Wednesday, April 25, 2012

8 Essential KPI's for the Intersection of Marketing and Sales

Conversations between sales and marketing improve when marketing generates data on the state of joint processes such as lead management.  But companies who are serious about orchestrating sales and marketing in a modern go-to-marketing model need more than these execution-level metrics. At the intersection of sales and marketing, senior executives need operational-level investment, resource allocation, and performance metrics.

Tech marketers have done a great job of growing the range of measurement dashboards within their management tool box.  These reports provide data about process execution and are primarily driven from automation such as CRM, email marketing, and web analytics. The data in these reports can answer important questions such as how many leads were produced and what really happened to them? This data can be extremely useful when talking to sales.  Replacing hearsay, gut feelings, and assumptions with accurate data results in a much more credible and actionable conversation.

Operational Insight Drives Strategy
 
While this kind of data is valuable at an execution level, it isn't the kind that drives strategic decisions. Senior management needs to know how to invest their most powerful resources – money and people – to get the best results. For this task, they need operational key performance indicators (KPIs) that answer questions such as what are my people really doing and where is my money deployed. Just as important, they need context around this data in order to understand its meaning and highlight what to change.

Comparison benchmarks serve as excellent insight into the meaning of operational-level KPIs. IDC has produced such operational-level scorecards for many years for each function separately - for marketing (IDC's Marketing Performance Scorecard) and for sales (IDC's Sales Productivity Scorecard). These scorecards are based on detailed investment data from over 100 tech companies. IDC parses leaders from laggards, mines for best practice nuggets, and combines this information with insights drawn from scores of interviews, interactions, surveys and the IDC teams' deep practitioner experience.

Introducing the Customer Creation Scorecard: Operational KPI's for the Intersection of Sales and Marketing
 
However, operational benchmarks have been lacking for companies who are serious about orchestrating the collaboration between sales and marketing within a more modern go-to-market model.  For this initiative, senior executives need to look at the joint investments in sales and marketing.

Recently, IDC introduced the Customer Creation Scorecard - eight operational KPI's leading companies should add to their dashboard. The eight are organized into three categories: investment, staff efficiency, and productivity levers.

Here are the aggregate level benchmarks for your 2012-2013 planning processes:
  1. Investment: Sales + marketing budget ratio = 10.6% of revenue is spent on sales and marketing combined
  2. Investment: Sales to marketing ratio = 4:1
  3. Investment: Marketing investment per total sales headcount = $40K to $70K
  4. Staff efficiency: Quota bearing headcount to field marketing ratio = 32:1
  5. Staff efficiency: Program to people KPI = 27% of all sales and marketing investment is spent on programs and the remainder on people
  6. Productivity levers: Operations staff percentage = 4.7% of all sales and marketing staff are in sales operations or marketing operations roles
  7. Productivity levers:  Sales enablement score = 47 out of 100 is the index that IDC has developed for the technology industry based upon detailed quantitative and qualitative research
  8. Productivity levers:  Lead management score = 52 out of 100 is the index that IDC has developed for the technology industry based upon detailed quantitative and qualitative research

IDC finds that these benchmarks vary significantly depending on attributes such as go-to-market model, company size, and industry sector.   IDC's also provides guidance around these KPI's.  For example, IDC recommends that companies measure sales and marketing costs jointly to better control overall expenses (this includes "shadow" marketing investments where sales teams use their own funds to conduct marketing activities).

For more information on the Customer Creation Scorecard, IDC insight on what your KPI ranges should be and what to do about it contact me or anyone on IDC's Executive Advisory Group team.
 

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