Metrics that Matter to the Chief Marketing Officer
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Over the past few weeks Dave Kellogg, my co-host on the SaaS Talk ™ with the Metrics Brothers podcast, and I have discussed and debated the top metrics for the Chief Revenue Officer, Chief Marketing Officer and Chief Customer Officer in a B2B SaaS company.
I thought a newsletter edition highlighting the Top Five CMO Metrics would be a great follow-up to the Top Five CRO Metrics edition.
I also want to highlight upfront that Dave Kellogg recently wrote an authoritative article on “The Top 7 Marketing Metrics for a Board Meeting or QBR”. Naturally, some of those metrics have been included in the Top 5 featured in this newsletter. Some are presented with a similar perspective but with a distinct emphasis on what a CMO should aim to deliver, rather than just what they should report on.
Chief Marketing Officer: Top Three Responsibilities
I segment the primary responsibilities of the Chief Marketing Officer (CMO) in a B2B SaaS company in three categories including:
Create awareness for the brand
Generate demand that converts in revenue
Establish thought leadership for the category
This edition of the newsletter is not focused on discussing the role of the CMO, but rather how a Chief Marketing Officer should measure and report on the business impact of Marketing. However, if you're interested in engaging discussions with leading Marketing executives about the role of a CMO in B2B SaaS, here are four podcasts that make for great listens:
Podcast Links: Udi Ledergor, Matt Heinz, Latane Conant, and Jon Miller
Chief Marketing Officer: Top Five Metrics
#1: New and Expansion ARR
Let’s face it, if you are a member of the executive team, including as an experienced Chief Marketing Officer you share the company level goal of revenue generation and growth. In 2023 and 2024, this means “efficient revenue growth”.
The cost of acquiring one dollar of new ARR continues to increase as measured by the CAC Ratio (#4 CRO Metric in edition #5). One strategy to enhance efficient growth has been to increase the percentage of New ARR coming from existing customers versus new logo customers.
Every CMO should start with the fundamental belief that they CO-OWN New and Expansion ARR in partnership with the CRO. In addition, a best in class CMO will ensure they know how every dollar of Marketing investment performs in the context of both qualified pipeline and new ARR. In companies where I see a true partnership between the CRO and CMO, built on the foundation of co-owning revenue growth, the need for discussions about alignment is eliminated. This is because their relationship is founded on a shared goal, which is the top predictor of both role security and company performance.
#2: Inbound Marketing Pipeline Performance
The underlying premise is to simplify the definition of an “Inbound Marketing Lead” which converts into a qualified opportunity in the pipeline.
To eliminate all debate on which “attribution model” to use (they all are suspect), Inbound Marketing Pipeline for this purpose is simply defined as:
“All pipeline that comes from an inbound handraiser that is specifically requesting an activity that requires meeting with a sales person”
An inbound marketing opportunity may be from a contact us form, request a demo form or even a chatbot.
The primary metrics that a CMO should monitor at least weekly, but preferably daily include:
Inbound Marketing Qualified Pipeline Generated measured both by the number of opportunities and the dollar value of qualified pipeline generated in Stage 2 and above.
Inbound Marketing Qualified Pipeline Conversion across each primary stage of the customer acquisition funnel including:
MQL to SQL
SQL to SQO
SQO to Closed-Won
Inbound Marketing Pipeline Coverage Ratio as measured by the number of qualified opportunities required to close “X” number of opportunities and the qualified pipeline required to close “Y” dollars of ARR in the quarter. It can be debated as to what point in the current quarter this measurement should be taken, but for directional purposes it should be in the first “7” days for opportunities less than $10K ARR and no more than “21” days for opportunities greater than $25K ARR.
One of the common questions I get asked is “how do I measure the return on non direct response marketing investments such as organic social or media including podcasts?” By tracking and measuring “inbound marketing qualified pipeline” as a percentage of all qualified pipeline over multiple quarters, the trends should highlight that inbound marketing pipeline begins to grow materially as a percentage of total pipeline.
#3: Pipeline Cost and ROI
In the era of efficient growth, it is equally important to understand both “how many” and “how much” in the world of lead and pipeline generation. For this purpose, I recommend the following Marketing Pipeline ROI metrics:
Cost per “inbound marketing opportunity”. This metric is solely focused on the demand generation costs per qualified opportunity, and does not include all fully loaded Marketing costs (fixed + variable).
As we evolve from pipeline cost to Marketing ROI, I recommend the following two additional metrics:
Marketing CAC Ratio. This metric moves beyond looking at only the cost per opportunity on a variable basis and expands the concept of Marketing ROI to the fully loaded costs of Marketing divided by total dollars of qualified pipeline generated and total dollars of new ARR generated.
Sample formulas are:
The above does not dive into the granularity of channel or program specific Marketing ROI, which will often only use variable expenses allocated to the specific channel or program. This works well in paid media or other programs which are primarily comprised of variable expenses, but does not provide a holistic view of how the overall Marketing spend is performing measured against the two primary outcome measurements: 1) Qualified Pipeline; 2) New ARR.
#4: Awareness
I was debating on including this metric, as it can be difficult to measure. Moreover, this can be chalked full of vanity metrics that do not directly correlate to qualified pipeline and new ARR.
Increasing awareness can be accomplished by both “brand” and “category” centric investments. The podcast above featuring Udi Ledergor from Gong provides an excellent example of how investing marketing dollars into category creation, in this case, "Conversation Intelligence" had a direct positive impact on the number of times direct organic search results highlighted "GONG" on the first page of the Google search results.
For me, the best way to measure the direct impact of awareness investments by Marketing include:
Percent of Qualified Pipeline from Inbound (including organic search)
Percent of New ARR from Inbound
2/4/6/8 quarter trends for Inbound Marketing pipeline and revenue
Though there are other ways to measure awareness such as media coverage, social media engagement and organic search performance, they are all primary input variables to the two metrics that matter most which are qualified pipeline and new revenue.
#5: Sales and Customer Success Satisfaction
The goal of “alignment” is a much used, and frankly overhyped mantra often discussed by employees in companies that exhibit friction between GTM functions and/or GTM executives who have experienced the negative impact of misaligned Marketing, Sales and Customer Success organizations.
The concept of this metric is simple, the CMO should be surveying the satisfaction of individual contributors, front line managers and second line managers in the “revenue generation” functions they are supporting, including Sales and Customer Success. Notice I skipped the CMO getting feedback via a survey from the head of Sales and head of Customer Success, as this feedback should be built into the operating cadence, culture, and conversations they are having daily.
CMO Performance Metrics go beyond Marketing Measurements!
As you can surmise from the above, the best in class Chief Marketing Officers want to be measured by those metrics that create enterprise value. At the end of the day, qualified pipeline and ARR are the two primary metrics that have the highest correlation to revenue growth and enterprise value. Yes, it is critically important to understand the multiple variables and signals that serve as leading indicators for a CMO, as they provide context for where Marketing investments in the future will optimize efficient growth. At the end of the day, the Chief Marketing Officer who acts as if they own the entire pipeline and shares ownership of both new and expansion revenue will become an indispensable partner to the CRO and a trusted resource by the CFO and CEO!!!
For the love of SaaS Metrics!!!
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