As much as people like to pit them against each other, sales and marketing are inextricably bonded. They feed into each other in a continual loop, especially when your business model revolves largely around recurring subscriptions or retainers.
The most important way to improve your sales is to keep track of your performance metrics in as close to real-time as possible. The same applies to marketing. If both are tracked and examined thoroughly, you should be able to see which marketing efforts have an effect on sales and which do not.
But exactly which metrics should you be tracking?
Two types of key performance indicators (KPIs) represent the two sides of the equation. In economic terms, the outcome measures are often plotted against process measures to see how marketing effectiveness is reflected in economic terms.
Outcome Measures
Most of the time, an analysis of business metrics consists of plotting outcome metrics against time. This enables management to detect seasonal trends, plot overall growth, or evaluate the effects of business changes that have a discrete beginning, like a new marketing campaign.
Most business metrics tend to focus on outcome because these are measures of the bottom line.
- Probably the most fundamental metric is current sales revenue. That is the total dollar value of sales in a given time period.
- Sales growth is a derived measure, subtracting sales revenue in a previous interval from current sales revenue.
- Retail operations often measure conversion rate. This is the ratio of sales (in dollars) to number of customers who visit the site.
- The important thing about sales growth is the gross margin. That is calculated as the difference between income and costs. Costs and dollars of income are important KPIs.
Process Measures
Process measures are important if you want to view your marketing campaigns as experiments and test the effectiveness of various strategies. Process measures depend a lot on the way business is done in your company. For many companies whose marketing is focused on a web-based process, a set of web-based marketing metrics are most useful. These metrics can be derived directly, in most cases, from website analytics.
Marketing metrics might include:
- E-mail metrics like bounce rates, e-mail open rates, deliverability rates, rate of lead generation, click-through rates, cost per lead, lead quality measures;
- Social metrics like friends and followers on social platforms, number of posts, referrals, number of closures;
- Search metrics like ad position, click-through rate, cost per click, cost per acquisition;
- Display metrics like consumer impressions and feedback measures.
Many organizations not built around intense web-based marketing still rely largely on direct sales metrics. They keep track of the actual activity of sales staff as they develop marketing campaigns.
Common sales-based process metrics include:
- Number of sales calls as an important way of determining the effectiveness of the sales process;
- Number of sales contacts per closing as an important measure of sales effectiveness that relates directly to costs;
- Revenue per sale as a direct measure of sales effectiveness;
- Types of sales contacts metrics that requires a classification system under which staff can itemize the kinds of contacts they make;
- Timing variables can be very important. Lead response time (how long does it take sales staff to contact a lead) is often tracked as a measure of sales performance;
- Product mix is a measure of the range of products on offer;
- Number of new customers and ratio of new customers to established customers.
Marketing process metrics can simply include descriptors of the marketing campaign placed on a time scale:
- date and timing of the marketing campaign start;
- duration of the campaign;
- campaign type;
- targeted client group;
- campaign intensity;
- campaign cost.
Of course, there are many different ways to slice it. What KPIs are most valuable to you and your organization can vary depending on your internal structure, overall business goals, staff and client base size, and your growth over time. In fact, they may change entirely as you further hone your strategy and close the loop between your sales and marketing.
Keep an eye on this space for more information about marketing metrics and KPIs!