If you don’t know what’s working, how do you know what to change? So measure inputs (not outputs), measure buyer progression, and – don’t measure what you’re not prepared to change (or can’t).
To most ears, “Measuring Sales and Marketing effectiveness” sounds like a low priority. It may be on your B or C list, even on a good day. If you’re feeling less generous, you might even call it an academic indulgence and not consider it a priority at all.
But if you don’t know what’s working, how can you know what to change?
If you don’t know, then one idea is as good as the next. One person argues for their pet sales or marketing tactic and another argues for theirs.
Who wins? Seniority, or the loudest voice. What happens next is that you head into implementation, without a factual basis for the choice.
When this new tactic fails, you change – lurching from one great idea to the next, often never really giving the chosen tactic a chance to prove itself.
Warren Jackson, CFO of Hardbits, puts it simply:
But if you’ve read The Leaky Funnel, you’ll know he also said:
Too much measurement, or measuring the wrong things, is also a low-rent activity.
You can measure inputs:
- Marketing touches (direct mail, email, invitations)
- Sales activity (meetings, proposals)
If you measure how effectively these inputs progress buyers – you’ll need a common definition of the buyer’s journey – you can start testing changes to your tactics. A/B tests allow you to test possible changes. You might send the old letter to half of your list, and another letter with just one element changed to the other half. The results will tell you whether to change or not. There are some traps though, so discuss A/B testing with us before you try.
Here are a few practical ideas we’ve learned about measuring the funnel, from more than 200 sales and marketing effectiveness projects:
- Get a good contact management system. It can be a comprehensive system, an integrated and robust customer relationship management (CRM) system from one of the major vendors, or a simple and affordable desktop system such as ACT! or Microsoft Outlook.
- Make sure you record the date each opportunity progresses successfully from one stage to the next in the funnel.
- When you record an opportunity as lost, record the stage in the funnel the prospect had reached prior to leaking from the funnel, and the date it was lost.
- Extract this funnel data every month, and perform some basic analysis. Key things to look for include :
- How long does it take, on average, for prospects to move between each stage? We call this “lag”. Has lag changed for any stages? Are you getting better or worse at progressing buyers?
- What is our leakage for each stage? Has this got better or worse? “Leakage” is the percentage of prospects who fail to progress from each stage.
- Compare your measures with others – perhaps other divisions in your business, or other non-competitive companies. You may also wish to compare your funnel metrics with direct competitors through a trusted intermediary.
With these basic measures, you are now in a position to make two major changes to the way you manage effectiveness today:
- Build a model of your future funnel. Base this on your current effectiveness, and determine what your funnel (top, bottom and middle) needs to look like for you to meet your revenue targets. There will be gaps. From this basic model, decide what you need to change. Things you need to change will include :
- the top (size of target market)
- the bottom (revenue objectives) and
- the middle (how effective you are today)
- Measure the result of every change. Whether you swap tactics at certain stages, or change the way you execute the current tactics, you must measure the impact of the change. If it worked, keep the change. If it didn’t, go back to what you did before and move on to another tactic to test – either swapping the tactic or changing how you execute it.
As a general rule, you should test only one change at a time. Split your universe of prospects in two and make the change for just half of these prospects and then use the other half as a “control”.
The result of this attention to detail will astonish you in terms of sales generated where you felt there were none.