Successful Quarterly Performance Reviews
What C-Suite Executives Want
Let’s face it, reporting mediocre marketing results to a C-suite executive board is as fun as a root canal. Almost every Vice President of Marketing enters quarterly and annual reviews with a sense of unease. This discomfort lies in the limited ability to provide the kind of metrics most C-suite executives want to see the bottom line of sales revenue against the marketing spend.
Reporting on marketing’s key performance indicators, or KPI’s, is critical within the domain of marketing operations. However, most of the time KPIs fail to make a true impact on the C-suite executives who generally think in two ways: revenues and costs. They know what the VP of Marketing was given for budget and the revenue goals that were set. So, reporting on the number of impressions, click-throughs, attendees, responders, and ultimately leads in the pipeline are just noise to these folks. They know there is some value to it all, but it is limited in most of their minds. In order for marketing to earn the respect of these vital stakeholders the key focus must be on business metrics that speak to the bottom-line revenue generated.
The KPI that Your C-Suite Wants
The challenge is that most marketing investments in social media, automated marketing, events, and collateral don’t have a direct line to revenue. Certainly, sales opportunities can be tracked within CRM to provide some level of visibility to the pipeline revenue they represent. Unfortunately, the links tend to be very limited and are often questioned as to the portion of credit to give to marketing.
To gain a solid footing in these quarterly and annual reviews, senior marketing executives must ensure their activities are tracked and channeled in a revenue-focused process that converts impressions, click-throughs, attendees, responders, and ultimately leads into bottom-line revenue. With more reliance on marketing to help companies acquire new business, there are some KPIs that the senior executive branches will want to hear about during reviews. Here is a short list of important revenue-focused KPIs that senior marketing executives should focus on.
Estimating Total Customer Acquisition Costs
Customer acquisition costs are best described as “estimates” because there are ultimately some cost components that extend beyond the marketing department’s scope to calculate even with the assistance of operations and finance. Marketing executives need to factor not just their overall marketing budget but also the labor costs of their teams and the sales teams supporting the efforts and engagements.
This requires the marketing department to act tactically and define which marketing activities are geared towards an installed base of accounts, which are geared towards Target Account Penetration (TAP) accounts, and which activities are across both. If programs are geared for customer retention and/or expansion, then they should be defined as such and revenue should be calculated based on figures being reported within your CRM.
New business usually involves TAP accounts, and marketing activities geared to TAP accounts should be identified as such. Marketing must assess the current volume of business that exists within each TAP account and define a revenue threshold as to when a TAP account can be categorized as acquired. The revenue threshold can apply just as well to TAP accounts that have little or no business traction existent.
Armed with the total marketing costs including budget expenditure and labor costs, a marketing executive can estimate the number of new accounts and total income marketing has helped obtain. A simple calculation of total costs divided by the number of new TAP accounts acquired will show the estimated average customer acquisition cost metric.
Senior executives may choose to further break up the costs in terms of how much of the total acquisition cost is owned by marketing and how much is owned by sales and operations. Collectively the three units provide the total estimated cost of acquisition of new customers.
Retention metrics must take into consideration current revenue levels by account against the new levels attained within a defined period of time. These revenue figures are then factored against the costs of acquiring the added business, much the same way as with TAP accounts.
Separating performance metrics by the two customer types (installed-base vs. TAP) is critical to give marketing a solid understanding of their impact on the bottom-line. Senior executives want to hear how these two figures compare. In other words, how does the revenue against the spend (or cost of acquisition) compare between a current customer and a TAP account?
Marketing can compare the total lifetime costs and revenue of installed-base accounts to the revenue attained and estimated revenue potential of a TAP account. These figures help companies determine collectively what their proportional focus should be between retention and net new. Both are critical to the growth of the company. Executives should keep in mind that there are always external market factors that influence the composition of sales and marketing focus. For example, the revenue growth within installed-base accounts often levels off in maturing markets. This drives companies to put an added focus on net new acquisitions (TAP accounts).
Marketing and sales departments often promote to customers the time to return on investment for their products and solutions. Internally, companies need to calculate the time to return and yield of their estimated customer acquisition investment. It is an interesting metric to consider. If your retention rates and average customer lifecycles are generally short, then high customer acquisition costs may be a concern to executive funders.
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Note: This post originally appeared at: https://www.linkedin.com/pulse/successful-quarterly-performance-reviews-jay-quinby
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