CMO of 6sense, taking the guesswork out of predictable revenue growth with the power of AI and insights to uncover buyers already in market.
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For years, I’ve been beating the drum about the issues of measuring marketing impact with marketing-qualified leads (MQLs): MQLs can be easily manipulated, they encourage working leads instead of accounts, and they aren’t a holistic measure of how you’re contributing to overall company success.
There are much higher-impact metrics that marketers should be literate in—ones that contribute to company valuations, health, revenue and efficiency. They’re the metrics your CEO and shareholders care most about, and they can show how your efforts directly contribute to your company’s long-term health. Here are a few of them.
Sales Efficiency: Win Rates, Average Selling Price, Cycle Times
Win rates show how our efforts contribute to closed deals. Competitive win rates measure how well we’re differentiating ourselves from the competition; noncompetitive win rates show how we’re doing at creating new projects. Win rate measures three things that are fundamental to early-stage growth: market demand, product-market fit and effectiveness of sales execution.
Cycle times and average selling price (ASP) can be indicators of whether marketing is serving up the most winning opportunities to sales.
These are basics that everyone probably understands, but marketers sometimes think they can’t have a significant influence. I disagree. These three metrics show whether you understand your market and ideal customer profile and how well you’re qualifying accounts.
Marketing’s Influence
Marketers can influence all three of these metrics by:
• Using intent data to get into deals early.
• Multithreading deals from day one.
• Getting serious about competitive intelligence.
• Understanding win-loss rates.
• Ensuring product marketing is effective.
Marketing can improve win rates through thought leadership, a compelling value story, high customer satisfaction scores and partnership with enablement. Earlier-stage education to create problem and solution awareness, creating urgency, and setting the stage for buyers to select your solution when they do decide to buy can also help.
To accelerate cycle times and ASPs, marketing can engage multiple stakeholders on the account and make strategic plays so that by the time the account is ready for sales outreach, the sales process will be faster, more successful and of higher value.
Revenue Retention
Gross revenue retention (GRR) measures how many customers you retain from one year to the next, not including cross-selling and upselling. Net revenue retention (NRR) is the same but does include cross-selling and upselling.
Early-stage growth companies should watch GRR, while midstage companies should watch NRR. Both are indicators of how much value you provide customers. GRR measures how many customers stick around; NRR measures that plus how much more those customers spend with you after the contract is signed.
Lower retention rates mean sales has to work harder to bring in revenue.
Marketing’s Influence
Customer marketing is more than case studies and references. It’s keeping customers engaged and happy so they’ll stick around—and be interested in cross-sells and upsells. That requires digging into customer data, identifying and dissecting patterns, and understanding use cases and the customer journey. All of that lays the groundwork for successful account-based marketing programs for existing customers that are just as compelling as those for prospects.
Rule Of 40
SaaS investing circles talk a lot about the Rule of 40—a ratio of revenue growth to profitability. To calculate it, add your top-line year-over-year revenue growth to your EBITDA margin. A result of 40 or higher is associated with a higher valuation. OpenView’s 2022 SaaS Benchmarks Report states that companies that perform best on two metrics—customer acquisition cost (CAC) and net dollar retention (NDR)—have both the highest median growth rate and the highest median Rule of 40.
Marketing’s Influence
I’ve already discussed how marketing can influence net dollar retention, and next I’ll talk about CAC. McKinsey lays out some other ways marketing can contribute to the Rule of 40:
• Allocate resources based on future customer opportunity, not current revenue, so you provide the most coverage to the highest-growth accounts.
• Get granular about operating data, and integrate it across the business into shared dashboards so marketing, sales and customer success can all see relationships between activities and growth. In my experience, having clear pipeline quotas and tracking them by GTM segment creates alignment across sales, marketing and customer success. It also allows us to drill into each channel to see which ones perform best by GTM segment.
• Use advanced analytics and machine learning in order to predict customer health, which can help with things like cross-selling/upselling and preventing churn.
Customer Acquisition Cost (CAC) And CAC Payback
CAC measures the sales and marketing spend to bring on a new customer. To calculate it, take your total sales and marketing expense and divide it by the number of new customers you attain. CAC payback is the number of months it takes to recoup that investment (sales and marketing expense divided by your ARR [new and expansion] times 12).
Marketing’s Influence
Sellers and marketers waste untold dollars pursuing the wrong accounts or pursuing them inefficiently. We can drastically reduce that waste by using data and AI to determine which accounts are the best fit for what we offer and are in the market to buy. Aligning those accounts across marketing and sales and reaching out to them in the right way, with the most relevant message at the optimal time, will reduce CAC and CAC payback periods significantly.
It’s important to be on top of your spend efficiency ratios. I like to track things like ROI for all major programs, cost of pipeline generated and pipeline per business development rep (BDR) to ensure we’re prioritizing investments that yield the most impact.
Elevate Your Game With Metrics That Matter
Do MQLs have a place in marketing? Sure. But you’re not doing yourself any favors with a singular focus. That’s not how you help build the type of company you want to work for, and it’s certainly not going to get you promoted.
Modern marketers meaningfully contribute to their companies’ success and can articulate their value across the organization. Get to know the metrics I’ve outlined here, and connect the important work you do to the most meaningful business measures.
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