Are you implementing demand generation the right way? Yes? No? Maybe? Demand generation activities deal with creating an effective sales pipeline for your business. Meaning, it is not ONE tactic. It is a culmination of tactics, strategy, tech stack, etc for an end to end optimization of the sales cycle in a given organization. This also means that it is important to know if you are doing demand generation the right way. But, how do we know that? By measuring the success of strategies and tactics at each stage of the sales cycle. In order to achieve the maximum return on investments in every activity, you need to analyze the right data. According to Integrate, marketers in charge of demand generation are tasked with the challenge of understanding marketing and sales performance at a far more granular level. Measuring the right prospect and demand gen program insights, allows you to optimize programs to generate higher quality leads that convert to a new customer. Without any further delay, lets look at the top metrics you need to look at if you want to implement demand generation the right way. That said, these are not the only ones you need to measure. Here is an infographic by Bizible that can help you with others Now, lets discuss the 4 metrics.
1. Cost Per Acquisition
As the name suggests, cost per acquisition is the amount of money you have spent in taking the lead through the buyer’s cycle and finally, converting them into a buyer. This is not just an important metrics for doing demand generation the right way, it is an integral part of assessing the effectiveness of demand generation as a whole. In simpler terms, if the cost per acquisition is at a higher side or exceed average customer lifetime value, it is near to possible for any organization to achieve profitability. Calculating CPA for campaigns isnt rocket science. Calculate the total cost spent on acquiring buyers (only marketing related expenses) and divide it by the number of customers acquired for the period that campaign ran. CPA formula looks like this –
For example, the total cost of the campaign is $1000 for 100 customers, then the cost per acquisition is $10. The lower the value, the better it is.
2. Marketing qualified leads (MQL) to Sales qualified lead (SQL)
For those of you who are not aware of the term MQL, an MQL is a lead that is qualified for nurturing based on pre-defined criterion and lead metrics information. Similarly, an SQL is a lead that is ready to invest in your product and services if nurtured properly and given the right offers. The formula to calculate MQL to SQL conversion is not complicated. It looks something like this – Number of SQL’s / Number of MQLs = MQL to SQL Conversion Rate This formula will help you understand the percentage conversion at this point in the sales funnel. You can read about this metrics in detail here. Similarly, you should analyze lead to MQL conversion for knowing if you are doing demand generation the right way. Everything put together will help you understand the gaps in the sales funnel. For example, you can know if most of your leads drop out after being checked as MQL. Meaning, you can work on your tactics, content, and strategy at that stage. Here are how the formulas for each stage of the funnel conversion look like (MQLs/SQLs) x 100 = Top-to-Middle Funnel Conversion Rate (SQLs/Customers) x 100 = Middle-to-Bottom Funnel Conversion Rate (MQLs/Customers) x 100 = Top-to-Funnel Conversion Rate.
Must Read: MQL to SQL conversion rate
3. Closing percentage
This is the stage where SQL becomes a buyer. It is important to understand how many of the SQL’s your sales team is able to close. It is also an important factor in how effectively you are converting, qualifying and nurturing marketing qualified leads and sales qualified leads. Not only that, it highlights any bottom of the funnel weaknesses The formula would look something like this (Deals Closed Number/Sales Proposals Number) x 100 = Closing Percentage
4. Lifetime customer value
LCV is the total profitability of a customer over the total period of your relationship with your business. Not only does this metric reveals the effectiveness of closing deals, it also highlights the quality of account management and customer engagement practices. This infographic from Hubspot shows how a customer lifetime value graph should look like. A climbing CLV not only shows that effectiveness of conversion but also shows that you are doing demand generation the right way because you are generating high-value customers.
That said, demand generation strategy and lead generation funnels play a crucial role in identifying these high-value customers and elevating them to your sales team And, the good part again is, it is not difficult to calculate. CLV takes into account the average size of each customer, no. of purchases one customer makes in a year, and average profit margins for that customer. It is then read with the customer retention rate. Here is a graphic to help you out.
If you are looking to do Demand generation the right way, it is important to focus on the right metrics. In fact, it also requires you to take into consideration the right information and act on it at the right time. According to this article, with real-time performance measurement and optimization tools, demand marketers can unify data from across lead sources, the MAP and CRM to understand and fine-tune full-funnel marketing performance without any lag in accessing intelligence. Meaning, you will know if you are doing demand generation the right way! So, what do you think? Are you doing demand generation the right way?
Vikas Bhatt is the Co-Founder of ONLY B2B, a premium B2B lead generation company that specializes in helping businesses achieve their growth objectives through targeted marketing & sales campaigns. With 10+ years of experience in the industry, Vikas has a deep understanding of the challenges faced by businesses today and has developed a unique approach to lead generation that has helped clients across a range of industries around the globe. As a thought leader in the B2B marketing community, ONLY B2B specializes in demand generation, content syndication, database services and more.