Digital marketing is usually hired to help grow sales, yet the relationship between your marketing efforts and your customers’ purchase actions often feels convoluted.
As marketing operations and demand generation experts at McGaw.io, we’re well-versed in analyzing and optimizing sales funnels across numerous industries and purchase cycles. That’s why we’ve collected these 15 short- and long-term growth metrics to help you parse through thousands of complex customer journeys and arrive at a holistic view of your marketing organization’s performance.
Navigate this post:
- Volume of engaged organic search traffic
- Conversion rates throughout funnel stages
- Time on page or scroll rate
- Return on ad spend (ROAS)
- Lead to marketing-qualified lead (MQL)
- Marketing-qualified lead (MQL) to sales-qualified lead (SQL)
- SQL to business opportunity
- Opportunity win rates by lead source
- Average contract value (ACV)
- Churn rate
- Customer acquisition cost (CAC)
- Customer Lifetime Value (LTV) & LTV to CAC
- Share of revenue from marketing-originated customers & share of marketing-influenced customers
1. Volume of engaged organic search traffic
SEO and content marketing are vital growth engines for companies. After all, organic search is responsible for more than 50 percent of all site traffic, according to BrightEdge, which added that this figure is larger than paid and social media combined. Its explosive potential is due to many factors, including the cumulative impact of high-quality and well-optimized content.
Our first marketing metric, the volume of engaged search traffic, is a crucial indicator of your audience’s overall interest. It combines the measures of the volume of traffic to your website, as well as its quality.
You can pick your own benchmarks for what you’ll count as engaged traffic. We recommend keeping them low though, so you don’t disqualify too many visitors. We like to consider a user engaged once they’ve spent more than 45 seconds on a landing page, or once they’ve scrolled more than 60% down the page. For an in-depth elaboration on how to measure and evaluate the quality of organic traffic, check out our article on SEO analytics, as endorsed by Google Analytics on Twitter.
2. Conversion rates throughout funnel stages
We’re defining “conversion rate” broadly. We’re talking about your organization’s ability to pull prospects into your orbit, so you must track and optimize towards greater reach and more efficiency across each point of conversion.
That means you should be connecting conversion rates through each customer touchpoint. Examples of touchpoint conversions include off-site ads to site visits, landing page visit to submitting contact info, lead to deal close.
You’re looking for any point where prospects can drop off or take action. Each conversion rate should help explain events along the journey where prospects leave or join the funnel.
Significant gaps are to be expected for each additional step customers must take. Yet, anything out of the ordinary may indicate that you’re leaking sales leads who might otherwise have continued. For instance, if a handoff was missed, an error was encountered, or other unforeseen mistakes occurred.
3. Time on page or scroll rate
Don’t take the quality of your website content and product for granted. Time on-page is a hugely valuable metric that helps show how long users engage with any particular page or application screen.
Longer sessions indicate more engaged users. Those tend to remember you better, return to the site or app sooner and more often, and feel happier with your company overall.
Ideal time-on-page varies depending on the length of content and the rate of engagement that you’re targeting. An easy shortcut is to take the word count of your content and calculate the approximate time it would take to read (For reference, the average person reads about 300 words per minute).
In general terms, a visit shorter than 45 seconds usually indicates that your user didn’t find interest in your content. A visit shorter than two minutes shows that your user took time enough to skim. For articles and longer service pages, a visit longer than four minutes signals significant interest. This not only surfaces some of your most valuable traffic, it proves the appeal of your product and marketing pages.
Short of conversion, there’s no higher honor than your users taking their time to stop and read/watch/interact.
4. Return on ad spend (ROAS)
Paid channels tend to be prominent revenue generators for companies that seek to scale. When the campaign performs high, the tendency is to increase the ad spend. But as many demand generation professionals are aware, doubling your ad spend won’t necessarily double your advertising revenue. You may get a higher volume of leads, but there’s no guarantee that these leads will purchase as often—or spend as much—as the leads you’ve captured in the past. Or you may find that the doubled ad spend will bring the same quality of leads, but their volume will not be doubled.
That’s why it’s so important to calculate the efficiency with which you spend your advertising dollars.
ROAS measures exactly that. Calculate it by dividing campaign revenue by campaign cost and comparing it to income you received from said campaign (in the form of a ratio).
Say you spent a total of $5,000 on the ad budget and netted $10,000 in revenue; the result would be $2, which would give you a 2:1 ROAS ratio.
Commonly cited ROAS benchmarks suggest a significantly higher ideal ratio, at 4:1, but most set their aim higher, even more so for ecommerce. That said, some companies have been able to remain profitable at 3:1, depending on a range of factors like business model, company maturity, high degree of repeat business and high lifetime value.
5. 6. & 7. Lead to marketing-qualified lead (MQL), MQL to sales-qualified lead (SQL) & SQL to business opportunity
Most leads you capture aren’t ready to convert to paying customers yet. Your job throughout this and the next two steps are to make their movement through the funnel seamless and attractive. Lead scoring is a valuable concept here—you approach the work with the goal of growing your lead scores.
Lead to marketing-qualified lead (MQL)
A marketing-qualified lead is a user who has met your marketing department’s qualifications to advance further down the marketing funnel.
MQL is the second leg of your sales leads’ journey, and as such, the bar for entry isn’t as high. They are more interested in your brand than most, but may not be ready to purchase.
To qualify MQLs, keep an eye out for the following qualities, then add more as they pertain to your funnel:
- Must have more descriptive data than a mere email address
- Should fit within a feasible revenue range
- Corresponds to the correct vertical and/or targeted position
- Has shown a demonstrable interest by completing a contact form for a lower-funnel CTA
Keeping track of the Lead to MQL rate helps marketers better understand lead quality and up the quality of leads passed to sales. Digging deeper into this audience will help understand commonalities within your prospects and identify any further action that may better nurture early leads.
Marketing-qualified lead (MQL) to sales-qualified lead (SQL)
Sales qualified leads are the highest lead qualification, denoting that your sales team considers the lead ready for direct outreach.
This metric represents the percent of MQLs that become SQLs, helping you understand the efficiency with which your team can nurture MQLs into SQLs, and additionally raise any issues in the handoff between marketing and sales.
Note as well that companies with a longer sales cycle—such as most B2B and SaaS organizations—should calculate this based on a multiple-month stretch, as the longer sales cycle requires more time for MQLs to be converted.
A pragmatic alternative that we advise is to use numbers for the whole of each month, and analyze your lead metrics on a month-over-month basis. While this is not 100% accurate from the point of view of conversion attribution windows, it is much easier to track in Excel or Google Sheets. The ideal solution of tracking a 90-day rolling conversion window gets difficult for reporting, if you don’t have one of the premium marketing attribution tools in your MarTech stack.
SQL to business opportunity
This metric represents the final leg of the customer journey, at the innermost circle at the funnel’s end. SQL to Oppty offers an evaluation of your sales team’s ability to close deals, insights into opportunities to improve your sales cycle, and the quality of generated opportunities that have been designated as ready to close.
Calculating this value is easy—simply relate deals won to the number of SQLs.
An analysis of hundreds of B2B businesses found the average conversion rate between lead and opportunity was 13 percent. Note also that lead source plays a large role in the lead’s likelihood to convert.
8. Opportunity win rates by lead source
When it comes to increasing revenue, you have the following three options:
- Expand your lead pipeline
- Increase the size of your average deal
- Improve your opportunity conversion rate
A slight improvement in opportunity conversion rate can have an exponential compounding effect in sales. Improve these rates by learning more about the various channels you’re using, and how each performs in delivering leads that ultimately convert.
The same analysis by Salesforce roughly benchmarked the average SQL to Win Conversion rate at 6 percent. This rate, however, varies dramatically by lead source. Customer and employee referrals scored a whopping 14.7 percent, social media captured 8.5 percent, while email marketing registered 7.8 percent.
Leads may convert from a range of sources; some may have entered their info on a clipboard at a convention, filled out a lead form from a web ad, while many others will find your site through one of any number of search terms on Google.
To calculate this metric, relate the number of closed deals to the total number of opportunities previously created. Then group by lead source. Make sure to use numbers from the same time period.
9. Average contract value (ACV)
ACV is the average revenue generated by a contract within a year. Most often associated with B2B SaaS companies, ACV is compatible with any organization running a recurring revenue model.
To calculate ACV for long term engagements, use this formula:
For example, if a customer signs a five-year-contract for $50,000, then your ACV would be $10,000.
If the contract is written up monthly, you can calculate monthly recurring revenue (MRR) and multiply by 12.
Calculating ACV lends your organization a clearer picture of the relative size of deals that come from marketing, which can be compared to the size of opportunities that come from outbound prospecting done by the sales team.
This may additionally help understand how effective your teams are at expanding opportunities once the opportunities have landed. You’ll get help answering questions about how enticing your customers find your upsells, for example. It can also help validate any ongoing efforts to increase the size of your deals.
These metrics are more narrowly focused on showing cost, efficiency, and net profit.
10. Churn rate
This familiar metric is used to measure the rate at which customers leave a subscription-based business. Calculate this by relating canceled subscriptions to total customer base over a given time period.
Churn % is a notoriously slippery metric fed by a wide array of inputs—product quality, customer experience, expectations set by sales and customer teams, and even customer touchpoints play a role.
Despite being sometimes tricky to calculate, churn % is among the most powerful indicators of the health of a subscription-based business.
11. Customer acquisition cost (CAC)
CAC is a marketing metric hall-of-famer, providing one of the single-most pivotal data points for the financial health of an organization: how much it costs to gain a new client.
This is a direct measure of the efficiency with which you acquire customers.
Costs are treated broadly here to fully cover the totality of sales and marketing expenses, including salaries, commissions, overhead, advertising, and platform expenses—all over a given time period, of course.
Say you spend $300,000 in marketing and sales expenses in a month, during which 30 customers are acquired—your CAC is $10,0000.
CAC can help signal significant changes in the revenue-generating ability of your sales and marketing teams. Such a signal can greatly help organizations chart the effectiveness of new initiatives and strategies over the long term, effectively demonstrating the impact your recent efforts have had on the bottom line.
Contrasting CAC with ACV lends this metric even greater utility. You can, for instance, use the comparison to determine the length of time it takes your organization to earn back the acquisition cost.
Startups, for instance, will often purchase advertising at a higher cost because they’re more focused on growing their customer base. This strategy often works because it capitalizes on long-term repeat business and incremental sales, optimized for greater cost efficiency as the sales pipeline flushes out.
Keep in mind that CAC is an average of all costs, meaning low cost leads like those from organic search or partner referrals can help offset the higher cost of attracting more lucrative customers.
12. & 13.: Customer Lifetime Value (LTV) & LTV to CAC
SaaS companies rely a great deal on recurring revenue, from upsells and add-ons—on top of monthly subscription revenue. But even companies that close sales offline form a relationship with the customers that lead to repeated business. It is therefore important to establish the value customers bring over time.
Lifetime customer value predicts the net profit earned over the full length of your customer relationships.
Start the calculation by determining the average purchase value. Then determine the average customer lifespan and number of purchases during the span. Once you have these values, you can multiply them all:
Average purchase value X number of purchases over lifespan.
To finalize the LTV metric calculation, incorporate the churn rate.
The metric will give you an actionable representation of how much a customer is really worth to your business. This is the value that you should really use to express how much revenue your marketing and sales efforts are generating.
Then, relate the LTV to CAC. It’ll tell you whether your acquisition costs are reasonable, because it’ll allow you to compare the long-term value of a customer with the cost it took to acquire them. It may also show whether marketing and sales efforts directed towards establishing and lengthening these customer relationships are working, or worth doubling down on. LTV to CAC is a lot like an ROI metric, but from the long term perspective.
LTV to CAC is calculated as a ratio. So, say your acquisition costs are at around $1,000, and the LTV is $3,400, your LTV:CAC would be 3.4:1.
Investors are particularly interested in this metric, and those in B2B and product-based companies tend to want a ratio higher than 3.
14. & 15.: Share of revenue from marketing-originated customers & share of marketing-influenced customers
Percent of marketing-originated customers conveys the impact your marketing efforts have on customer acquisition. The math is simple—divide the number of customers who began as marketing leads by the total number of customers. The share of revenue originating from marketing can be figured out by relating the total revenue from marketing-originated customers to total sales revenue.
Marketing-influenced customers, on the other hand, adds a crucial layer to help identify how frequently marketing efforts nurture non-marketing leads into sales. Here, you’re providing further visibility into the long tail of marketing and branding influence.
Calculate your share of marketing influenced customers by totaling all new customers who interacted with marketing within a given timeframe, and relating that to the number of new customers.
Benchmarks vary depending on the maturity of your sales department. Organizations with more mature teams should shoot to source around 25-30 percent of the sales pipeline from marketing; 40 percent for teams not already well established.
Your turn: Set up your system of measurement and reporting, then make amazing marketing decisions
Mastering the art of measurement and analysis is a long term process of goal prioritization, proper planning, and iteration. Accurate and actionable data is what helps you understand your customers’ journey and experience, which in turn enables you to grow revenue.
Some may find the effort confounding, but we promise you that it’ll be worth your while and investment to ensure that you can collect and trust the growth metrics we describe above.
There are analytics tools that’ll make the process easier for you. You can get a ton of help with data collection via Supermetrics for Google Sheets. Then you can get help with the processing of more complex metrics such as ROAS via Supermetrics Uploader, which pushes social spend data into Google Analytics. And just about any calculation and reporting can be accomplished with our personal favorite, Supermetrics for Data Studio.
Finally, if you want to dive in deep and want help from experts who will both implement an amazing system for you and coach you up in using it, talk to us at McGaw.io. We love being the team’s analytics & BI agency. A demonstration of lead to sales metrics we like to use is our marketing analytics case study with BitFountain, an iOS development educator. We were able to discover their most profitable marketing channel, Twitter, and raise engaged website traffic by 374%. We also launched a content strategy that produced 11,354 email leads, and we reached a record rate in daily conversions between home page visit and purchase completion.
We hope this article inspired and enabled you. Please share it with your peers, and do amazing work.
About the author
Dan McGaw, one of the original growth-hackers, has led the teams at Code School and Kissmetrics to create massive growth. He previously founded the companies Fuelzee, Starter Studio, and Bootstrap Academy. He is the Founder and CMO at McGaw.io, an analytics and growth consultancy that helps companies grow revenue and builds marketing technology tools.