David Scott on Metrics to Measure Marketing Success

Photo of David T. Scott, author of The New Rules of Lead GenerationThe following is a guest post from David T. Scott, author of The New Rules of Lead Generation: Proven Strategies to Maximize Marketing ROI.

As marketers, we feel like we need to use all available channels to reach new customers. A well-rounded marketing mix is, after all, one of the cornerstones of sound marketing theory. But this multichannel strategy won’t work if marketers can’t accurately measure and compare performance between each of these channels. The sad truth is that many marketers face this very challenge every day.

The inability to measure success makes it difficult for marketers to identify both the channels that merit further investment and the channels that aren’t working. Instead, marketers resort to measuring the performance of each individual channel on a campaign-by-campaign basis, doing their best to decide if the math works out.

This approach doesn’t give marketers the higher-level insights they need to build successful lead generation programs. Even worse, some marketers neglect a data-driven approach entirely, preferring to build their strategies on a foundation of intuition and gut instinct. This is inexcusable in today’s data-rich marketing paradigm.

Marketing vendors don’t make it easy to measure across channels. They tend to sell their inventory along channel-specific cost structures. For example, vendors typically sell display ads on a cost-per-impressions-delivered (CPID) basis, search engine marketing ads on a cost-per-click (CPC) basis, and email and direct mail lists on a cost-per-thousand (CPM) basis. What’s more, marketers tend to evaluate their campaign performance along these same metrics, further confounding cross-channel measurement.

But there’s an easy way to conduct a clear, accurate analysis in spite of these complications.

Here’s what that solution looks like:

 Know what makes a potential lead a qualified lead.

  • A potential lead must both take an action that shows an interest in your products or services, and be qualified to purchase your product or service.This action could be a simple as downloading a whitepaper or as involved as speaking with a member of your sales staff.

Calculate your target cost-per-lead (CPL).

  • CPL tells you the exact price you pay every time a potential lead converts to an actual qualified lead. You can measure all marketing channels by CPL, and it’s the most important metric you can track.
  • Your target CPL is the amount that you’re willing to pay for a qualified lead, and it directly influences the ROI you want to see from your lead generation program.

Calculating the average lifetime value (LTV) of your customers is the key to further understanding this ROI.

  • LTV is the total value of a customer throughout their relationship with your company.
  • For example, if a typical customer buys 10 times at a value of $100 per purchase, that customer is worth $1,000 to your company. By looking at LTV, you can determine if your marketing expense will result in the ROI you want to see.

Once you have your LTV figured out, use that number, along with your ideal CPL, to calculate your target ROI using the formula below:

  • (LTV-CPL)/CPL=Target ROI.
  • With these numbers in hand, go ahead and calculate the actual CPL and ROI you’re seeing from your various lead generation channels.

Compare this actual number to the targets that you want to hit.

  • If your actual CPL and ROI beats your target CPL and ROI for a certain channel, then that channel merits further investment.
  • On the other hand, if your actual CPL is higher than your target CPL, then you need to make changes to your campaign. Those changes could include altering the offer, revising the copy and design, or even changing vendors in the hope of better pricing.

If the actual costs don’t meet your target metrics, stop using the channel.

  • Not every lead generation tactic works for every brand, and you shouldn’t waste time and money trying to force something to work that doesn’t.
  • Instead, use the process I’ve explained to identify the lead generation channels that work best for your brand, and tweak your campaigns along the way until you reach the best possible performance.

If you can implement this process successfully, you’ll make better use of your marketing budget, effectively identify the right lead generation channels for your brand, and ensure that your lead generation strategy delivers the greatest possible impact to your organization’s bottom line.

Jacket Image, The New Rules of Lead Generation by David T. ScottDavid T. Scott is the founder and CEO of Marketfish, a data management and lead generation platform. Prior to Marketfish, David served as VP of Marketing for PeopleSoft and Intermec. His management pedigree also includes Boston Consulting Group and General Electric. He has also contributed articles and insights to Forbes, BtoB Online, Direct Marketing News, and Business 2 Community.

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One response to “David Scott on Metrics to Measure Marketing Success

  1. Frank Viola

    You forgot to mention your tenure at Entellium

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