We talk a lot about your inbound KPIs for sales and marketing – CPL, conversions, etc. But the reality is that most CEOs and investors don’t care about these metrics. As useful as they are for you, they’re not as useful for that kind of top-level decision making.
But less than a decade ago, Fournaise was reporting that 80% of CEOs didn’t trust the “results” of their CMOs and marketing departments. And whilst that has improved with better metrics and analytics tools in the marketing space, there is still a long way to go to prove that marketers aren’t just focused on brand or engagement; that they care about the bottom line and are working to improve it.
So what stats can you be presenting to instill confidence and make their decisions easier? And once you’ve presented them, how can you make sure you’re working to improve them? Here are the 3 KPIs your CEO really wants to see, and what you can do to improve them:
1. Customer Acquisition Cost
Just like you calculate Cost per Lead for paid media, you need to be calculating Customer Acquisition Cost for every piece of business you win. The CAC usually includes both sales and marketing, including human resources. Here’s the basic calculation:
(Entire sales budget + entire marketing budget)
number of new customers
So for example if your marketing budget was £100k, your sales budget was £75k, and you acquired 70 new customers, your CAC would be £2,500.
You can use that calculation for any period: a month, a quarter, a year, etc. But keep in mind that the longer the period, the more reflective it will be of longer sales processes. Our recommendation would be to calculate it based on a rolling 1-year period to accommodate the full sales process and still account for ongoing changes without drastic peaks and troughs.
It’s also important to illustrate what percentage of the CAC is marketing spend, called M-CAC. So if your marketing budget accounts for 71% of the total sales and marketing budget, your M-CAC would be 71% as well.
How to improve CAC
This is where you get to take a good hard look at your normal marketing KPIs, making your campaigns and your department as efficient as possible. Here are some good places to start:
- Make sure your tech stack is enabling efficient use of human resources and marketing spend
- Bring your CPL down as far as you can without sacrificing lead quality
- Consider partnering with agencies for deliverable-based retainers and projects instead of time-based engagements
Essentially, any of your standard budget-stretching tactics will work here to help you get the biggest bang for your buck.
The next stat to look at is the ratio between your customer lifetime value (LTV) and the CAC. Your LTV is the amount of money on average that you earn from a customer during the entirety of your relationship with them. The ratio of this figure to your CAC is essentially the ROI of your sales and marketing departments.
To calculate the LTV:CAC ratio, just divide your LTV by your CAC. So, using the previous example of a £2,500 CAC: if your LTV is £15,000, then your LTV:CAC ratio would be 6:1, or 6x.
How to improve LTV:CAC ratio
Most investors and board members want at least 3x, so if you’re not hitting that number, there are a couple of things you can do:
- Reduce CAC
- Increase LTV
Here are a few ideas for increasing LTV:
- Use your CRM and marketing automation to identify up-sell and cross-sell opportunities and follow up on them automatically
- Create and deliver content to help your customers make the most of their investment
- Collect and action feedback regularly
- Offer on-demand support channels
- Encourage longer billing cycles
- When the time is right, increase your pricing
For most of these ideas, a robust CRM and marketing automation tech stack is required, so your best bet is to find an all-in-one solution (like HubSpot) to enable efficient and measurable implementation of these strategies. Click here to speak to our Growth Consultant about a demo.
3. Revenue attribution
Once you’ve delivered on the other 2 more important metrics, it’s time to start looking at the nuance of your marketing performance whilst still keeping the focus on the bottom line. Revenue attribution reports allow you to attribute the bottom line to your different marketing channels.
With HubSpot’s attribution reporting, there are different models you can choose, allowing you to focus on the interactions you find most useful:
- First interaction: awards 100% of the credit to the first interaction with associated contacts
- Last interaction: awards 100% of the credit to the last interaction with associated contacts before their first conversion
- W-shaped: awards 30% of the credit to the first, lead created, and deal created interactions, sharing the remaining 10% between all other interactions
- U-shaped: awards 40% of the credit to the first and lead created interactions, sharing the remaining 20% between all other interactions
- Full path: awards 22.5% of the credit to the first, lead created, deal created, and closed won interactions, sharing the remaining 10% between all other interactions
- Linear: awards equal credit to all interactions
For each of these models, you can choose whether you want to view the data based on just marketing activity, just sales activity or both.
This means that you can see very clearly how much revenue is coming from email marketing, organic search, paid media, or any other sources based on what your priorities are.
How to improve attribution
Because improvements depend on individual channels, here are some recommendations instead for improving your attribution reporting strategy:
- Make sure you’re using a software that adapts and updates these automatically
- Use multiple models for different purposes so that you have the full picture
- For marketing-related conversations, don’t be afraid to use marketing activity only
- Use filtering to see how the revenue attribution changes for different industries, personas, etc. in order to better inform your marketing strategy moving forward
We know you’re all about your KPIs, but it’s important to make sure you’re presenting only the most important ones to senior leadership. With these basic stats, you’ll be able to communicate effectively about the value of your work and use that success as leverage for more budget and new initiatives.
To learn more about how to improve these KPIs in your organisation, click here to book a call with our team!