Getting to the Heart of Marketing Performance Measurement

Most executives are familiar with the Marketing Qualified Lead (MQL) metric that rose to prominence a few years ago. This simple and straightforward form of measurement was applied to the marketing activities of all kinds of companies to quantify the results of marketing activities.

As useful as this metric has been to the broad conversation about marketing, its practical application over the long-term requires a more critical examination. While MQL has certainly helped further the dialogue surrounding marketing operations overall, one more instance of the age-old breakdown between marketing and sales has taken place.  Can this current schism be addressed? Can a different measure of marketing performance benefit both sides?

Identifying Specific Shortcomings

Though qualified leads have certainly helped marketers adopt a scientific, numbers-based approach, this method has proven to be less useful for the sales pipeline. Two specific shortcomings have become evident:

  • Tracking the number of qualified leads does not necessarily reflect or meaningfully predict incoming revenue.
  • The rate of closed deals can fall despite application of the metric.

These two apparent shortcomings are closely connected. The emergence of these complaints actually points to a disconnection between sales and marketing.

What Can We Learn?

Because few companies are selling products within a rapidly expanding market, each team must acknowledge the parameters of the market where your products or services compete. Specifically, your team should quickly react the competition’s actions. The MQL metric as it is commonly applied cannot accomplish this in a direct manner; thus it fails to draw attention to this all-important aspect of revenue generation.

In most circumstances, there are a finite number of customers interested in purchasing your product. It can be reasonably concluded that a company’s industry peers are using lead generation methods of similar sophistication; competition for greater win rates between companies is the natural result. Additionally, there is likely to be an upper limit to the number of units sold within a period of time. Since MQLs cannot grow faster than the current market, the closing rates projected by the metric have logical limits.

Sales professionals will also point out that market influence should take into account customer behavior, another aspect that the qualified lead approach does not account for. In the past, the traditional B2B marketing model did not always recognize the way that customer activity influenced marketing programs. Once a customer buying cycle is applied to current marketing efforts, additional shortcomings of the qualified lead metric become evident.

Improving Metrics, Improving Performance

Though MQLs have been shown to have certain shortcomings, they can still be useful if they are applied correctly. Specifically, it is helpful to tie marketing performance to the conversion rate of closed deals. This is arguably the most important metric since it most clearly demonstrates the success or failure of all related metrics and strategies. If a large number of MQLs nonetheless have a low conversion rate, latter stages of the sales pipeline must be examined.

The emergence of competitive win rates is going to be the real evidence of an improved application of MQLs. Revenue growth never fails to be a strong measure of marketing performance, though customer retention rates should also be considered. Though we will no doubt see the emergence of increasingly nuanced marketing metrics, these two measurements remain valid.