The Six Demand Marketing KPIs That Are Critical to Achieving Growth
There has been a major shift in the status quo in the past few years as companies try to hold marketing accountable to firm metrics. But while many have tried, Harvard Business Review estimates that only a quarter of marketing leaders are successfully showing impact. Why? Because most leaders don’t know what demand marketing KPIs are the most important to measure.
The unfortunate truth is that marketing teams are stuck measuring vanity metrics. They’re focused on activities and metrics that don’t tie back to the ultimate goal of demand marketing: providing lift to pipeline and orchestrating customer engagement. You can read more about why this method of measurement fails in the article, “Revenue vs. Vanity: The Metrics that Matter for Driving Growth.”
Instead, demand marketing KPIs should focus on outcomes. Outcome oriented metrics focus on actions that contribute to revenue. While the individual metrics will be unique to your business, there are six key KPIs that every organization should track and optimize. They are:
- Lift: the percentage of total sales generated from demand marketing
- Quality: how demand marketing and buyer education affect average deal size
- Conversion: how often Demand Marketing Qualified Leads convert to Closed-Won Opportunity opportunities plus total customer lifetime value
- Health: end-to-end conversion rate of the Demand Marketing funnel
- Levers: ROI of engagement channels, content, and Demand Marketing programs
- Velocity: how demand marketing and buyer education affect time-to-sale
Tracking outcome oriented KPIs is a huge step in making the critical shift to a strategic demand marketing state. Once you can see impact, you’re able to operationalize strategies, optimize programs, and intelligently make decisions. Making this shift is business critical. Read on to learn more about each of these six demand marketing KPIs and how you can begin measuring success in your own organization.
Demand Marketing Lift
Demand marketing lift is defined as the percentage of total Closed-Won Opportunity sales that have been sourced directly by demand marketing. It is the increase in sales that wouldn’t have occurred without demand marketing’s contribution.
This KPI looks at both the short term and long term by assessing the immediate increase in sales generated by demand marketing and by tracking how many more sales were generated by demand marketing over time.
Learn more about how to measure your own demand marketing lift by reading the blog, “How Do You Know Your Demand Marketing is Providing Real Lift to Sales?”
Demand Marketing Quality
Demand marketing quality is defined as average deal size for Closed-Won Opportunity opportunities generated by demand marketing and contribution to customer lifetime value (CLV).
In other words: were the sales generated by demand marketing high quality and did they increase over time? You can look at quality in terms of average deal size, customer lifetime value, retention rate, and more.
These metrics assess both the immediate impact of demand marketing and the long-term value of the deals demand marketing brought to the table. You may be surprised to find that marketing is bringing small deals that turn into whales after two or three years. Or the opposite: perhaps those initial whales dry up after six months and leave you scrambling for new revenue.
The overarching question is: did demand marketing activities increase the value of leads over time and was demand marketing highly net present value positive? If the answer is yes, it’s a sign of good lead quality. If not, it may be time to reassess both your marketing tactics and your lead qualification process.
Read more about how to improve your lead quality in the article, “A Framework for Sustainable Growth: ANNUITAS Demand Process.”
Demand Marketing Conversion
Demand marketing conversion is defined as Qualified Lead to Closed-Won Opportunity rate.
The question you ask to establish conversion metrics is a straightforward one: do leads coming in from demand marketing convert at a higher, lower, or similar rate as other sources like sales, renewals, and referrals?
You may or may not want the answer to be “yes”. It depends on your unique business need. Sometimes yes, you absolutely want demand marketing sourced leads to convert at a higher rate than sales sourced. But if demand marketing sourced leads convert at a lower rate while significantly enhancing quality and lift, that could be equally as valuable to your business.
One caveat here: If you have misalignment in your lead management process this will become a very hard metric to accurately measure. That’s why it’s important to consider conversion rate as only one part of your KPI portfolio.
Demand Marketing Health
Demand marketing health is defined as engaged to Closed-Won Opportunity rate.
If lift, quality, and conversion give you a direct line of sight into how demand marketing is performing, looking at health widens your frame of reference.
Health is about the percentage of leads that made it from the initial engagement stage all the way through to Closed-Won Opportunity. This demand marketing KPI is assessing: how healthy is your entire funnel? Is it optimized or a little bit leaky?
If you have a low engaged to Closed-Won Opportunity rate, or if you’re finding that leads get “stuck” at any point (bottom, middle, or top), it’s time to review where you can tighten up your funnel.
In general, we recommend making your funnel look less like a martini glass and more like a pint glass. Qualifying leads sooner, faster, and with more education leads to a higher conversion rate and a healthier funnel.
Demand Marketing Levers
Demand marketing levers is defined as total demand marketing program, engagement channel, and content and conversation track ROI.
Taking these levers into account gives you a better understanding of both individual components that impact your prospects’ critical path (i.e. the path a prospect takes through the funnel) and the efficacy of your spending. It puts things in terms of ROI.
A demand marketing KPI based on levers feeds into the big picture while letting you shift individual tactics as you go. By keeping an eye on these components, you’re able to quickly assess: is this content working, or should we try a different asset? Do we keep advertising on this channel or shift to another? Do we need to make adjustments to our nurture program?
Overall, you’re trying to identify the individual touchpoints of your portfolio so that you can maximize your outcome and optimize your prospects’ path through the funnel.
Levers are more of a leading indicator than any of the other outcome-based KPIs outlined here. But it’s a critical piece of the equation so that you can gain better insight into what’s actually driving outcomes (and what might be a waste). We don’t recommend depending on levers alone to drive my decisions. However, we recommend relying on lift, quality, and conversions to inform which levers you should pull.
Learn more about how to pull different levers by reading “How to Optimize Your Engagement Channel Strategy.”
Demand Marketing Velocity
Velocity is defined by throughput time from point A to point B and measured in days and weeks—15 days, 30 days, 150 days, and so on.
Many marketers think of velocity only in terms of first engagement to Closed-Won Opportunity. But it can also refer to engaged to qualified lead, qualified lead to opportunity, and opportunity to Closed-Won Opportunity.
Taking time to consider different stages gives you a more granular view into each stage of your funnel (compared to overall health, as described above). It lets you isolate behaviors and think about the different needs for different stages.
It’s important to note: increasing velocity isn’t always the goal.
Yes, reducing time to close is a noble goal. But sometimes, especially for heavily considered purchases, effective demand marketing is about staying with people over a longer buying journey, consistently offering valuable moments so that their likelihood to convert goes up.
A critical component of managing velocity is a Conversation Track Architecture. You can read more about it in the article, “The Key to Operationalizing Go-to-Market Around Customer Journey: ANNUITAS Conversation Track Architecture.”
Managing the Change to Outcome Oriented KPIs
Making the shift from measuring activity metrics to outcome oriented KPIs is a big change.
It’s not about flipping a switch; it’s about building and optimizing a system that drives demand marketing success. But this is a big change, and the hardest part can be getting your people on board. So, how do you get everyone to agree to the same values and buy into this reporting approach?
Different metrics for different people
From the individual digital marketing coordinator on up to the CEO, different stakeholders will value certain metrics differently and different stakeholders will have a different degree of ability to impact the metrics directly.
The key here is to not include every single one of these demand marketing KPIs in every single dashboard. Instead, create different views for each group of stakeholders. A good demand marketer will be able to dig into a lot of different views, pulling in levers and health metrics when relevant.
All of these dashboards should come from the same pool of data; you’re simply varying the level of detail and focus areas depending on who you’re talking to.
Business leaders know that they must continue to push marketing teams to adopt outcome oriented KPIs in other to drive growth. But marketers have a stake in this too. The reality is that marketing strategies fall apart in execution every single day.
Many marketers know how to put strategic plans together, but far fewer know how to translate the plan into effective execution.
Focusing on outcomes instead of activities will allow you to operationalize your best laid plans more effectively and you’ll be less likely to get caught in the weeds.
The key is to educate the rest of the organization around this mindset shift.
The enemy in the transformation is people’s experience and tribal knowledge within the organization. Whether from complacency or lack of understanding, it takes time to shift thinking on measurement.
Most marketers and ops pros are used to measuring things a certain way. If someone pushes for A/B overkill or points to an activity metric as proof of success, treat it as an opportunity for change management. Tie it back to the big picture (ideally with those relevant dashboards we discussed above) but make clear you’re no longer focused exclusively on the activity metric itself.
Take the time to understand what matters most to your marketing ops, finance, and sales teams before kicking off these conversations. Open rates may not be important to the big picture, but they may be an indicator of marketing automation program health to your ops team. Before you make changes, be sure to understand all perspectives.
Changing the way you measure success is a huge step in shifting from a tactical to strategic demand marketing state. Making that shift is key to achieving and optimizing growth goals. It can be done, but it requires clear alignment on what outcomes are most important and how they will be measured.
To learn more about this topic, read:
“Making the Critical Shift from Tactical Demand Generation to Strategic Demand Marketing”
“Revenue vs. Vanity: The Metrics that Matter for Driving Growth.”
“How Do You Know Your Demand Marketing is Providing Real Lift to Sales?”