This is a 3 part series list of the most important key performance indicators (KPIs) that every B2B SaaS revenue team should measure to impact their revenue bottom line. These KPIs are a mix of both lead and lagging metrics.
To understand the difference, lagging indicators are simply indicators about a past performance, such as new sales revenue. While lead indicators are indicators that are actionable and usually determine or have an impact on a lag indicator.
Every revenue department, is typically divided into 3 key areas:
- Customer Success
In this article, we will be deep diving into the KPIs that each marketing must track. It’s important to say that these aren’t the only KPIs. However we consider these actionable metrics compared to vanity metrics, and recommend everyone of our clients to measure them.
The marketing team is in charge of communicating the value of what you’re building or selling.
This value communication can be done in many ways, which falls down into one of these 3 main types of categories/channels:
We refer to outbound as the “spear” method, because it requires a more personalized and targeted approach. Such a method involves 3 key channels, which are Email, LinkedIn or phone (calling).
For outbound, we must track 6 key metrics:
- Activities: How many emails, calls, or LinkedIn messages had to be sent? These are the 3 key activities that need to be tracked.
- Conversions & replies: The number of conversions usually relies on how many conversions initiated (aka replies).
- Reply Conversion Rate: Most CRMs, and email software platforms typically give a reply conversion rate, which is calculated by dividing the number of replies per activity.
- SALs: Stands for Sales acceptance leads, meaning the number of leads who replied and are qualified for the sales executive team to take over.
- SALs Conversion rate: Referring to the number of sales acceptance leads divided per the number of activities.
- Source/Medium Conversion Rates: It’s important to track each channel (LinkedIn, phone and email) separately to see what will work best for your industry specifically.
You already probably heard about HubSpot’s famous Inbound marketing approach, which works more like a “net” method, capturing leads through content marketing. It differs from Outbound marketing, by being more scalable but much less targeted. However, the main difference is that inbound leads are experiencing some type of pain and are actively searching for an educational piece of content or specific solution.
For inbound, we must track 6 key metrics:
- Traffic: How many new and returning users do you have per month? This is incredibly important if you have a media or marketplace component.
- Traffic Source/Medium: It’s important to track the source/medium of where the traffic is coming from. To track this properly, we recommend setting up a UTM structure that you follow each time.
- SEO Queries, Position and Click through Rates: It’s important to track the number of search queries each keyword gets, its average positioning and click through rate. (These are already tracked on Google Search Console)
- Conversion Rate per Source/Medium: Each source/medium will have a specific conversion rate. For example, traffic coming from Google organic search might convert much higher than social traffic.
- Conversion Rate per Landing Page: Each landing page will convert differently, and it could depend on the conversion goal (your call to action), as well as things like copy, and creatives on each page. It’s important to track these at an individual level.
This type of marketing strategy includes all types of paid traffic, including sponsored ads, CPC bidding on listings, and media buying in platforms such as Facebook, Google, Pinterest.
For paid marketing, we must track 3 key metrics:
- Budget: Most of the marketers here take budget tracking for granted, that’s why we are including it here. It’s important to track your budget on a monthly, weekly and if possible daily basis.
- Cost per click: All paid marketing channels will have a CPC. It’s important to track it and find ways to lower it, which typically falls down into iterating on creatives, copy and for listing platforms, position ranking.
- Click Through Rate: Almost all paid channels will provide a click through rate, a KPI which indicates from all the impressions that your “ad” had, how many people actually clicked on it. The CTR is usually correlated with the CPC.
Other KPIs necessary for all channels
We didn’t want to be repetitive on 6 key metrics that must be tracked on each type of marketing strategy mentioned above, so we decided to make this separate list:
- Average Purchase Price or Deal Size: For B2B low ticket startups, this KPI can be tracked from the marketing team, while for high ticket startups it must be tracked from the sales team. It’s important to know what an average customer is worth. In most cases, the average purchase price or deal size will vary depending on the channel. In particular, outbound marketing customers are usually worth 2 to 3 times more than an inbound customer, thus having a higher CAC. The more a customer is worth to you, the more you can spend to acquire one, which means a higher CAC.
2. Number of MQLs: It’s important to remember that not all leads are created equal. This means that each lead is at a different level of education, and problem awareness. For this reason, the marketing team needs to determine a marketing qualifying matrix, which will serve as a filter to sort out all leads from marketing qualified leads. The number of marketing qualified leads per channel along with their respective conversion rate must be tracked.
3. Number of SQLs: Not all marketing qualified leads are also qualified for sales. That’s why we recommend for both sales and marketing teams to determine a qualifying matrix and set of criteria to determine which leads are sales qualified leads. The number of sales qualified leads per channel along with their respective conversion rate must be tracked.
4. Cost per Lead of each channel: The cost per lead (CPL) is calculated by adding up all the expenses incurred to acquire a new lead. We recommend calculating this for all new leads (generic one), one for marketing qualified leads (MQLs) and one for sales qualified leads (SQLs). By calculating them separately, your team can take different approaches when trying to lower them.
5. CAC per Channel Source: Each of the channels and sources mentioned above will have a client acquisition cost (CAC). It is important to track them separately, given that some channels will be more expensive by nature and channels quickly change overtime. You calculate this adding up all the expenses incurred in the channel source, including salaries, advertising budget, and tools.
6. Total CAC: As a marketing leader, it’s crucial to be able to track the total Client Acquisition cost at your company. VCs and angel investors even consider this as one of the most important unit economics before they make any type of investment. This is calculated by adding up all types of expenses incurred to get one more customer, including software and tools, marketing team salaries, paid media budget, and servers (if applicable).
Many marketers fall into the trap of only accounting paid media budgets as the expense for their CAC calculation. All though this mind me tempting to do, since it provides a really low CAC, it won’t speak the truth on how well the marketing team is performing.
We also recommend taking the Sales team quotas, salaries, and all other types of expenses into your CAC, since those expenses are necessary to properly get a customer onboard. However, it is possible to have a marketing CAC and also marketing and sales CAC.
We strongly live under the mantra of:
“What doesn’t get measured, can’t get improved.”
Although many gurus and experts will tell you to track an infinite number of KPIs, you will notice that 80-90% are actually vanity metrics, meaning that they will only guarantee a distraction for you and your team.
All of the KPIs mentioned in this article are crucial for the marketing team to track since it will have a direct impact on your bottom line revenue being generated.
Other KPIs that must be tracked to have an impact on your revenue come from both the Sales and Customer Success teams.