If you were around in the 1990s, you might remember the mysterious optical illusions known as Magic Eye. They were like peering into a 2-D kaleidoscope. If you looked hard enough, something magical happened. From the messy phantasmagoria leaped an eye-popping sight: a 3-D fighter jet, a dragon, or a skyscraper. The remarkable images were always there—you just had to learn how to look at them the right way.
As marketers, we often have our own Magic Eye of data to sort through. Marketers who relied on traditional metrics are now looking for the right way to analyze their data to reveal an important measure of marketing performance: revenue.
How can you learn a new way to look at your data to uncover how marketing drives revenue? Luckily, just like a Magic Eye, it’s already there if you know where to look. Let’s put on our geek hats and dive into revenue marketing metrics and KPIs.
Why do revenue marketing metrics matter?
Firstly, marketers are becoming more and more revenue-driven. While revenue was always an important consideration, it is gaining more traction as a measure of marketing performance. Marketers are realizing that relying purely on traditional marketing metrics does not give a complete picture of the impact of marketing. According to Hubspot’s 2021 Marketing Statistics Report:
Secondly, revenue marketing opens up new possibilities in terms of measurement and analysis, ultimately revealing new sources of revenue and growth. When you focus on revenue marketing, you start eliminating a lot of siloing that happens in many organizations. If you are looking only at traditional marketing metrics, you tend to overlook the impact of marketing on the actual sales numbers.
Case in point: If your sales team is routinely complaining that the leads passed to them are not “qualified enough,” then maybe you should start tracking SQLs and actual sales figures as a measure of the marketing team’s efforts. This, in turn, ensures that the quality of the leads generated by marketing goes up. It’s a very novel way of measuring marketing performance.
Finally, with revenue marketing, you as a marketer can implement KPIs that accurately reflect your contribution to the revenue organization.
Look at it this way: which of these statements has a higher impact?
Marketing had a huge role in meeting Q3 targets.
Marketing attributed revenue accounted for 65% of Q3’s revenue.
In this article, we are going to dig a little deeper into various revenue marketing KPIs and metrics you can consider implementing in your organization to reveal the real picture of how your department affects overall sales. Let’s roll…
Revenue Marketing Metrics: Business Outcome Metrics
Before we dive into the types of metrics, we need to differentiate between revenue marketing metrics and traditional marketing metrics.
The difference is that revenue marketing metrics use business outcome data. So what is business outcome data?
Business outcome data has two parts:
On one end, you have the marketing funnel. At the other end of the spectrum, you have the financial outcomes coming from that funnel. Let’s dig in…
- Financial Outcomes
Here we look at the final dollar value generated (or expected to be generated) by a marketing activity. We look at measures like revenue, pipeline, and Lifetime Value (LTV).
Your marketing funnel is basically a lead to your customers. From a revenue marketing point of view, each stage of the funnel is a way to model the milestones that your prospects go through as they move towards becoming customers and generating revenue.
In other words:
Funnel Stages Are Proxies To Revenue.
If you have a well-modeled funnel with clear conversion rates and definitions per stage, you can use your funnel to predict future customers, and as a result, predict the revenue outcome.
Now let’s look at the most popular types of metrics used by top revenue-minded marketers.
1. Volume Metrics: Pinpointing Marketing Impact
These metrics indicate how you’re doing in terms of volume (scale/effectiveness), and you can divide these into two broad categories:
Financial Outcome Metrics
These metrics either directly measure revenues or they are proxies to revenues. Some examples of direct revenue metrics would be pipeline, revenues, and LTV.
- Revenue Metrics: Your revenue, pipeline, and LTV.
- Predicted Revenue: Each Funnel stage contributes to the revenue. For example, if X MQLs lead to 0.2X customers, which results in Y revenue, we can calculate the expected revenue per funnel stage. The pipeline metric works on the same principle but for opportunities.
In other words, you can use your funnel to predict future revenue. And we can dig down to the individual stages of the funnel and get the revenue contribution of each stage as well.
- Revenue Forecasting: But that’s not the end of it. You can go further and use more advanced forecasting methods to generate a more accurate forecast of the financial outcomes that consider more variables than just conversion rates.
Let’s look at volume from the funnel metrics side.
- Customer Accounts Won / Deals Acquired: Your marketing funnel is also a valuable source for a different set of metrics. As described above, when it comes to funnel metrics, we count the “units” that go through the funnel—i.e., 50 leads/MQLs/Opps/Customers, say.
- Proxies To Accounts Acquired / Deals Closed: You can view funnel stages as proxies to the accounts acquired or deals closed. You can drill down and evaluate each stage of the funnel for its contribution towards the final number. These would be the parameters from individual stages like leads, MQLs, and so on.
Here’s a handy-dandy table which summarizes what we’ve covered ‘til now:
|Metrics||Financial Outcome Metrics||Funnel Metrics|
|Direct||Revenue||No. of won deals (customers)|
|Proxy||Predicted or potential revenue (overall and per funnel stage)||Parameters from each stage (leads, MQLs etc.)|
Earlier in the article, we talked about the importance of having KPIs that reflect the marketing contribution to the revenue. Here are three ways in which revenue marketers can measure their contribution to the company’s total revenue:
1. Marketing Sourced Pipeline/Revenue
This is revenue that originated via a marketing activity—“the portion of the overall sales pipeline that marketing had uniquely initiated.”
When looking at your business through a first-touch attribution model, leads that generated revenue, and have a marketing activity as a source.
You can use this metric to determine how much marketing contributes to the revenue generation efforts, but it has its own downsides. Essentially, depending only on this metric will give you an incomplete picture of the marketing contribution.
In reality, you can look at this number as simply leads that were introduced by a marketing touchpoint. This is important, but as we know, there’s more to marketing than just creating that first touchpoint. Which brings us to our next metric.
2. Marketing Influenced Revenue/Pipeline
On the other end of the spectrum, we have marketing-influenced revenue/pipeline, where we count any revenue where marketing touched the customer anywhere throughout their journey.
We can immediately see the downside of this number. While we can show that marketing indeed contributed to the conversion efforts, we cannot quantify how much it contributed and in what way, since we attribute all revenue to marketing, assuming that marketing “touched” the lead at any point in time.
You can fix this with multi-touch attribution, which is how we’ll get to our third marketing contribution metric.
3. Marketing Attributed Revenue/Pipeline
With multi-touch attribution, you can now see how much revenue was generated by each individual marketing touchpoint.
Put it another way:
You can get the overall contribution of marketing to revenue,
You can also slice and dice into individual activities to figure out the contribution of each channel, asset, or campaign.
2. Cost-Efficiency Metrics
Cost-efficiency metrics use the same business outcome data but with an extra dimension added to the mix: marketing costs.
Adding the cost variable to our metrics provides a whole other dimension to marketing contribution analysis, allowing us to see the revenue generated and the cost of generating said revenue.
Conventional attribution solutions let you pull cost data from marketing platforms. But with some attribution solutions (including Infinigrow), you can also add offline data (such as event data, TV ads, and any other marketing activity), expenses, and even salaries to get a complete cost picture.
Let’s look at two main parameters:
1. Marketing ROI
Good old ROI gets more accurate with attribution and data structuring.
To get a crystal-clear ROI picture, marketers can get the ratio of attributed revenue to marketing spend.
Marketers can use their attributed revenue to see the true spend-to-attributed revenue ratio, providing accurate Marketing ROI.
2. Cost Per MQL/SQL/Opportunity/Customer
Like revenue and other financial outcome data, you can also get the costs for your funnel results. By crossing your funnel parameters—MQL / SQL/Opportunity/Customer—with cost data, you can see the costs of generating results throughout your funnel.
3. Time-based metrics
While revenues, volumes, and cost are all important parameters, we can’t ignore speed. Since all marketing goals are ultimately time-bound, we need to consider the time factor as well.
Just like cost-efficiency metrics, time metrics cross business outcome data with an additional dimension—time.
Let’s look at some basic Time metrics:
Funnel Velocity Metrics
- Sales Cycle: This is either Opportunity to win or lead to win time. This is a basic measurement of how fast you’re making money. This looks at how quickly the leads are moving through your pipeline and making revenue.
- Funnel stage velocity: This metric breaks down the sales cycle to show how fast prospects move through each stage.
You can get the individual metrics on how quickly the prospects move through each stage.
For example, Lead-to-MQL velocity
Financial outcome velocity metrics
- CAC payback period: The number of months it takes for a deal to return/recover its investment (CAC), based on the deal’s recurrent revenue.
- Time To Impact (TTI): The time it takes for a campaign/content to drive a certain business outcome (usually a won deal), from its touchpoint in a customer journey to the conversion.
We love TTI here at Infinigrow. If you’d like to know more about it, we look at it in a bit more detail here.
- Time To ROI (TROI): The time it takes for a marketing activity to become ROI positive. Here’s a secret tip to get the Finance team on board with your budget using the power of TROI.
When you shorten the TROI, it can help you recover your marketing budget quickly. By using the returned investment and reinvesting it, you can create a “compounding budget,” a budget that grows as you earn revenue. That’ll definitely make the Finance team happy.
4. Cohort-based conversion rate
Another type of revenue metric you can look at as a time metric (since it also adds a dimension of time on top of existing funnel data) is Cohort-based Conversion Rate.
Here’s the problem with conventional funnel conversion rate measurement. B2B sales cycles take time. Let’s say you run a huge campaign that drives a crazy amount of top-of-funnel impact. But for that top-of-funnel activity to convert to opportunities/customers, it will likely take months. Let’s say your lead-to-opportunity velocity is 3 months.
To get an accurate measure of funnel conversion rate, this is what you need to do:
- Create a group of the leads generated 3 months ago. Add a time buffer to cater for variance. This group of leads is your cohort.
- Analyze how many opportunities were converted to date.
- Divide the number of opportunities by the number of leads in the cohort.
The result? A cohort-based analysis that shows you the true conversion rate of your funnel, over time.
BONUS: Adding A Forecasting Layer On Top Of Your Revenue Marketing Metrics
One unique element of revenue marketing is the goal of generating predictable revenue. To do so, we use forecasting to estimate the business outcomes of our activities.
While we touched on this above, forecasting can be effective on top of each of the above metrics.
Based on existing data and trends, you can use forecasting to predict:
- Future Revenue
- Predicted ROI
And lots more…
These forecast metrics are your North Star for your decision-making, an essential part of the revenue marketing framework in your company.
Ready to start analyzing your marketing performance through a revenue-driven lens? Just like the remarkable images buried in a Magic Eye, the information you need is already there.
Sometimes, analyzing your team’s contribution to overall revenue just takes a fresh perspective—a new way of looking at your existing behaviors. Using these revenue-driven marketing metrics, you can start to reveal your department’s overall effectiveness—and how you impact overall sales.