You measure what matters. And in 2023, demand generation metrics matter more than ever.
Budgets may have tightened, but you’re still being asked to generate more demand. In this environment, marketing teams need to prove their value to the business, which means adapting and improving how you talk about your approach and results. Here are four vital demand generation metrics every marketer must keep front-of-mind. Tightly define their application inside your organization and refine your messaging around them. Doing so will help you stay on track to hit your goals and make your team’s contribution more visible to your organization’s key stakeholders.
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We speak to Emma Moorman, Senior Product Manager at Informa Tech for her advice on how to define and refine the most important marketing metrics in 2023.
We asked which metrics marketers rely on the mostInforma Tech’s CMO Study¹ – which included 25 in-depth interviews across its global network – found that organizations most commonly use sales-qualified and marketing-qualified leads, plus cost per lead, as their core demand generation metrics. Although it’s one of the least used, net-new revenue contribution was highly valued as a metric. That’s likely because they’re difficult to implement and accurately track.
Most used demand generation metrics:
Least used demand generation metrics:
1. Informa Tech. (October 2022). Voice of the Customer Survey. |
Marketing-qualified lead (MQL)
- What it is: MQLs are prospects who have shown some level of interest by interacting with a call to action or digital content, like a website or social media post.
- What it tells you: Determines if your marketing attracts the right audience
- How you measure it: MQLs can be measured in different ways:
- Basic formula: MQL / total leads
- Formula comparing to sales-qualified leads (SQLs): MQLs / SQLs
- The data challenge: This lead generation metric demands close communication with sales to ensure you define leads by the same criteria. It also reveals data quality: are you sure your pool contains leads with the right budget, job title or need?
- Why it matters: This metric ensures you’re on your marketing game. It shows if you’re attracting the right leads and if your team and the sales team define quality prospects the same way.
Emma’s advice: “One of the changes we’ve seen over the years is marketing shifting to focus on revenue and opportunity. That means a lead that is qualified by an action – let’s say downloading a whitepaper – isn’t really describing how ready someone is, or where they are in their process. This means MQLs have become lukewarm in a space that’s demanding leading indicators and intent qualification.
“By definition, MQLs create separation between sales and marketing. One team fulfills its goal and passes it to the next. In an aligned approach, the focus isn’t the MQL, but high-intent leads that sales and marketing have defined and qualified together. Not only does this improve and create the right focus on qualified pipeline and close rates, it should have an impact on other metrics, such as CPL, too.”
How to make improvements: Move away from MQLs and SQLs and towards a unified lead definition that’s agreed and shared across sales and marketing.
Cost per lead (CPL)
- What it is: Cost paid for one interested lead
- What it tells you: Evaluates the effectiveness and efficiency of your marketing
- How you measure it: Total ad spend / total attributable leads
- The data challenge: CPL provides one of the most simplistic measurements of your marketing success. The challenge comes in knowing the standard CPL for your industry or business type. The other challenge is long-term tracking to ensure your CPL remains consistent.
- Why it matters: CPL is inextricably tied to what you’re selling. A CPL of $100 is more reasonable if you’re a luxury car maker versus someone who sells custom mountain bikes. Lead quality also matters. If you’re unable to convert leads to purchases, your CPL will rise. If your program worked in the past, but now attracts fewer qualified leads, you need to find the reason. Is it the campaign? Is it the targeted audience? Is it oversaturation? This information keeps your lead generation metric on target.
Emma’s advice: “While CPL gives us a useful metric to use as a proxy for efficiency of budget and alignment to ROI, it can be a challenge to use as a benchmark for the quality of lead coming in. When we sit in a CPL mindset and it’s a volume game, it might take us away from the real questions we want to answer: ‘Am I attracting my ICP [ideal customer profile]?’ and ‘How can I be sure where a lead is in the sales cycle?’ This means there could be a temptation to aim for lower CPLs, which may make your top-of-funnel number look great, but isn’t really moving you any closer to meaningful and quality lead generation. Furthermore, going for low CPL that isn’t producing quality leads will affect alignment and trust between sales and marketing.”
How to make improvements: Be clear about your ICPs and ensure you’re creating meaningful value in your content-centric lead generation. Help speed up the sales cycle by asking qualifying questions and use data (such as intent signals) to pinpoint where your leads are in the funnel.
Lead-to-opportunity conversion rate
- What is it: The percentage of total leads that convert into opportunities
- What it tells you: Measures the effectiveness of your sales process
- How you measure it: Leads converted into opportunities / total leads
- The data challenge: While the formula is simple, the definitions of “lead” and “opportunity” may be sticking points. These definitions depend on what you’re selling, your industry, or other variables relevant to your sales process. These need to be solidly defined before you start measuring.
- Why it matters: This demand generation metric measures sales success and provides insight into the effectiveness of your sales funnel.
Emma’s advice: “Alignment between sales and marketing works best when the team jointly look at revenue-focused metrics to guide and evaluate efforts – but many organizations are not consistently mature and still follow activity metrics. When sales and marketing are aligned on ICPs, the buyer’s journey and how they qualify where someone is in their buying journey – backed with a clear planned path of conversation and lead strategy – it removes the conflict around defining the lead-to-opportunity rate. It’s a metric that a well-aligned sales and marketing team should be constantly optimizing to help build pipeline and better forecasting.
“If we move away from the MQL and focus on sales-and-marketing-aligned, high-intent qualified leads, there’s no need for conflict. Because it’s not one team [marketing] hitting one metric before they pass the baton to the next team [sales]. The two teams are working together to define, attract and nurture.”
How to make improvements: Have your sales and marketing teams partner to revisit your “lead” and “opportunity” definitions as they relate to your buyer journey, allowing you to better categorize each and more accurately track your pipeline.
Customer lifetime value (CLV)
- What it is: How much your business earns from a customer over the lifetime of the relationship
- What it tells you: Predicts how much revenue a customer will generate for your company
- How you measure it: (Average customer purchase value * average number of purchases) * average customer lifespan.
- The data challenge: The challenge comes in tracking this information and ensuring you keep relevant data attached to customer records. The other challenge is longevity. It takes effort and tech tools to track the entire customer lifetime journey.
- Why it matters: This metric provides information that helps keep a business financially stable. If you know the customer lifetime value, you know how many customers you need to add each year and predict the revenue. That information helps you set your budget. When this metric goes up or down from its norm, it tells you whether your marketing and sales practices are working or not.
Emma’s advice: “CLV can be a really interesting metric when you use it for segmentation of your own data. Understanding which customer profiles spend more or less can be a really useful insight to feed back into your demand generation strategy and further hone your ICPs. Knowing CLV for different groups can help you understand where you may be wasting budget – and perhaps paying too much.”
How to make improvements: Measure your customer segments by CLV to understand whether you’re focusing enough efforts per segment, and when to pivot.
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