070. B2B Demand Gen Metrics That Drive Business Growth

Foreign.

Welcome back to another episode of Demand Gen Studio. As always, I'm Miranda Jenkins and I'm joined by Emilio Garcia. How's your Friday going, Emilio?

Doing. Doing good. I'm happy that we are on at the end of the week. I would rather had a better, slightly better weather weather but I, I can't complain. It's been few days.

Yeah, it's probably important for the rain. It is very gloomy though. Very dark and gloomy. Awesome. Well, today we're going to be talking about B2B demand gen metrics that drive business decisions. So we're going to dive into the difference between metrics that maybe look good on paper but then metrics that actually drives and guide business decisions. So we'll cover the differences between the two of them and then talk through some demand gen metrics that sales and executives actually care about. So let's start at the top. Emilio, what would you say makes a metric decision worthy for B2B?

Yeah, that's, that's a great question. I will start saying that specifically for demand generation. We are in a tricky place. You know, B2B marketers or practitioners are in a tricky place. And the reason is because if you ask for any stakeholder or investor in a company, what is the number one metric that they care about for them? It's quite easy, right? It's shareholder value. That's pretty much what it's called. But it's return on investment, right? If I put a dollar, how much I'm getting back and you know, how fast is that happening? So people like the CEO, they have very clear metrics, right? It's very simple. It's just one thing is the shareholder value. And for obvious reasons, reasons that CEO will try to align all departments to that goal, right? How do we do better for. And I like the work stakeholders better than investors because there are other stakeholders in the company. Employees are stakeholders in the company, right. Customers are. So what works for the company usually means that is good for employees, is good for customers, is good for investors, if there's any. For debt holders, if there's any. So the CEO, the management will try to align that big goal, what's good for stakeholders to the, to the different departments. And it is clear for some departments that they influence that number, but they are not directly responsible for it. Let's put accounting or human resources. If you are head of human resources or accounting, you know that you influence that number. But it will be silly to measure you by sales or by market share or by profit margins primarily because that's not your job. Right. Your job is not to sell. Your job is not to only or directly influence profit margins or market share, but you contribute. Definitely. Right. Human resources have to bring talented people, make it in an efficient way. So what is good for an efficient and effective. What's good for that department typically has to be aligned with the company as well. Well, that is the issue with marketing. We've been doing this for so long and we were so close to sales that it feels like our metrics should be the same as let's say sales have or the organization have. And that's super, super important. I think Miranda. Right. Is that we distinguish that. Yes. We have to be aligned with the goals of the business. Which when you were asking you what are the key metrics of the business? The key metrics of business are truly a handful. And they're all the same for every for profit organization. Right. Is market share, profit margin, revenue growth. That's pretty much. You want to summarize it? It's pretty much what's happening. But for marketing, while we need to be aligned with those business goals which typically translate to sales as sales, sales growth, sales velocity, we are not sales or marketers are not in the business of just, you know, working for the next quarter. We are in the business of growing the presence of the brand. So as we say for the, for the craft, potential customers demand the services and products of the company rather than only relying on the salespeople going out and asking for business. That's the ultimate goal. Right. Is having that brand recognition. So but obviously it's not that easy. You have to break it down. So I'll say that what makes a metric worthy of being followed is that is ideally, if not perfectly highly aligned with the metrics of the business of the overall organization. That's one, one thing that makes it for me worthy of pursuing. And the other one that is very important is that what's important for the business, while this is this global idea of growth and market penetration and return on investment, it doesn't have always the same intensity and it doesn't always have the same focus. There are organizations that are not that worried about, you know, crazy high growth and maybe just maintaining marketing market share or that at some point in time I more work on improving margins, not necessarily increasing revenue. So you have to be conscious or aware of, you know, what level of importance the organization has as a demand generation practitioner or executive.

All right, so getting into the differences between what are called vanity metrics versus maybe actionable metrics, it's the name. Vanity metrics has such a like negative connotation. It sounds, you know, it sounds so bad. It sounds like something you wouldn't even want to like, you know, be putting on a report or it's maybe like deceitful to be putting on a report. But it's my understanding that what the metrics that are considered vanity metrics, they're more just covering giving a sense of reach or awareness rather than like tying to business decisions or revenue. So for example, if you consider a vanity metric like website visitors or a number of new followers, it's not necessarily like a deceitful metric. It's just informing a, you know, the, a larger your amount of reach or you know, amount of awareness. What's your take on that? What are your thoughts around that?

Yeah, I love that question. My view on it has changed over the years. I think I, I share over time, right that in my mechanical engineer by trade. So I, I, I wired toward numbers and I even like to say that we are a data driven organization or agency and that have changed over the years because I will say that binary metrics is something, as you said, that you threw around for something that you consider is not aligned with higher metric or a higher purpose. So everything can be bannery if even, even things like market share or revenue growth, if for whatever reason while you are measuring that that is not necessarily the ultimate goal that you're pursuing, right? Because you can make the argument that maybe worth, you know, growth for growth sake is not necessarily a good thing. That is vanity, right? That you know, let's. It happens sometimes that you say it's actually there's a phrase for it. Revenue is vanity, profit is sanity, I think is set because yes, you can have a ton of income, but if you're not keeping any of it, then you're not really making progress on the ultimate goal that is to create, you know, some profit out of what you're doing. You're just spinning your wheels. So every metric can be vanity if it doesn't align with the ultimate goal. The other thing that makes a metric a vanity is. This is very tricky for when you say well, if something, if when you measure something it gets improved is yes, as long as you don't lose the fact or the aim that metrics are means to an end. They are not the end. Because if you start making it the end, people will find a way of gaming them or optimizing for them for the sake of optimizing for them without any impact to what really matters. Right? Every metric that you can pick, every single one. If you start rewarding people for the metric rather than the outcome that you, you, you pursue, you will get the number. It is incredible, right? If you say, well, I want to increase the number of people that you know, see our brand, people will find ways to do that, increase traffic. We have talked about this one many, many times. There are types of campaigns that will have a higher way, higher volume of traffic, visitors with terrible quality, right? If you optimize, if you tell your algorithms on your app platforms that you want to optimize for conversions, whatever you say conversions are, you will get them. But we know the story of every single marketer that is looking at those form fields filled with gibberish, not by humans or you always wonder who in the world invests time filling a form with information that is not relevant and that is not going to buy. Well, every single metric you pick, if you start rewarding people for it and it's thus it's not only for marketing, someone will come up a way to hit the target. And so that's the part that I think is important to always have in mind that every single number that you pick, use it as a guidance. And remember in reminding people that these are means to an end. The metric itself is not the goal. Right is what the metric helps you infer about the world. Right is what truly matters. There's. There's a phrase that I heard from Blair ends that he says all models are wrong, but some are useful. And I like it's pretty much what I'm trying to say, right? All metrics are not truly reflecting 100% reality, but they are useful. Not all traffic that you are getting is coming from humans or people that is going to buy from you or, or for the reasons you think you are getting it. So it's not 100% good. There are synthetic visits that have nothing to do with fraud, just crawlers visiting your website that are not marked as crawl visitors rather than humans. Conversions are not truly conversions for whatever reason. So every metric you pick will have some error. But that doesn't make it a binary metric. It's just an indicator. And obviously we have talked about the social media ones, right? Is yes, followers engagement views are a proxy for something that you want to accomplish, which you are modeling. The idea that if this is, if this reflects the real world, people are engaging with your brand and that's valuable. But the purpose is not just to increase the number of followers. You know, that's not the only thing that you're trying to accomplish. So that's my take on, you know, mandatory metrics.

Yeah. The goal is the destination. The metric is the GPS to help you get there.

Yes, yes, it's. But sometimes you have to actually have to look outside of your, of your window and say, you know, I know what the GPS is saying, but this is not where I want to go right is this, you have all those systems are just models that approximate reality, whatever our eyes are seeing. So you always have to take that in mind. I guess.

So the metrics that are going to drive business decisions are going to be to some extent tied to your individual business and what your specific businesses goals are. But let's kind of talk through some demand gen metrics that you think matter for the majority of, you know, B2B businesses. So breaking it down, what are some like pipeline metrics that you think are important for marketing to be aware of?

Yes. And here again, I think it will be super helpful for everyone that might be watching or listening this to put some context on why demand generation worries or care about pipeline at all. Why is that a metric that matters to demand generation? And the reason is because while there are many ways to go and see what demand generation stand for, one that comes up very frequently is that demand generation came to be out of, out of the frustration that marketers had with lead generation tactics or lead generation initiatives. So in the early days of the Internet, obviously getting leads was pretty much the purpose or the focus of any, you know, inbound or digital marketing efforts. And it was very clear that, you know, if you were to have data, content or ways to get email information from people, you will get the opportunity to connect with someone and maybe have an opportunity to sell. So marketing started to optimize for lead generation, right? Let us put some, let us put more ebooks there, let us put more webinars there, let us put more demo requests and offers, even offering people some incentives to participate in a demo for software, for example. So when you start optimizing for lead generation, you might start seeing a pattern which is marketing will start saying, look at how many leads we are getting. And whatever definition of an MQL is, look at how many MQLs we are getting. But you turn around on the pipeline, on sales and you see nothing. Right. And so it started to happen. Is that, well, if we are doing all this, are we really having some business impact? And that business impact is, are we, are we adding some value to the sales pipeline even when marketing is not responsible for sales? Well, if we're Doing all these brand efforts and all these lead generation efforts, some business outcome has to be on the other side. And that business outcome typically can be measured by the health of your pipeline. So that's, I want to mention that is important. That's a little bit that makes demand generation different from, let's say someone that is solely focused on SEO or email marketing or even, you know, content creation. Not that they don't care about that. But if you are doing any of these tactics and you're looking at the pipeline, if you're looking at the impact that that's having on the business, you are doing a little bit of demand generation, even if you don't call it that way, because that's the breach that the craft is trying to break in is not just what you're doing on your, on, on your department, but the impact that that's having on the next two, you know, departments, which is sales and customer success. So yes, I'll say that some of the metrics that matter a ton on that sense are the pipeline centered ones. And there is basically this concept of this speed at which your pipeline moves along. There's some controversy about, how do you call it? I think it's something between sales velocity, which is kind of like what had been popular on SaaS, and deal velocity or deal speed or deal flow. You will hear some different concepts of ideas, but I don't want to get lost in the semantics. The concept is the one that matters and it's very similar to inventory management. Right. So companies that had a ton of inventory, they worry a ton on that turnover is called. Right? Is I have products that I buy from my suppliers, they stay on the inventory and is money sitting there and it will not transform into revenue until I'll sell them. So I don't want to have them on the shelf more than necessary. You worry not only about the amount of things that you sell, you worry about the speed that you turn over that inventory. And so if you take that analogy, that's pretty much what you're trying to do on the, on the pipeline part. The pipeline for sales, it is kind of look of inventory. It's just that inventory of deals. So if you say, well, how do I increase the turnover of the pipeline? Well, there are some levers that you can use and I like to mention them. All right, Is if you want to get off the, on the other side with more revenue, the easiest one or not the easiest one, but the obvious one is get more deals. If everything is the same, you're closing Them at the same speed, at the same percentage of success and at the same size. If you get more deals into the pipeline, you will have more turnover of revenue. So that's the one metric that is important. How many more deals do we have? That's one idea. The second one is well, what if we close them at a higher rate? Because unfortunately compared to inventory, not all your deals close one, right? A ton of them close lost. So if we somehow can bring in not just more leads that have commercial intent, right? Increase the chances that more people come in and ask for our services. But we do that, we do it in a way that we bring in more qualified people in the sense that they know better our offer, they understand better how we are different, they understand better where strengths, pricing, all those things, how we compare to competitors, right? So you more educated buyers, pretty much that's what you're saying, right? Is people that already know very well about the company, then you increase the chances that every time that you open that deal, it closes. So that's the second important thing, right Is what is the ratio of new deals or SQL to MQLs to close one? Not just the sheer number, the very related, very related is well, why we just close them faster, right? So, so if we have the same amount of deals and we just speed up the time that it takes from someone that express a need to someone that actually buy, then you will be better off as well without increasing the number of deals and without increasing the close rate. That's a tricky one because it is influenced by the knowledge of the buyer for sure, right? A more knowledgeable buyer, a better buyer will close faster, they will be ready. But also is influenced by the friction of the organization. If, if your processes are not prepared for a committed buyer, you will slap a paper contract, you will make it convoluted to get a demo, to get pricing, to get approvals for. You know, your, your pricing is. Is difficult, all those things slow down, right? Obviously, unfortunately, if your product itself or your service is a complicated product, then that will reduce the speed. That doesn't mean that you have to oversimplify your product. Because in B2B, you know, at the end of the day we are not selling candy, but you can do things to speed up or reduce the complexity of the purchase itself, which is has to do everything with the utilization. So that sales cycle, right? How long does it takes to close the deal? That's the other level and finally the one that is underappreciated sometimes is the deal size, right? And we have Seen it on the B2C world. Pretty much what Costco does is to increase the deal size. Right. Instead of, instead of you buying one bottle of shampoo or one soap, you have to buy 10. You get great pricing, but you have to buy a ton. And so pretty much what they're saying, well, I will invest the same time as an organization on the checkout, but you will leave with a way larger amount of product and that improve our margins and increases the deal flow. Right. For the same amount of transactions. So again, this is not necessarily something that from a demand generation perspective is in the, it's in the direct influence of most marketers nowadays, especially digital marketing ones because those choices are typically done by product marketing or whoever is in charge of product rather than promotion, which is pretty much what we do on demand gen. But that's the other metric that you can use to impact. Right. So those are the four that you can use to measure pipeline. Right. Is number of opportunities, success of closing those opportunities, speed of closing those opportunities, and how large what is the contract value of the opportunities. And of course on that one, that's where the lifetime value of the customers comes in. If you say, well, we don't have a product or service where all the value that the customer will bring in or buy a purchase from us will be delivered in one transaction or in one month, but it will happen over a long period of time, then it's in your interest to increase the number. So that's where you know those metrics are important now and we will jump into this one. I'm sure all these metrics that I'm sharing with you are about the quantity, you know, the, the thing that you get out of it, but not how much as the organization you invested in accomplish them. Right. They're just the raw numbers without any consideration for what do we do to accomplish them. Which is, has to do with efficiency.

That's such a, that's like the perfect of how like how important it is to be for the metrics to be tied to the, the goals of the business because they're all so connected to each other. If your goal is to, you know, if you, if you think about the goal being like to bring in as many MQLs as you possibly can. Well, another really important metric is the conversion rate between MQL and SQLs.

Yeah.

And so if you're, you know, if you think of it more of like tunnel vision of doing everything you possibly can to bring in the most amount of MQLs, then there's a good chance that your MQL to SQL conversion rate is going to suffer because they're not all going to be highly qualified. And then your, you know, SQL to win rate conversion, you know, metric, they're also tied to one another. And it's, it's just like a perfect example of why it's so important to be cohesive as a business and have that alignment between marketing and sales where you approach it more and helping each other reach a common goal. Instead of marketing having their goals and sales having know their goals.

Yes. And again, this is the part where I say is hard for marketers because while the role of the demand generation specialist or executive is not the whole company, the, the thing that makes it different from, let's say someone that is in human resources or other departments are farther away from the, from the market itself is that you need to have some knowledge of what the business wants to accomplish out there. Right. So and using that term of an efficiency, if, okay, we jump into that one is just like I was saying, you can have great metrics for the value that you want to create. Let's move into a higher level. Let's say revenue. Well, we want increase the revenue and we want to increase the ratio that we increase the revenue. They're not the same thing. Right. You can say, well, I increase revenue from $100 to $150. That's great, you increase, you know, we are tracking the growth. But how long did it take? Because it takes 10 years. It's not the same if it took one year. Right. So the ratio of growth, the speed of it matters as well, not just the change on the overall value, but if in order for you to sell more you ended up reducing the price of your products and undercut your profit margin and you actually earn less, then your investment wasn't that great. Right. Is the cost of acquiring that client was larger than in the past, you might say, well, that's it. That isn't what I wanted to do. I wanted to bring in more revenue and keep that my return or keep my profit at the level that I had or even increase them. So that ratio of the efficiency or of your efforts matters. Right. Is the, is a ratio that has to do more with the resources that you put in and how much do you get back out of them? But and this is where I'm saying that practitioner has to be aware of it. There are situations where companies decide to do large investments even if they're undercutting their profit margins or undercutting their cost of Acquisition because they're pursuing market share and not all businesses are in that space. SaaS is a good example where it's a race against the clock, where typically the market leader on the category is the one that ends up winning. And so every other player has to double down on growth to increase market share. Even if they're sacrificing profit margins at the beginning or not having profits at all, which is the weirdest thing, right? In order for them to secure a place at the end of it where they then can expand those margins even if they don't grow anymore as much as they did at the beginning. But not all companies or industries are in that stage, right. There are very mature industries where growing the share of the company is not as important and you are more in maintaining or defending the share. And there the profit matters and therefore the willingness of the organization to invest in acquire more revenue is not as generous as in other industries. Right?

Yeah.

Awesome.

Any other demand gen metrics that you would say are important? You know.

I'll say again, kind of like rephrasing that one. Take a look at the ratios. Those are important. The ratios of growth of your value metrics like growth revenue or revenue growth deal pipeline, dollar value and obviously the raw number of MQLs, SQLs opportunities you have and how fast you're growing them. But don't forget the ratios of efficiency, right? Is the cost per lead, the cost per opportunity, the cost per client. And that doesn't mean on the benchmarking of it, that doesn't mean that you have to match your competitors ratios because you have, your organization will have different goals. There are times where you will say well I'm willing to pay more for my, for the acquisition of leads of traffic of clients because my goal is to grow chair and the only way to do that is that I outspend my competition, if you want to call it that way. In presence, in share of voice, you just have to be knowledgeable of what are the main goals that the company is pursuing.

Well, so now that we have our metrics outlined, do you have any tools that you recommend using to help identify and track the metrics?

Yeah, another big one, right, Is that brings in context I guess is that the other thing that makes demand generation very unique is that we know that in order to grow brand awareness and increase capturing existing demand, you have to be in so many places digitally, right? Search engines, social media platforms, you know, events, video channels, audio channels. There's so many places that you spend time on and efforts that you do and so when you start accumulating all these metrics and aggregate them, a challenge comes out which is which of all these tools is telling the truth. When I'm making those measurements, you have a tool that is reporting, you know, traffic from Facebook and then LinkedIn and it's coming from Google and from YouTube. And in all of them you define what a conversion is. How do you know that the conversions that Facebook is seeing are the same as the ones that Google is seeing? And if you have set up attribution metrics, how do you know that what Facebook says or meta says, I brought this. How do you know that Google is seeing it the same way, which typically isn't, because they can only see their own parcel of the world. Right. So the, the other big challenge that demand generation has is what is the source of truth across all these places and panels. So there, I think from the beginning, you need to establish two big ideas. Is your model of attribution, right? How are you going to assign impact? And trust me when I say this, this is a human thing, is we make the choice of how do we measure impact. There's no perfect way of doing it. Just a model that you apply to impact on the activities that you do. You weighed in the impact and the other one is using that information, how are you going to optimize for that outcome that you're pursuing? Which again is another choice that the models shouldn't do for us, or if they're doing for us, we have to be knowledgeable about what choice they are making. So in order for us to do that, you have to concentrate all that in one place, ideally. And there are two options. If you're early in the stage, probably a CRM will be your better choice. Right. Obviously I'm talking here about all the potential brands. We are obviously biased toward HubSpot, but it can be Salesforce, it can be any of the many, many, if not hundreds of thousands of CRMs that you have there. I find CRMs useful because on the CRM you typically bring in the information for marketing plus these other things that we want to know about, which are the pipeline and all the ratios for deal flow. So bring a tool or pick a tool, a CRM that has the basic models for web attribution or general context and deals attribution and where you can measure pipeline so you can start making informed decisions about the impact that your activities have. Obviously build dashboards and metrics for that. One great to organize them is to have a hierarchy of metrics. Right? So yes, you want Your kids, the ones that we were talking about, either at business or marketing level, there shouldn't be that many. One, two, three, max. And then you have your leading indicators, if you want to call it binary metrics, but basically what they are doing is they are, they will tell you faster with a shorter feedback loop. They are more sensible to changes on your tactics than the lagging indicators or the KPIs. The KPIs usually are looking at past information. So whatever you do today will not influence them right away, right? Whatever you're doing today will not influence radically today the, the size of your deals, the ratio of closes them, how long it takes is going to take a few weeks, months or even years for those measurements to change in a meaningful way. And so in the meantime, you cannot use them to judge if the changes that you're doing in your tactics are working. You need something that has a shorter loop. And those, those metrics are the leading indicators, right? That's your vanity metrics like traffic and impressions and clicks and engagement, because that will give, that will give you a quicker feedback on the activities that you're doing. But finally, I don't want to dismiss the fact that it's also important to measure the level of activity that you're putting into those activities, right? Am I doing the work? So just like in sales, if you want to measure impact on sourcing deals, you have to measure meetings, demos, and also how many calls, emails are you sending, how many doors are you knocking? On marketing, we have a similar thing, right? Are we creating the content, are we sharing on social media, are we sending those emails, are we launching those campaigns, are we putting time to test ideas? So those are the levels that I will have in mind, right? Your KPIs shouldn't be that many, are the ones that are aligned with the business. Then the leading indicators or metrics that tells you have a shorter feedback loop and finally the activities that you believe, right, you think are going to impact the numbers. So you want to measure the level of activity that you are putting on them to get a sense of if I do more of this, do my leading indicators change at the same rate or they don't do anymore. And so I'm saturating the channel, I'm getting diminishing returns on what I'm doing. So. And that typically will be a CRM. If you are a more mature company, typically you will graduate to a business intelligence tool. And most CRMs, the larger ones will have something like that. That is just a place where you can come and bring in information from so many sources, not just your CRM, from the rest of the tools, so you can come up with dashboards that tell the story of what's happening on your CRM, plus what's happening on these other platforms that you're using. It's always helpful to, you know, like, look at the. The bigger picture, but also the nitty gritty details.

Yeah, absolutely. Well, this has been great. Any last closing thoughts for our listeners as we wrap things up?

No, I think it's just keep trying, keep learning. You know, I think the basic ideas are for every department, not just for marketing. Always make sure that you're aligned with the goals of the business. Definitely. But don't ignore that the function itself is not that of the other department or the whole company. We influence those numbers, but we are not isolated on what we do and find ways to break down, you know, the problem into smaller pieces that are within your reach, and then the end result will come.

Awesome. Well, I think that's all for this week, and we will see you guys next time.

Thank you, Miranda. It's been great.