Looking for a guide to building marketing funnel reports? You’re in luck!
In our previous post, we shared the primary marketing metrics a B2B business should measure to track marketing effort and performance.
In this post, we want to follow up by discussing how to build reporting around those metrics as it relates to your marketing funnel.
In the spreadsheet below are several columns that list many of the metrics we spoke of in our previous post.
We’re going to walk through each of these terms briefly, apply them to both an inbound and outbound marketing example, give tips on how to analyze the data, and finish with the next steps to help you get started.
Are you ready? Let’s go!
First, let’s briefly recap a few key terms to make sure we’re all on the same page.
Key Definitions For Your Marketing Funnel Report
Channel: the main route for marketing efforts. In this case, either inbound or outbound.
Inbound: any kind of marketing-related program- search engine optimization (SEO), paid media, social media, content marketing (share and create content), podcasts, CTAs, webinars, syndication, and sponsorships, etc.
Outbound: encompasses sales process activities like the sales team doing outreach to the target audience or prospecting of some type.
Names: potential customers who have never engaged with the company.
(Positive Replies) a.k.a. Leads: people who have engaged with the company and given their contact information.
Budget: the amount of money dedicated to marketing efforts increasing brand awareness.
Marketing Qualified Lead (MQL): leads that have met a set of criteria and are qualified for marketing.
Note: This is typically a points-based system where points are assigned based on engagement activities like filling out a form, downloading a whitepaper, registering for a webinar, attending events, etc.
Once somebody hits a certain number of points, they become a marketing qualified lead. Qualification can also vary by stage.
Cost per MQL: Budget/number of MQLs.
Conversion Rate (CVR): The percentage of MQLs that become SQLs.
Sales Qualified Lead (SQL): the number of MQLs that meet BANT criteria during the qualification call and are ready for a sales meeting.
BANT: budget, authority, need, and time.
Cost per SQL: Budget/number of SQLs.
Conversion Rate to an Opportunity: The percentage of SQLs that become opportunities.
Opportunities: SQLs that have moved through the sales qualification process and are ready to be closed.
Average Contract Value (ACV): The average deal size for a close won opportunity.
Pipeline: The ACV x the number of opportunities.
Cost per Opportunity (CPO): Budget/number of opportunities.
Close won rate: the percentage of opportunities that moved to close won.
Customer Acquisition Cost (CAC): Budget/number of close won deals.
Revenue: ACV x close won deals.
ROI: Revenue / budget x 100.
Lifetime Value (LTV): The number of years a paying customer renews their deal.
Total Lifetime Value: Revenue x LTV.
CAC to LTV Ratio: CAC / LTV.
Reporting for the Inbound Marketing Funnel
Now that we understand the difference between inbound and outbound marketing strategy, let’s walk through an example for inbound.
Usually, you start with a budget and a goal to drive leads to the business. So, let’s say for example the marketing budget is $15,000, and the marketing team generated 100 high-quality marketing qualified leads. This means that the cost per lead is $150.
Once leads become MQLs, they then get transferred to the sales cycle.
Let’s say, hypothetically, that the sales team converts 12 of those MQLs into SQLs, which gives us a cost of $1,250 per sales qualified lead.
Those 12 SQLs do a demo, and at a 30% clip, we now have 3.6 SQLs that have moved to the next stage- an opportunity. Therefore, you now have $180,000 in marketing-generated pipeline.
In order to figure out what the cost per opportunity is, we’re going to take the budget and divide it by the number of opportunities which gives us a cost per opportunity of $4,167.
You have roughly 4 opportunities, and if you close at a rate of 25%, you have $50,000 in revenue.
To calculate the Customer Acquisition Cost (CAC), we divide the number of deals won by the budget. That ultimately tells us what the return on investment (ROI) is for the marketing effort.
In this case, it takes $15,000 to make $50,000 which is a pretty decent ROI. But it doesn’t stop there.
You also want to look at, from an operational perspective, the lifetime value of the customer. If you don’t know this from the beginning, you can put some placeholders here and start doing some modeling to see what it will look like.
For this example, we’re going to say that it’s 3 years. So the lifetime value of that account is $150,000. Then we want to compare the CAC to the lifetime value ratio and we want it to be at least 3:1.
From an investment perspective, the inbound marketing program in this example is going very well, with a reasonable cost per MQL and SQL.
Reporting for the Outbound Sales Funnel
For outbound, the math is a little bit different in that sales prospecting has a different workflow. Typically, you first start your prospecting work by building a list. You can either buy pre-built or custom lists, make them yourself, or use software that can help you build lists, with automation, internally.
In addition to the cost for your lists, let’s say you also set aside $15,000 for the budget. You get 1,000 names, run your email sequence and outreach touchpoints, and you end up getting 100 positive replies, or 1% CVR.
We wouldn’t call these MQLs because they didn’t come from any marketing programs. Because it’s a sales effort, we’d call these SQLs.
After qualification, the SDRs are going to book a meeting. In this example, they ultimately get 8 SQLs that move to the next stage of the funnel and convert at the same percentages as our previous example.
You can see in this scenario, that the CPO and SQL cost is a lot higher. The customer acquisition cost is also higher, but you’re getting the same amount of money. If your LTV is three years, then your ratios are still solid.
These are the kinds of benchmarks that you want to establish for your own company. From a financial perspective, business owners may be willing to break even on year one, because you know you’re going to make it back on year two and three. While others are only going to be comfortable with a faster payback. It really all depends on how your business is set up and what your growth goals look like.
Evaluating Your Marketing Funnel Metrics
The most important pieces to look at this sales funnel stage are going to be the cost per opportunity and the return on investment. From our experience, we’ve seen the cost per opportunity be as low as $300-$600 and as much as $5-7,000. Whether or not these numbers fit your model will ultimately depend on how much you sell your product or service for and how long you think customer retention is possible.
In my opinion, in most cases, you want to try and get a 5X return on any marketing spend that you have.
The reasoning for that is if you generate $1m in revenue through marketing campaigns, and 20% of the revenue is your marketing cost, then you’ve spent $200k to get that done. Thus the 5x return on your spending.
You now have $800,000 left, and when you take into consideration your cost to build software, taxes, sales commissions, a customer success team, rent, etc- you’re eating up a lot of profit on costs.
Obviously, you want the marketing percentage to be as low as possible so that you can get as much return as possible on your investment.
The minimum should be a 5X return unless there are strategic reasons for it to be less than five. For example, if the ACV is really high.
If it’s your first time running reports and you haven’t had a chance to optimize your lead generation efforts or the customer journey (buyer’s journey), then you can set 5X as a goal to work up to.
Another way to look at it would be to say that if you can get anywhere from 8-12X your money then you’re basically saying that anywhere from 8 to 12% of overall revenue expense is going to your marketing costs, which is obviously a much better number.
As a marketer, if I were evaluating this track, these are the questions I would ask.
- Why is CPO so high?
- Why is the ROI so high?
- Can we get a better conversion rate for MQL to SQL?
- Which channels should we invest more in because they’re top performers?
Then I’d think about ways to optimize the funnel and offer suggestions.
- Perhaps there are improvements that we need to make on the SDR team to get it from 8% to 16-17%.
- Maybe we need to find ways to improve the conversion opportunity for the sales team versus the SDR team versus the sales team.
- Maybe there are ways to help improve the close won rate.
Take Your Marketing Reports To The Next Level
These are the metrics that you should always be looking at.
Hopefully, this gives you a sense of the way that you should be thinking about your metrics in terms of the marketing funnel, all the way from the very top of the funnel with the lead, through the middle of the funnel with customer pain points, to the bottom of the funnel with revenue.
The quality of your metrics is only going to be as good as the tools that you use to capture this data. If you haven’t invested in a CRM, like Salesforce, Hubspot, Sharpspring, or Pipedrive, then I would strongly consider checking those tools out.
For example, with Salesforce, you can have a dashboard of reports that give you this view and break it out by the different types of inbound and outbound campaigns you have running.
Again, inbound could include content marketing (i.e. blogging, SEO, landing pages, infographics, case studies, etc.), paid media (i.e. Google Search ads, Facebook ads, LinkedIn ads, etc), email marketing, etc.
If you’re running outbound campaigns, then the data you get from Salesforce will help you to make decisions that accelerate or improve the different programs that you’re running from a pipeline perspective.