A few weeks ago I was asked what the most important metric was for marketing and I quickly answered REVENUE, as it was so clear to me, but I think that caught the other person off guard. Let me explain why this is the only answer in my mind.
There is no doubt that a start-up, or company of any size for that matter, cannot survive too long without generating revenue. Funding helps but is not a long-term solution. And other than profitability, you could argue the revenue is the main metric that should matter for everyone in the company.
But specific to marketing, I wrote in my very first post on this new blog that I believe marketing and sales need to be inextricably linked for a start-up, or any technology company for that matter, to be successful. And what better way to link them than to give them the same metric to measure success.
If both marketing and sales are being measured on revenue then they have an extremely vested interest to work together towards this common goal. In fact, I would argue that this should be taken one step further and companies should add a concept similar to commission to every marketing persons’ salary just like a sales person.
Now I’m not saying that revenue is the only metric for marketing and there are clearly more specific metrics that can be measured for each campaign or tactic but these should be linked to revenue in some manner.
A good example was from a campaign I ran a couple of years ago. It was a Google pay-per-click campaign to get sign-ups for a new service. It was very focused on a few keywords in a specific geography. At first glance, the campaign was doing quite well as the click-through-rate (CTR) and cost-per-click were both quite good and if those were are only metrics most marketing teams would have considered it a success.
But we were also able to track the number of sign-ups for the service, which was directly related to revenue, from these clicks and found that while we were converting some, the total revenue from this campaign was not significant enough. Furthermore, when we looked at the cost versus the revenue generated it did not make sense to continue so we shut it down.
Measuring the number of customers and revenue needs to be done for any marketing campaign but unfortunately that can take some time depending on the sales cycle. There also need to be interim metrics that marketing can more directly and easily measure, such as the cost per lead, but you need to follow through and see which of these leads generated revenue too. By tying every marketing campaign back to revenue, you can judge them in terms of what they are contributing to the top line and see if they are more cost-effective compared to other tactics, which contributes to the bottom line too.
I’ll be drilling down into this topic further in many future posts on the need to align sales and marketing, how to do that and how to measure it. In the meantime, let me know if you agree that revenue is the most important marketing metric.