WHICH REVENUE LEAKS SHOULD WE FIX?
In our first post we covered the four marketing performance reports that every board, CEO and CMO should track. To improve their performance metrics, marketers often throw money at the problem, hoping that an increase in marketing spend will result in a commensurate increase in marketing performance.
We’ve all heard the phrase ‘throwing good money after bad’. Consider this. Marketing is like a car. Unless you have a fine-tuned Ferrari, there may be things you can do to your car to maximize its performance for every $1 spent on gas. Imagine your car has a leaky fuel line, a dilapidated engine and rusty parts. Should you spend a lot of money on fuel knowing that much will be wasted? Or should you try and fix the drags on performance before spending your entire fuel budget? The reality is you need to both – you need to fix the car and drive it at the same time.
Now let’s get back to business. Leaks are areas where you lose customers. Every company has them. The question is what should you fix first? Where is your lowest hanging fruit? The following charts can help you determine where to focus.
1) Conversion rate trends over time
As mentioned in the previous post, it is very important to track progress around the different stages of the funnel. Tracking conversion rates from one stage of the funnel to the next shows you where you’re losing customers. Low conversion rates show high funnel leakage and revenue loss. As a general rule of thumb, marketing should focus on improving conversions at the greatest leakage points; those cinch points in the funnel where prospects fail to progress. If there are no egregious leakage points, you’ll get the highest ROI for your time invested by beginning at the bottom of the funnel and working your way up to the top. This helps ensure that active prospects in your pipeline immediately benefit from your improvements.
2) Funnel Stage Durations Over Time
As the saying goes “time is money”. If prospects stall at certain stages of your funnel, then your sales velocity will also be impeded. Duration is the measure of the average time it takes for a prospect to advance through each stage of the funnel. Similar to conversion rates, velocity measurement identifies chokepoints in the sales cycle that are slowing down deal flow. These areas generally benefit from marketing attention. Savvy marketers use the report below to identify the slow phases in the sales cycle. Then they provide tools and sales materials to lubricate prospects’ progression to the next stage. In other words, they help prospects say ‘yes’.
3) Net Promoter Score Over Time
How do you increase trial conversions, customer renewals and word of mouth referrals? You create a great product that delights the customer. How do you know if you’ve done that? You measure the Net Promoter Score over time. This is too important a metric to leave to occasional market research. You’ll want to operationalize this measurement so that you track it for every customer continuously over time. Want to do this? We’d be happy to show you how.
4) Churn/Retention Over Time
Customer churn is the silent cancer that has killed many a company. Sales and Marketing are humming along bring in hordes of customers but growth in total revenues falters. What’s going on? Customers are not renewing. We’ve all heard the adage that it is far less expensive to retain a customer than find a new one. Here’s the report that provides laser focus on a critical metric that is the key driver behind a customer’s lifetime value (LTC). By reducing churn, you increase the LTV of your customers which actually gives marketing more latitude in how much they can spend to acquire new leads. Fixing churn can lead to a positive virtuous cycle where everyone wins – the customer is happier and marketing has more budget leeway to get creative.
In this post we shared the core reports that helps marketers determine which revenue leaks to fix. Now that we have a well honed marketing engine, our next post turns to where to invest your discretionary marketing budget.