The real success of demand generation programs is a positive pipeline to spend ratio.
The most critical demand generation metrics to determine your impact on pipeline generation are the following:
- Cost per Inquiry
- Cost per Marketing Qualified Lead (MQL)
- INQ to MQL Conversion Rate
- Cost per Sales Qualified Opportunity (SQO)
- MQL to Sales Qualified Opportunity (SQO) Conversion Rate
Only a handful of metrics will truly measure the impact of your demand generation efforts. The determining factor of a successful demand generation strategy is a positive pipeline to spend ratio across your demand generation programs.
Why are certain demand generation metrics the most critical to your success?
Each one of these metrics will help you pinpoint which part of your marketing funnel is leaking and needs attention. It holds both your marketing team and business development team accountable for being mutually successful.
Also, it builds rapport between both teams and helps foster healthy and productive conversations that are always backed by quantified data points. True marketing and sales alignment happens when there’s a positive feedback loop between and optimization is happening at each stage of the demand waterfall.
Why is Demand Generation important?
Demand generation is the marketing activities that help sales move demand pipeline across measurable stages of the buyers journey. It takes both generating demand, efficiently capturing demand and enabling your sales team for success.
Most seasoned demand generation marketers know that the buyers journey is rarely a linear progression of clearly defined marketing touch points. It’s usually a convoluted journey of hard to measure marketing activities that eventually lead to marketing sourced pipeline and sales.
You’re going to learn the 5 most critical demand generation metrics that will help you immediately identify what’s working, what’s not and what’s needed.
1. Cost per Inquiry
The first demand generation metric that’s critical for building a predictable demand generation engine is understanding your cost per inquiry. The cost per inquiry is the ratio between your marketing spend over total number of inquiries acquired.
This dollar amount is calculated at both an aggregate level by measuring spend across all marketing channels divided by total number of inquiries and is also done on a per channel basis.
Is it possible to calculate the cost per inquiry for inbound marketing channels?
Yes, it’s possible to determine the cost per inquiry for inbound marketing using marketing attribution tools such as Bizible but the most predictable method is by tracking paid media channels.
Some of the common paid media channels include content syndication, paid search, paid social and display advertising. The actual cost per lead will vary by both the competition on the marketing and how well the marketing campaign was executed.
The cost per inquiry determining factors include:
- Channel type (explicit or contextual)
- Competition
- Targeting
- Offer
Remember, an inquiry is simply a lead that’s expressed interest in understanding how to solve a problem. It does not mean that person is ready to talk to sales.
Now it’s the overall marketing’s team obligation to nurture that lead across multiple touch-points with a valuable experience. This
This is simply a basic inquiry that still needs to qualify itself through a process called lead nurturing. The lead nurturing process
Eventually the lead nurturing process should elicit a meaningful action from the inquiry, which will convert the it into the next stage called a marketing qualified lead.
2. Cost per Marketing Qualified Lead (MQL)
The holy grail of demand generation is low cost marketing qualified leads that convert to opportunities and closed won deals. The cost per MQL can make or break any demand generation program. It can make the entire marketing organization from the CMO down viewed as either a frowned upon cost center or celebrated profit driver.
An MQL is often determined by a lead scoring model. Lead scoring is a methodology of ranking leads based on a predetermined set of signals that indicate sales readiness. The signals include lead source, behavioral scoring and predictive analytics. The cost per MQL is also influenced by marketing channel performance and how well the inquiry stage of the marketing funnel provides content that elicits a meaningful action in the customers journey.
Also, there can be a direct MQL stage that’s labeled by lead source. Usually, a direct MQL lead source includes marketing assets that self-qualify the prospect with higher commitment call-to-actions such as free trials, request a demo and use-case specific collateral.
Determining cost per MQL will vary based on your organization’s annual contract value (ACV) but on average the b2b marketing qualified lead ranges between $150 to $900 per MQL. For SaaS based revenue models it’s usually dependent on the monthly recurring revenue versus annual contracts.
The cost per MQL can also shift based on the intent of the advertising channel. For example, a demand generation marketer may feel comfortable paying double the standard cost per MQL for paid search if the offer being promoted is of high value that captures existing demand, which converts to opportunities and significant pipeline.
3. INQ to MQL Conversion Rate
The INQ to MQL conversion rate represents the quality of your top-of-funnel inbound and outbound marketing activities. A low conversion rate from INQ to MQL means that there’s a gap between your audience targeting and offer correlation or the lead scoring criteria is not surfacing actual demand as marketing qualified leads.
The INQ to MQL conversion percentage is a key demand generation metric. The benchmark INQ to MQL conversion rate across the demand waterfall is 10%. If your demand generation marketing programs are below 10% then start to drill down into each inbound and outbound marketing channel that’s driving inquiries to determine the cause of the low conversion rate.
Low conversion rates in the INQ to MQL stage of the funnel can be narrowed down to a few variables. This includes poor targeting criteria, promoting assets that do not provide enough value to move the buyer to the next marketing stage, wrong messaging or a combination of these factors.
4. Cost per Sales Qualified Opportunity (SQO)
The demand generation metric of cost per sales qualified opportunity is the total cost to convert a marketing qualified lead into an opportunity. A sales opportunity is a qualified lead that fits BANT requirements or displays intention of becoming a potential customer in the near future.
Sales Qualified Opportunities are measured by stages within the sales pipeline. Each stage is a predictor of future pipeline performance. An SQO or Stage 1 opportunity is a sales-accepted lead that has been worked by an SDR or BDR and passed to a sales executive for an initial meeting. This meeting is a further drill down into the prospects pain point and is also an educational process about building towards a viable business outcome.
To calculate the cost per sales qualified opportunity, simply divide the total cost of your total marketing investment by the number of opportunities created. This is a simplified version of calculating the cost per sales qualified opportunity.
As your marketing funnel becomes more sophisticated and your cost per MQL becomes more reliable, you can start predicting each stage of your demand waterfall based on conversion percentage per stage.
The total number of accounts in the pipeline along with actual pipeline dollar amount per opportunity is a leading indicator of how sales is pacing towards their quarterly booking targets.
Using a measured approach towards evaluating demand generation metrics per each stage will help you build a reliable demand generation program. You’ll need to have reliable conversion rates across the marketing funnel to clearly state how much you’re willing to spend on acquiring a marketing qualified lead while still maintaining a positive return on advertising spend (ROAS).
Quantifiable demand generation metrics allows marketing to influence the GTM strategy not be viewed as a cost center. Focusing on running profitable campaigns by tracking from inquiry to MQL to SQO and closed won business.
Truly sophisticated marketing funnels that utilize paid media as the main lead driver, can actually calculate “for every dollar spent what’s the return in pipeline” and build models.
From a demand generation marketing programs perspective, it informs the maximum amount that you’re willing to spend on acquiring a marketing qualified lead while still maintaining a positive return on advertising spend (ROAS).
5. MQL to SQO Conversion Rate
You can calculate the MQL (marketing qualified lead) to SQO (sales qualified opportunity) conversion rate by dividing the total number of SQO’s over the total number of MQLs.
The benchmark demand waterfall MQL to SQO conversion rate is 30%. This means out of the total number of MQLs, 30% are expected to become sales qualified opportunities that can be worked by the sales team.
Most demand generation marketing benchwork conversion rate’s are around 30% and anything below that is either an issue with the MQL lead scoring threshold.
which is causing MQL’s too quickly and the prospect is actually not ready to engage with Sales. It can also mean that the inside sales team is unable to convert the qualified leads into opportunities. This may require a need rework the follow-up sequences or reduce SLA time for what is measured as Hot MQLs.