Marketing Metrics Must Predict as Well as Describe

In a recent post at Marketo's B2B Marketing and Sales Blog, Jon Miller identified six categories of marketing metrics to avoid. Jon's primary criticism of these metrics is that they relate very little to the financial outcomes (revenue growth and profitability) that are of the greatest interest to CEOs, CFOs, and other senior company leaders. When marketers use these kinds of metrics, it doesn't help their credibility in the C-suite.

Here are the six categories Jon identified:

• Vanity metrics - These are "feel good" measures such as press release impressions, Facebook "Likes," and names gathered at trade shows.
• Measuring what is easy - These are metrics that take the place of revenue and profit measures because they're easier to capture.
• Focusing on quantity, not quality - A good example is measuring the quantity of leads generated, but not their quality.
• Tracking activity not results - Senior company leaders care about results, not activities.
• Efficiency instead of effectiveness - Effectiveness metrics do a better job of convincing company leaders that marketing delivers real business value.
• Cost metrics - Jon contends that these are the worst kinds of metrics to use because they frame marketing as a cost center, rather than a revenue generator.

I agree with Jon that marketers should usually emphasize revenue and profit metrics when communicating with CEOs and CFOs. However, it's often necessary to use other types of metrics to provide a complete picture of marketing performance. This is particularly true when you need to communicate to senior company leaders why and how current marketing activities and programs will drive future revenue growth.

One limitation of financial measures is that they are lagging indicators. They measure the financial consequences of past marketing activities, but they can't measure how today's marketing activities will affect future financial performance. You can, of course, use financial projections, but unless those projections are supported by sound and convincing evidence, their accuracy and value will be questioned.

In many cases, therefore, the most meaningful marketing metrics will be non-financial measures that are leading indicators of future financial results. When marketers use these kinds of metrics, they must be prepared to demonstrate that the metrics they've selected are truly leading indicators of future financial performance. In other words, you must be able to "connect the dots" between the metrics you're using and the financial results that senior leaders care about.

For example, a company blog rarely produces revenues directly for a B2B company. Not many people will read your blog and immediately call you to make a purchase. However, a blog can be an effective tool for attracting the attention of potential buyers and generating leads for your business.

The most obvious metric to use with a blog is "number of readers," but that metric will not be compelling to senior company leaders if it's used in isolation. To make this metric meaningful, you need to demonstrate that increasing the number of blog readers will contribute to future revenue growth. More specifically, what you need to do is "connect" blog readership to revenues by providing your senior leaders answers to the following questions:

• How many blog readers register to obtain access to other content resources?
• How many of these identified leads are affiliated with organizations in your target market?
• How many of these identified leads become sales-ready leads?
• How many of the sales-ready leads become legitimate sales opportunities?
• How many of these sales opportunities result in a closed sale?
• How much revenue is produced by these sales?

When you answer these questions, you can link blogging to revenues and demonstrate the value of your blogging program to senior leaders.

Including non-financial leading indicators in your marketing measurement system is particularly critical if your company offers complex products and has a long revenue generation cycle. In these circumstances, many marketing programs will contribute to revenues that won't show up on the income statement for several weeks or months. Leading indicator metrics provide the mechanism for demonstrating the value of marketing programs that take time to bear fruit.