It’s that time again. For many marketers, planning and budget season is in full swing; that means it’s time to take a fresh look at what your marketing reporting can do to help with better, more accurate planning and budgeting. Traditionally, the marketing dashboard looks at past performance, with the goal of showing what has already been delivered. That’s obviously important, but when reporting is done right, it can tell you more. It can predict the future. Even better, it can tell you what the future you want might cost. No, this does not require marketing operations to add “psychic vision” to its list of skills. But it does require some specific information and a few calculations.
Here’s a simplified version of what you need to get your regular reporting data to tell you the future. First, you have to know your conversion rates as leads go from cold to close in the current buying process. SiriusDecisions uses our Demand Creation Waterfall model to track the percentage of contacts that go from phase to phase in a standard way. First they become inquiries, then convert to marketing qualified leads, then sales accepted leads, and finally closed business. Usually these metrics are used to track what marketing contributes to sales and how much of it has converted to closed business. But why stop there? Using just this information, you can predict future results as well. For example, you now know that that if marketing generates 100,000 inquiries, a certain share of these will end up as closed business, based on past performance. Unless dramatic changes are planned, past performance is in fact a good predictor of future results for marketing. This knowledge lets you predict how many inquiries are needed to reach the volume of marketing qualified leads expected. Now let’s apply this simple prediction to planning: Use the metric for conversion from contact to inquiries (basically your average response rate to tactics), to estimate whether plans in place will generate a sufficient number of contacts at the top of waterfall to convert the inquiries and MQLs in order to meet goals. This isn’t perfect science, because some of those inquiries will be from the same people or existing active opportunities, but when carried through the complete waterfall, it will be a reasonable estimate. Be sure to consider the different response rates of tactics if you see these vary widely so you don’t underestimate requirements based on your marketing mix. Also consider performance differences in regions, product or solution groups, and other variations in your business.
That’s the first part of your future prediction. The second is cost, which is used to predict budget requirements. Based on the current year’s budget for demand creation programs, and the number of inquiries you generated (pulled from the previous data), what was your average cost per inquiry? Using the same budget data, divide by the number of MQLs generated last year and you have a rough cost-per-lead. Look at the number of inquiries you need to generate, and the budget you have. Do they match? Look at the average cost per lead. If sales is asking for the same quality of lead, you know how many you can generate using available budget. Does that meet your goals? What if sales is asking for harder-to-find leads, or more highly qualified leads? Then your cost will go up. Does your budget match?
Now you see how current reporting can help you map future needs and results. All this makes it easier for marketing to create a credible budget request, and a realistic plan, all based on actual performance data. While this oversimplifies the process a bit, and we have not even begun to talk about whether your goals are reasonable based on benchmarks, it’s a great way to start making next year a good one for marketing. Maybe you’ll even want to dress up as a fortune teller for Halloween.