or long-held beliefs that are not challenged, can easily derail the best intentions of Marketing and Sales executives seeking to improve their own performance.
Many of the topics on this blog are discussed in more detail in my book Digital Body Language
In my day job, I am with Eloqua, the marketing automation software used by the worlds best marketers
Come talk with me or one of my colleagues at a live event, or join in on a webinar