article | January 25, 2014
The Sabermetrics of the New CMO
This post is for CMOs who are newly hired or evolving. Your #1 goal entering a B2B organization is to drive results. How does the modern CMO drive results? First they think like Billy Beane, the GM of the Athletics baseball team.
Billy’s team evolved to leverage sophisticated metrics called sabermetrics to attain success. The sabermetrics were better indicators of offensive success & wins than traditional baseball statistics. If you are not familiar with the story, the results were remarkable.
In 2002, faced with limited payroll, Billy lost his top players to free agency. What was his solution? He found players excelling under his defined sabermetrics yet were undervalued against traditional statistics. This resulted in becoming one of the best teams in baseball with the smallest payroll. Their 41mm payroll had just as many wins (103 wins) as the Yankees 125mm payroll. Billy was successful by focusing on the metrics that drove results.
Today’s modern CMO is evolving the same way. Gone are the days of traditional and meaningless activity metrics. Now are the days of defining meaningful KPI’s that drive results. Today’s technology allows CMOs to match marketing efforts directly to sales dollars. With this, a 15-30% revenue contribution from marketing is going to be expected.
So what metrics should today’s CMO track? They are available here, download our complete Modern B2B Marketing Metrics to be world class. Below we’ll discuss the top 3 from the list.
Quantity of Sales Qualified Leads to the Sales Force (Leads)
This represents an important leading indicator for whether sales will hit their number. The Sales Qualified Lead is what drives the % of marketing contribution to the funnel. Making sure you are on track for the year requires you to be rock-solid.
It also requires you to be agile. The conversion rates between stages of the Lead Management Process are tracked. Compare the rates against industry averages and historical performance. Be agile by identifying any underperforming stages quickly. This allows you to make campaign adjustments in time to recover. This is key increase the chances of marketing contribution.
% of Marketing Contribution to Sales Funnel (Opportunities)
And Marketing Contribution as a % of Revenue (Wins)
These two metrics will prove your worth to the CEO. First step to get here is to meet with the head of sales. Make an agreement on how to define ‘Marketing Contribution’ for your business. Typically net new logos are defined here. By default, marketing tends to focus in this area. However, marketing should be engaged in existing customer upsell & cross-sell too. It can be difficult to calculate the true marketing contribution. Approach this with the sales leader as leveraging marketing to get into deals early. Your content marketing is selling when the rep isn’t present and identifying funnel opportunities. After agreeing on definitions, document them.
Next, separate the revenue into three areas:
It’s important to split new customers from existing customers. They have different degrees of difficultness and the expected percentage of contribution. Once you have segmented the revenue, think through the expected marketing contribution based on the agreed upon definition.
World class marketing organizations typically have a Net New Customer contribution rate of 30%. The range varies between 15-30% based on lead generation program maturity.
For Existing Customers, marketing contribution will range between 10-20%. The % of contribution is lower, but usually greater than Net New revenue.
As a new or evolving CMO, your #1 goal is driving results. Today’s technology allows you to match marketing efforts directly to sales dollars. Start by defining your KPI’s and how you will measure lead generation success. Download the Modern B2B Marketing Metrics now to get a head start.
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