Essential metrics: Measure what matters most

Video Transcription

All right, now we’re getting to metrics and the fun stuff. And again, I’m trying to make sure that we leave some time toward the end of today’s presentation for some Q and A. So keep your questions coming. This is a tool that I recently developed within our methodology and the categories here are really designed around a typical B2B infrastructure of metrics. So it looks a little different for B2C and different kinds of business models. 

But this gives you a sense. And what this is meant to convey, this metrics mountain, is that we see tons of confusion by executives and senior leaders saying we have no idea how to tell if marketing’s working for us. Marketing gives us a lot of spreadsheets. Our agencies show us all kinds of engagement metrics, but I have no idea how that’s helping my business. And the reality is, there are many different tiers of data when it comes to marketing and not all of them are important at the same time to the same people. And it’s really important that you are able to design a dashboard for your business that gives the right level of visibility to the right players to create integrated accountability up this mountain. 

So when you think about it, you could be enamored all day long with metrics about how your content performs. Like how many clicks did we get on this email? How many times was this blog looked at? Those are important metrics for your marketing team members to be tracking and understanding the trends and understanding how to optimize the performance of content. Above content, you have campaigns which stitch together multiple components. So this webinar campaign involves email invitations and sales follow up and there’s a lot of different things that go into it and we’re going to look at how the campaign performs. Right. 

Again, that’s a really important piece for marketing to be looking at and then starting to work with sales or business development. So I won’t walk you all the way through this mountain, but I am going to spend some time today on some of the essential metrics toward the top of this mountain that I love to obsess about with leaders because they don’t necessarily understand and have never put the programs and processes and tools in place to measure customer acquisition cost, customer lifetime value, the time to close and convert on a deal, and some of those really important things that help, you know, the impact of marketing and sales collaboration to get to real revenue and outcomes. 

So hope that’s helpful if you want to go deeper on some of the metrics that I’m about to unpack that I just mentioned. I’m going to leave this on screen just long enough that you could grab your phone if you’d like to take a picture. But again, we’ll make sure that this event recap is shared with you and you can get access to the slides if you like. But we do have a guide on our website that digs a little bit deeper into some of these top three metrics, and it is probably going to be helpful for you if you’re struggling to understand how to measure the value of your investment in sales and marketing. All right, let’s look at these three metrics as an example and kind of peel them back a little bit. All right, so time to convert, time to close. Or you might call this deal velocity. Okay. 

What this means is how long does it take from the moment that you have identified a new prospective opportunity or a deal or a buyer to the point where they’ve said yes and they’ve become a new client or customer or buyer. What we’re seeing in 2024, which is not surprising given the economic slowdown that began in 2023, is that sales cycles are lengthening. So like I said earlier in this presentation, if you feel like the deal cycle has been a slog, you’re not alone. And I hope in your business you’re measuring that through some good CRM best practices, that you’re watching the timelines and that you, as a team, if it’s, if the timelines are getting longer that you’re doing, what we’re doing here, which is talking about how do we shorten them, how do we pivot our strategy, how do we maybe change our sales process, how do we change some of the solutions we’re providing so it’s an easier way to say yes, but still get our foot in the door. Those are the kinds of conversations that are really important. 

The other thing that’s happening is not only are the cycles getting longer to get to a yes, but a lot of the cycles that lead to an eventual no aren’t actually a no. They’re just a deferred decision. There are a lot of deals that are just falling into just a holding pattern. We’re just going to not do anything right now. So it’s really important that your marketing team and sales teams have a strategy to continue to nurture those conversations and keep them alive. Because when they are back to the buying life cycle stage, you want to be top of mind with them. So how do you calculate this time to convert or this deal velocity? Well, it starts with needing to have a good CRM in place, a customer relationship management database where you’re tracking your pipeline and your deal cycle. And with that kind of tool in place, it’s really easy to measure the days between when something becomes a deal in your pipeline and when it is closed-won. 

So you, you’re just going to look at your CRM and build a deal report to show you that velocity and to track the trends over time. And I can tell you at Authentic, interestingly enough, there was a time when I thought in my head before we were using CRM and had historical data so very early in the business, I was like, I think my deal cycle is like three months. Maybe that’s kind of what it feels like. Well, once we started to get the baselines and then be able to see the patterns, I learned that our deal cycle is actually usually less than 30 days. And that was mind blowing for me because what I learned was I was spending a ton of time on long cycle deals that ended up never being the deals that we won. Turns out that the deals we win with the clients that are the right fit, we can close those deals in 20 to 30 days usually. 

And so having those insights helps you decide where to invest your time and how to what we learned is that we had to more quickly disqualify deals that were languishing in our pipeline because they just weren’t going to go anywhere. They might resurrect another time. But they have a deal right now, if they’re just sitting there, it’s not going anywhere. So data is essential. All right, customer acquisition cost. There’s a little smiley face on this page because I actually ran this through Chat GPT just to get some little talking points. But the fact is, all of us in marketing and leadership understand for the most part that the cost of acquiring a new customer or client has been increasing in recent years. 

And that’s for a number of different reasons that, you know, AI has reflected here. For us, it’s economic factors and it’s the cost of our dollars with interest rates, it’s the overall increase in ad spend and costs and restrictions on digital platforms. There’s just a lot happening around us that is making it more challenging than ever to predictively turn the knobs and drive down the cost of acquisition. And so I’ll talk a little bit later about the cost of retention and the essence and importance of retention in your strategy. But customer acquisition cost is hard to manage if you’re not tracking it. 

So let’s talk about how you measure customer acquisition cost. If you’re a B2B company and you have a sales team and a marketing team, you need to look at the entire investment in growth. So you would take the total cost of sales and marketing, which involves your staff and payroll for those positions and commissions, bonuses, all of that, as well as your program budgets. So anything you’re spending on marketing activation or sales events or any of those things, you take that total pool of dollars spent and you divide it by the number of deals that you won in that time period. 

So at Authentic, we measure the cost of acquisition monthly by our monthly sales and marketing spend divided by the number of new clients to give us that spend. And then we look at the trends quarterly and we look at it annually. So we’re looking quarter to quarter, year to year data to see how our cost of acquisition is changing. And that helps us make different decisions about where we want to invest and where those dollars are going to go and where we’re seeing the best conversion through which channels. So this is a really important metric to watch. You’re going to get this data partly out of your payroll system, working with your finance team and out of your CRM in terms of the number of new clients won. And now I want to talk about customer lifetime value, an often overlooked but probably the most important metric as well as you know the customer sentiment and their I’m sorry, I’m losing my, I’m losing my acronyms in my head talking out loud all at once. But customer lifetime value is essential and too many businesses get obsessed with new client acquisition. They’re all about more at bats, more wins. And of course wins. New clients and new customers is the lifeblood of every business. 

But what they fail to recognize is that if you’re allocating all your marketing dollars and energies over to net new business and acquisition is your entire marketing strategy. Demand gen, lead gen and marketing is spending no time helping sales and delivery to nurture, retain, build, grow and turn your current customers into raving fans and advocates who stay with you. You’re losing so much money. So my encouragement to you is don’t spend so much time and energy and money trying to bring people in the front door and then not pay any attention to what’s happening with attrition and churn as they’re leaving your organization. 

So some of the stats on this page are pretty stunning. It costs five times maybe more to acquire a new customer than it costs to keep them. So make sure your marketing program has budgets for customer appreciation for maybe you need to put together a customer advisory board and really treat those people with, you know, the special accolades of being advisors back into your business, whatever that needs to be. You need to have some programmatic approach around it. We already talked about that second bullet point. Too much focus on new client acquisition, not enough on client retention. And if you haven’t done an exercise, if you, if you sell more than one service or product or solution to the same type of customer client and you haven’t done an analysis of the number of your clients who are using more than one of your solutions, one of the biggest growth opportunities is to make sure you’re educating your clients on what else you can do for them. 

I’m shocked at some of the vendors that we’ve worked with at Authentic who I’ve never even known. I worked with them for three years before I even knew they offered other services. And I had been approaching other vendors for that help. So don’t forget to remarket your offerings back to your existing customers. Like that add-on revenue is really incredible because you’ve already hopefully established trust there and you can go deeper. So how do you measure customer lifetime value? Well, in a B2C versus a B2B, it’s a little different because in a B2C or even in a B2B world, that’s more about transactional or product purchases. 

You have to make a decision about, like the timeline of the repeat purchase history that you’re going to look at. But in a business like Authentics, where it’s an engagement, a continuous engagement, like on a retainer basis, we’re going to look at the value of that client engagement, like what are the monthly fees? We’re going to look at the either not in our world and the number of deals they’ve done, but maybe in your world, your clients do multiple projects with you over the span of a year, and then you’re going to look at the time that they’ve been retained and engaged with you. So, and you’re going to calculate that out based on dollars over the lifecycle of that customer’s engagement with you to understand the value of that relationship. And some things might shock you. Like, for instance, we’ve had clients that have been on large retainers that look really valuable and then they’re not. 

They’re with us for only six months. And then we’ve had other clients on really small retainers that don’t seem and feel as important, but they stay with us for four or five years. The value of that relationship and that depth of that trust is incredible. And then you got to look at the profitability underneath that as well. But to get to customer lifetime value, you’re going to need to calculate based on some accounting data like start dates, total dollars billed, and end dates. So this quote really kind of sums it up that that customer lifetime value is one of the most important revenue metrics and can be a big driver of growth. But companies often underestimate it because they’re so enamored with generating new business. So if you’re experiencing a slowdown in the sales cycle when it comes to new business this year, count it as a blessing and to go deep with your current existing customers accounts offerings. 

Understand the value of those relationships and don’t lose sight of them and really maximize those relationships now and then put some plans in place with strategies to continue to cultivate that.