The 6 B2B Marketing Metrics that Matter.

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1 The 6 B2B Marketing Metrics that Matter. Show the return on your investment by tracking these six metrics.

2 2 Introduction. Ever sat in a management meeting as a high-level exec asks what a bounce rate is, then stares without meaningful comment when given the explanation? So have we. B2B marketers work hard to measure and improve a host of performance indicators website visits, conversion rates, generated leads per channel, social media platform engagement, blog post shares, click-through rates. On and on. Such metrics can be ideal to tell how things are going WITHIN the process, but they remain overly complex and ultimately detached from the basic strategic question of What s all this doing for us? For the strategic-minded audience, often lacking in time or interest for the myriad details vital to the tactics that drive your day, you can t present everything you measure. A full 73% of executives don t believe marketers focus enough on results to drive incremental demand, and if they think activities lack credibility, it doesn t make sense to bombard them with metrics that don t indicate end-result impact. When it comes to info meaningful to the big suits, cut to the chase and report on data dealing with the total costs and benefits. Read on to learn six critical metrics that wake up decision makers and show them your role is a key driver to their bottom line. Let s get started..com

3 3 1. Client Acquisition Cost (CAC) CAC is the total average cost your company spends to acquire a new client. How to Calculate: Divide your total Sales and Marketing Cost for a specific time period by the number of New Clients acquired during that same period..sales and Marketing Cost = Program and advertising spend + Salaries + Commissions and Bonuses + Overhead in the period New Clients = Number of new clients in the period Formula: Sales and Marketing Cost / New Clients = CAC Sales and Marketing Cost = $300,000 New Clients per period = 75 CAC = $300,000 / 75 = $4,000 per Client Why It Matters: An increase in CAC can imply there s a problem with sales or efficiency. Irrespective of other dynamics, you want a low average CAC, relative to the value of an average client. Nevertheless, companies growing and/or moving up the client food chain may need to invest shorter term costs, thereby increasing CAC temporarily, to achieve longer term growth in revenue and marginal profit. Benchmark: Industries and price points differ greatly, and CAC is very dependent on such specifics..com

4 4 2. Marketing % of Client Acquisitions Cost (MPCAC) MPCAC is the Marketing-only portion (as opposed to Sales) of CAC, calculated as a percentage of overall CAC. How to Calculate: Divide Marketing Cost by total Sales and Marketing Cost used to compute CAC. Marketing Costs = Expenses + Salaries + Commissions and Bonuses + Overhead for the department only.sales and Marketing Cost = Program and advertising spend + salaries + commissions and bonuses + overhead Formula: Marketing Cost / Sales and Marketing Costs = MPCAC Marketing Cost = $120,000 Sales and Marketing Cost = $300,000 MPCAC = $120,000 / $300,000 = 40% Why It Matters: MPCAC can show how a team s performance and spending impact overall CAC. An increase in MPCAC can mean: 1. The team is spending too much or has too much overhead. 2. The sales team could have underperformed (and consequently received) lower commissions or bonuses. 3. You are in an investment phase, spending more on to provide more quality leads and improve sales productivity. Benchmark: Outside Sales 10-30%, Inside Sales 20-50%, Near Humanless Sales 60-90%..com

5 5 3. Ratio of Client Lifetime Value to CAC (LV:CAC) LV:CAC compares the average client Lifetime Value (LV) with CAC How to Calculate: Divide LV by CAC as an X to 1 ratio. Lifetime Value (LV) = Avg Marginal Profit per Client / Avg Client Churn Rate (per period) Formula: LV / CAC to 1 LV = $22,000 CAC = $4,000 LV:CAC = $22,000 / $4,000 to 1 = 5.5 to 1 Why It Matters: The higher this ratio, the more ROI your sales and team is delivering to your bottom line. However, a ratio that s TOO high may indicate a lack of investment in reaching new clients. Spending more on sales and will reduce LV:CAC, but could help speed long term growth. Benchmark: 1:1 or less means you lose money the more you sell. 3:1 is a good target. 4:1 and up is very strong, but in a competitive market you could be under-investing in Sales and Marketing..com

6 6 4. Time to Payback TPCAC TPCAC is the average number of months your company takes to earn back the CAC it spent acquiring new clients. How to Calculate: Divide CAC by Average Marginal Profit per period for new clients. Avg Marginal Profit (AMP) = Avg client revenue minus Avg client marginal expenses Formula: CAC / AMP = TPCAC AMP = $400 CAC = $4,000 TPCAC = $4,000 / $400 = 10 Months Why It Matters: The less time it takes to payback CAC, the sooner you can start creating long term profit from those new clients. Lower TPCAC also tends to allow for faster growth. In very general terms, most businesses aim for TPCAC less than 12 months. Benchmark: Under 6 months could signal the need to invest more in Sales and Marketing months is reasonable. Over 18 is likely a problem..com

7 7 5. Marketing Originated Client % (MOCP) MOCP is a ratio that shows what new business is driven by, by determining which portion of total client acquisitions directly originated from efforts. How to Calculate: Take all new clients from a period, and tease out what percentage started with a lead generated by your team. Formula: New clients started as lead / New clients = MOCP New clients in a period = 75 New clients started as a lead = 50 MOCP = 50 / 75 = 67% Why It Matters: MOCP illustrates the impact your team s lead generation efforts have on acquiring new clients. The metric depends heavily on your sales and relationship and structure, so an ideal result will vary depending on industry and business model. Organizations with outside sales teams and inside sales support might target 20-40% MOCP, whereas those with inside sales teams and lead-focused teams might strive for 50-80%. Note that this metric can be calculated using dollars instead of clients when the relative value of clients differs significantly. Benchmark: Outside Sales 20-40%, Inside Sales 50-80%, Near Humanless Sales 70-95%..com

8 8 6. Marketing Influenced Client % (MICP) MICP accounts for all new clients interacted with while leads, anytime during the sales process. How to Calculate: Take all new clients from a given period, and determine the percentage that had any interaction with touches while leads. Formula: Total new clients interacting with / Total new clients = MICP Total new clients = 75 Total new clients that interacted with = 60 MICP = 60 / 75 = 80% Why It Matters: MICP gives decision makers a big-picture look into s overall impact within the entire, consolidated sales cycle of generating new leads, nurturing existing ones, and helping sales close deals. Note that this metric can be calculated using dollars instead of clients when the relative value of clients differs significantly. Benchmark: Over 70% for established teams performing well..com

9 9 Conclusion. As marketers, we track so many different data points on what s working and what s not that it can become easy to lose sight of what s most important to those not immersed in to-do lists. But reporting strategic results doesn t mean ignoring tactical metrics like site traffic, social shares, and conversion rates. It simply means that when reporting to executives, it s crucial to convey performance in a way that s quickly engaging and appreciated. Rather than presenting the long list of softer metrics (like per-post Facebook engagements) use the bottom-line six we detailed in the above cheat sheet. When you can present such metrics that resonate with decision-makers, you ll be in a much better position to make a winnable case for budgets and strategies to rev your organization s now and in the future..com

10 10 About Grasshopper Marketing Our mission is simple: to help clients grow sustainable revenue by finding and motivating their prospective customers to act. We create progressive strategies based on duly diligent analysis, then apply our insights to measurable and beautiful brand and channel plans. We steer complex B2B companies toward clear and help them stop wondering and start doing. Let s start doing..com/on-demand hello@.com com