If your farm needed some new water wells, which drilling contractor would you hire?
What questions would you ask? What metrics would you look for?
You might start here:
- In the last year, how many wells did you start drilling?
- Of the wells you started, in how many did you strike water?
- How much water did each well produce?
- How long did it take to drill the well?
- How much did it cost to drill the well?
If you knew the answers to these questions, you would not only understand the results each contractor produced, but also the key factors that contributed to their results.
Good drilling contractors will use scientific methods to determine where they are most likely to find water. They won’t just guess where to drill. Because they planned carefully where to drill, more of their wells will reach water. Not only will their wells reach water, more of them will be high-producing wells.
The best contractors will find water-producing wells, they’ll take less time to drill, and their costs will be lower.
Mining for revenue is like drilling for water
Your executive team looks at the marketing and sales function in the same way that you might examine a drilling contractor. They have asked you to drill for revenue and they use just a few key metrics to determine how well you are doing.
The executive team expects Marketing and Sales to produce consistent streams of revenue at a low cost. They don’t want surprises. They not only need to see a revenue forecast, they need to see the factors that produce the revenue. These metrics give them the confidence that Marketing and Sales can deliver on the forecast.
What are the key metrics for Marketing and Sales?
The executive team doesn’t want to know all the details of the activities in Marketing and Sales. They want to see just a few key metrics.
Like the farmer who needs to hire a well driller, they want to know if you are looking for revenue in the right places and that you can convert these leads into revenue. They want to see that the cycle time to convert a lead is low. They want to lower their cost of customer acquisition.
In a short report, David Raab reduces the metrics of Marketing and Sales to five key numbers.
- How many leads did you produce in each acquisition program?
- How many leads converted into customers?
- What is the revenue per new customer?
- What is the time to close a new customer?
- What’s the cost to acquire a customer?
These five metrics (leads produced, close rate, revenue per new customer, time to close, cost per close) give marketers a clear picture of the value they’re producing and the factors contributing to their results. Putting them in context by adding trends shows whether performance is improving and what is driving any changes.
Good sales and marketing groups are like good drilling contractors. They will use scientific methods to determine their best leads. They won’t just guess which are the high quality leads. Because they nurtured their leads carefully, more of their leads will turn into customers. Not only will more leads become customers, more of their customers will have high lifetime value.
The best Marketing and Sales groups will be reliable revenue-producers, they’ll take less time to win customers, and their customer acquisition costs will be lower.
Photo Credit: Drew Brayshaw