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Welcome to the B2B Digital Marketing Hub, your one-stop destination for mastering the art and science of B2B digital marketing. Our podcast is designed specifically for B2B professionals seeking to elevate their marketing skills and outpace the ever-changing market demands.
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B2B Marketing Metrics That Matter – CLV, MQL, SQL, MRR
We live in a data-driven world. As a B2B marketer who wants to make the most of marketing resources and consistently meet marketing goals, you might find yourself drowning in metrics.
Tracking metrics is crucial. Not only does it help determine the success of your marketing efforts, but it also helps optimize future marketing efforts.
Even so, there are so many B2B marketing metrics out there. Attempting to keep track of all of them can be overwhelming. Worse still, it’s easy to get the feeling that you never do enough.
In this article, I’ll outline an intuitive approach to B2B marketing metrics, one that helps you make the most of performance indicators while maintaining your sanity. I’ll also list the most critical metrics according to this approach. Read on to learn more about B2B marketing metrics that matter to B2B marketers and clients.
A Simplified Approach to Marketing Metrics
As a marketer, you should use marketing metrics primarily to optimize performance.
Since your job is to facilitate the revenue generation process in a company, your main question when dealing with metrics should be, “How do these indicators help my company generate more revenue?”
Guided by that question, you’ll work backwards from revenue-related metrics to metrics associated with specific marketing efforts.
This might seem obvious.
But the proliferation of metrics has made it easy to lose sight of the end and instead focus on that upward trend in performance indicators. This could be detrimental to your marketing success.
For example, you could be focusing on increasing your number of leads, yet your cost of acquiring leads is higher than the lifetime value you get from the leads you successfully convert.
In another example, you could be celebrating higher website traffic, yet it doesn’t help your business make more revenue or it brings the lowest quality leads compared to other channels.
Working backwards from revenue to marketing effort, below is a list of the most critical B2B marketing metrics, ordered by the weight you should assign to each:
Customer lifetime value
MRR/ Average Deal Size
Cost of customer acquisition
Performance Metrics like MQLs and SQLs
Channel-specific metrics
I’ll go over each metric below.
1. Customer Lifetime Value
Customer lifetime value is the total revenue you generate from one customer over the entire time you are in business with them.
If you’re a subscription-based SAAS provider, this metric is fundamental. In theory, the value you get from a subscribing customer could extend indefinitely.
If you sell one-time products, then the lifetime value of a customer could be the value of that one transaction.
Knowing the lifetime value of a customer is crucial as it informs multiple aspects of your marketing campaign. One of the most important benefits is that it helps you know how much you can sustainably spend on marketing.
If a customer’s lifetime value is high, you can justify spending more to acquire or retain them.
If the lifetime value of a customer is $500, spending more than $500 to acquire one customer is unsustainable.
2. Monthly Recurring Revenue/Average Deal Size Per Strategy
Once you’ve used Customer Lifetime Value to determine the upper limit on the cost of customer acquisition, it would be prudent to set revenue goals.
Monthly Recurring Revenue and Average Deal Size can help you identify the marketing channels and strategies that are the most effective in meeting your revenue goals.
Monthly Recurring Revenue (MRR) is the monthly revenue collected from a customer when dealing with subscription-based products. Usually, subscriptions come in multiple tiers, such as standard, bronze, and platinum. Customers pay more per month according to the tier they’ve subscribed to.
Average Deal Size is like MRR but with one-time products.
It would be best to prioritize marketing strategies and channels that yield a better average deal size or MRR.
3. Cost of Customer Acquisition
This metric measures the cost of acquiring a customer through a specific marketing channel.
To arrive at this figure per channel, you can consider the number of leads you need to acquire one customer. You can then factor in the cost of acquiring each lead.
For example, using LinkedIn ads, the cost of acquiring a lead could be $10. Additionally, it might take ten leads to get one customer. In that case, the cost of acquiring one customer would be $100.
By this point, you’ve already determined the lifetime value of different classes of customers. So, you know how high you can go before the cost of acquiring a customer becomes unsustainable.
You can compare the cost of customer acquisition among various marketing channels. Naturally, you will likely prefer the channels with lower costs.
However, you also have the MRR and Average Deal Size values of different channels. So, if a strategy like Google retargeting gives you higher-MRR customers, you can spend more on acquiring customers that way.
4. Performance Metrics Like MQLs and SQLs
So far, the three metrics I’ve discussed will help you market effectively. They’ll help maximize the ROI of your marketing efforts. Put simply; they’ll help you decide how best to market.
But once you’ve decided how to market, you need to track performance and optimize efficiency. That’s where performance metrics come in. And there’s a ton of them. I have listed just a few of the common ones below:
Lead-to-Close Conversion Rate. This is the percentage of leads that you successfully converted to customers.
Average Sales Cycle. This measures your efficiency in closing leads. In other words, how long does it take from when you first contact the lead to when they make a purchase?
Marketing Qualified Leads. An MQL is a lead who has shown enough interest in the product to be marketed to. They are more likely to become a customer than other leads, but only with the right amount of nurturing.
Sales Qualified Leads. An SQL is a lead who is ready to be sold to. They’ve likely been nurtured to the point where they are ready to buy. All they need is advice to choose the best product or exposure to promotional offers – in short, what the sales team does best.
Performance metrics help you assess how well you are executing the marketing strategies that the first three metrics helped you choose. They also help you identify ways in which you can improve.
Out of the numerous performance metrics out there, choose the ones best suited for your marketing strategy.
5. Channel-Specific Metrics
Using metrics such as the cost of customer acquisition and the average deal size of customers from a channel will help you settle on the best channel to use.
It could be your website, your LinkedIn page and marketing account, or a combination of landing pages and an email list.
Marketers often make the mistake of giving too much importance to vanity metrics. For example, if you have many followers on a social media page but they are not helping you generate revenue, that might be a vanity metric.
However, if you’ve already determined that a channel is valuable to you not only in the quantity but also the quality of leads it generates, you are allowed to obsessively work to improve that channel’s metrics.
Channel-specific metrics include:
Email list growth rate
Website traffic
Engagement rates on social media
Conclusion
As a marketer, you’ll probably be under pressure to show that your marketing efforts are paying off. This can lead to an obsession with vanity metrics – metrics that show progress that doesn’t help the company meet its goals.
An obsession with vanity metrics harms the success of your marketing efforts and, ultimately, your company’s performance.
The smart way to go about B2B metrics is to prioritize the metrics directly impacting ROI and then work backwards to channel-specific metrics.
This approach can significantly improve the success of your marketing efforts. And as a bonus, you won’t feel like you are drowning in a thousand metrics!