market research

Measuring Marketing’s Contribution to the Pipeline

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For businesses, a pipeline is a targeted list of potential buyers who might have an interest in your products or services. Many companies face the challenge of capturing the attention of potential buyers and moving as many of these potential buyers as possible through the pipeline stages of contact, connection, conversation, consideration, consumption, and community. More and more companies are relying on Marketing to continuously and effectively grow their organization’s opportunity pipeline. Potential buyers who are not converted into customers are often referred to as leaks or pipeline leakage. Our role, as marketers, is to “plug the leak” and improve conversion rates. If the Marketing and Sales aspects of the pipeline are not connected and aligned properly, the potential pipeline leakage can be very large. So a crucial step is ensuring Marketing is properly aligned with Sales. Marketing and Sales alignment allows for the creation and implementation of strategies, programs, and tactics that will facilitate pipeline opportunity development and movement. Once your company achieves this alignment, the next important step is for Marketing to focus on marketing initiative that will effectively and efficiently contribute to pipeline performance and the generation of customers. We must be able to clearly demonstrate and measure our contribution to the pipeline.

Unfortunately, a Forrester Research study, “Redefining B2B Marketing Measurement,” found that “the metrics that most B2B marketers say they use — like number of leads generated and cost per lead” — rank in the lower half of the effectiveness list.” In fact, number of leads generated and cost per lead may actually work against us if we don’t look further into the buying process. At first blush, one program may produce more “leads” than another at a lower cost and therefore appear more efficient. But what is really important is how many of the opportunities convert (don’t leak) to the next stage in the buying process. If there is a higher conversion rate from the more expensive program, than it is actually more effective. If we only look at a marketing program in terms of qualified leads generated and cost, we could potentially be eliminating programs that actually help build the pipeline.

Therefore, we need to move beyond the lead as the marketing metric and leverage metrics more meaningful to the organization — metrics that are more closely tied to customer deals. Customer deals– that is, sales — is for most organizations one of the most important business outcomes. Every company establishes a revenue goal. This revenue target is generated by some number of deals and dollars from existing customers and some number of deals and dollars from net new customers. This brings up the question of what metrics should CMOs and their teams use to measure Marketing’s contribution to the pipeline? Here are four metrics to consider:

1. Pipeline contribution which measures the number of opportunities generated by Marketing that convert into sales opportunities and ultimately into new deals. This metric helps ascertain to what extent marketing programs and investments are positively effecting the win rate and reducing the number of qualified leads that wither and die or are rejected by Sales.
2. Pipeline movement which measures the rate at which opportunities move through the pipeline and convert to wins. This metric helps assess the degree to which marketing programs and investments accelerate the sales cycle.
3. Pipeline value which measures the aggregate value of all active marketing opportunities at each stage within the pipeline. This helps determine what increase in potential business marketing investments may generate.
4. Pipeline velocity which measures the rate of change within your pipeline-both in speed and direction. This enables you to determine whether your sales are accelerating, decelerating, or remaining constant.

When examining each of these metrics it is important to compare the marketing generated opportunities compared to non-marketing generated opportunities. This means we need to understand what is the difference in the win rate, average order value, conversion rate, and velocity between marketing generated opportunities compared to non-marketing generated opportunities. Ideally, over time, by monitoring results and analyzing the data related to these metrics, Marketing can begin to create more predictable results in terms of contribution, conversion, and value.

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Analytics and Marketing Ops: A One-Two Punch for Growth

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Today’s customers are more value-oriented and less loyal creating even greater challenges in today’s business climate. With customer expectations increasing, the competitive landscape growing, the proliferation of new technologies and channels, and the avalanche of data, marketers needs more than intuition and experience to succeed. The world is just too dynamic and the pace of change is just too fast. In fact, the deluge of data is actually fueling the growth of analytics. As Dave Frankland of Forrest once said, “the goal is not to collect data, but to develop insights.” Insights are the purview of analytics. Analytics are algorithms advanced and/or mathematical techniques on large volumes of data that help marketers translate data into actionable insights to help drive marketing and customer strategies and optimize marketing efforts.

Analytics is hard and time consuming so why make the effort and investment? A High Performance research study by Accenture found that companies that invest heavily in their analytic capabilities outperform the S&P 500 on average by 64% and recover more quickly during economic downturns.

How are the high performers different? First, they have above average analytical capabilities. Second they have better decision support analytical capabilities. Third, they more highly value analytical insights, which seems obvious or they wouldn’t have invested in the first two. And finally, they use analytics across their entire organization, including sales and marketing. Julio Hernandez, a partner at Accenture, says, “Companies need to be analytically inclined and data- driven in order to turn insights into action for driving growth.”

How can you use analytics to drive growth? Marketing analytics help you answer questions such as: “Which customers are worth paying a lot of attention to? Which ones are worth less?” Analytics helps you evaluate and address five growth opportunities:

  1. Acquire more valuable customers
  2. Acquire customers who will buy more from you
  1. Acquire customers who will buy your more high value products/services
  2. Retain high value customers longer
  3. Determine which marketing activities have the greatest impact on accelerating customer acquisition and improving retention

Companies use analytics to make decisions related to business operations, competitive moves, staffing and skill requirements, customer strategy, positioning and messaging, marketing optimization. Even so few companies really invest in analytics. A 2011 Ventana Research study included input from more than 2,850 organizations found that more than half of organizations still spend the majority of their time in unproductive data preparation and quality assurance processes, rather than in applying analytics.

There are so many possible analytic projects to evaluate it may be hard to know where to start. To prioritize projects we recommend you evaluate projects against two criteria: ease of execution from easy to hard and value derived from low to high. Score each project and classify them into one of four categories.

  1. High-Value/Easy-to-Execute- Must Do’s
  2. Low-Value/Easy-to-Execute – Quick Hits (things you can do in 30 days or less)
  3. High-Value/Hard-to-Execute- Transformative
  4. Low-Value/Hard-to-Execute- Nice to Have

We recommend you focus on the high-value/easy-to-do first. This is the way to demonstrate fast high value wins. Then tackle the easy-to-execute/low-value for the next set of fast wins while you put a plan in place to address the hard-to-execute/high-value projects.

The math associated with analytics is only one step. Here are a few items that should be on your checklist before “doing the math”:

  1. Establish a clear methodology you will use to guide your work.
  2. Define the business objective and desired outcomes.
  3. Analyze and select the most appropriate data sources to support the outcomes and scope of work.
  1. Select, extract, and transform data upon which will be used to create models.
  2. Create, test, and validate models
  3. Apply model results
  4. Manage and modify models to improve performance

It’s probably become evident that an analytics approach to marketing takes skills and resources. In their book The Four Pillars of Profit-Driven Marketing, authors Leslie Moeller and Edward Landry claim that being good at analytics is not enough. Analytics along with the tools to disseminate the insights from analytics, the processes that makes sure analytics is not an afterthought and the organizational infrastructure are the keys to success.

How do you scale it? Most companies have some analytical capability, usually residing in a market research or intelligence function. We believe the optimal way to scale is with marketing operations. Marketing operations is oxygen for growth. A properly chartered and resourced marketing operations function facilitates an agile marketing organization. These marketing organizations define efficient and scalable processes, including data capture and management; use analytics to identify and recommend ROI-led marketing investment, including developing models to optimize channels; and facilitate strategic planning and growth by using analytics to develop market and customer segmentation models.

Our research shows that many organizations have someone performing some part of the marketing operations function, primarily budgeting, research and planning. As we approach 2012 and continue to try and manage a business environment that most of us would describe as uncertain, perhaps it is time to invest in the infrastructure and skills to achieve the next level of capabilities on your marketing metrics and analytics journey.