Paul Graham, the founding partner of Y Combinator, said that what can be measured, improves. That principle should be applied to your lead generation efforts.
Even if your lead generation is going well, and you are seeing revenue being generated from it, you should still be measuring the process and optimizing any way you can.
The first primary way to measure lead generation profitability is ROI or your return on investment. If you are spending more money on lead generation than you are getting revenue in return, then your current method is not working, and it is time to scrap or change it completely.
The second measurement is the optimization. Understand that success is not simply running your lead generation smoothly but generating the maximum amount of leads with the minimal amount of investment.
To begin your measurement process, you need to separate and pinpoint the most accurate cause of revenue. There are many data points involved during this stage of lead generation, so make sure you are prepared to calculate the most accurate data.
7 Introductory Steps to Measure Your Lead Generation
1. Give revenue numbers specific attribution
Follow the money trail to measure which offer or discount or landing page or custom form directly attributed to your business is making money. This should always be the first step when choosing the best optimization path.
2. Measure your success in consistent units
Whether that is accounts, marketing campaigns, blog articles, SEO keywords, paid media ads — ensure your unit of measure is consistent across all of your leads and pipelines. Are you looking for more accounts? Then measure the number of new accounts your campaigns bring in. Are more visitors to your website more important to you? Measure the number of unique visitors a month, quarter, and year. Whatever the unit may be, make sure you measure it consistently across all types of marketing (email, social, content, etc.).
3. For B2Blead generation, pick variables that are relevant to the time frame you are measuring (or response variable)
Account for seasons, different tactics, and times that may impact or affect the revenue. Whatever the variable, pick the funnels stage you are most interested in to measure the variable against the consistent unit.
4. Recognize similar response variables
An example of similar response variables could be described as follows. Let’s say generated revenue is your response variable, and downloaded white papers are your unit of measure.
Revenue performance might not vary much from paper to paper, especially if they bring in similar revenue. To optimize for revenue, you should establish whether your response variable changes or responds to different outside effects, like age.
Let’s say you have two white papers — A is only a couple of weeks old, while B is a couple of months. Both have generated a similar amount of income over the last quarter — $300. This model shows that A is the more valuable variable, and where your marketing efforts should be pointed to since it was able to produce a more substantial amount of revenue in a shorter time span.
5. List the possible effects on revenue (explainer variables)
In step 4’s example, age was the possible effect on revenue. A possible effect on revenue is also known as an explainer variable, and they are essential to consider because isolation of an explainer variable can help to strategize and measure the effectiveness and outcomes of the variables.
6. Isolate explainer variables
After you have defined your list of explainer variables that can be measured, you need to narrow down which ones are good for analysis. Ideally, isolate one or two explainer variables that will be the most likely to assist in measuring variations in revenue.
Next, if possible, examine covariance (when one variable changes because of another variable’s change) and correlation (the relationship between the variable and your unit of measure) between this variable and revenue across all accounts or white papers (or whatever your unit of measure is).
7: Is there room to scale?
In your A/B test, is B involved in a marketing campaign, and A is not? Can B be promoted more to test for more revenue? Audiences might prefer A, and therefore should you produce more like A? Should you invest more money in a campaign to promote A, on an equal level to the promotion of B? Determine if you have room to scale each of your variables (and budget), and continue to test the success of each variable again and again.
Before you begin measuring, consider these points. Should your business target the direct-to-consumer (B2C) model, or the business to business (B2B) model? What are your product category, product type, product cost and product margins? You will want this information as you evaluate the effectiveness of your lead metrics.
If you are overwhelmed and need a place to track all this information, use this handy lead goal calculator from HubSpot to help you track the successes and misses from your lead generation and marketing campaign.
The overall purpose of this exercise and overall step in your lead generation process is to calculate the total amount of leads needed to hit your sales or revenue goal. You need to be able to measure current close rates for sales, give dollar values to each pipeline of lead sources, track monthly and by each pipeline the lead generation, and set and commit to a monthly goal for your lead generation.
Metrics to Look Into and Acronyms You Will Need
- UTM(Urchin Tracking Module): is code that is utilized by attaching to a URL to give Google Analytics information or data. (Tip: Assign each source their URL that lands on the same landing page or custom form, i.e., Google AdWords, Email Marketing, Social Media, etc.)
- Conversion rate: percentage of users who have taken action you desire. (i.e., buy something, download something, etc.)
- CTR: the number of people who have clicked on your button or call to action (CTA). To find this number, the formula is: (total clicks on ads)/(total impressions) = CTR. I.e., this number is figuring the number of people who see your CTA on your ad and click on it.
- ROA: The company’s profitability in relation to its total assets. The formula is net income/total assets = ROA.
Another way this can be considered is return on investment, which is the outcome of the profit and cost of investment from the resource. Evaluate the efficiency of an investment in terms of profit margin (i.e., if you put $30 into AdWords, but you make $60, and it costs you $2 to do the service, your ROI would be ROI = (90–30)/30 = 2 return on investment). The formula to calculate ROI is ROI = (revenue-cost of goods sold or investment)/cost of goods sold or investment. Click here to learn what a good ROI is.
- CPC: Cost per click, or the price the business or advertiser has to pay each time a click happens on your paid search ad (also known as PPC).
- CPL: Cost per lead, or the pricing model for online or digital advertising. In other words, what you, the advertiser, are paying for the sign-up of the visitor or consumer.
- CPA: The cost per action. PPC and CPC are both forms of CPA. However, this metric also includes clicking on the link AND taking or completing an action (i.e., downloading a white paper).
Channel or Pipeline Metrics
- Lead generation rate: Make sure you understand your conversation rate or the rate at which someone is going from one step of your funnel to the next (i.e., lead to a customer). The formula involves tracking the number of leads you get and the number of resulting sales so that it would look something like: conversation rate = (total # of sales/number of leads)*100. For example: If you had 20 sales last year, and 100 leads, your conversion rate would be 20 percent. Focus on what the value of a lead is to you. Lead value = value of sale/number of leads.
- Monthly channel/pipeline rate: The rate at which a lead becomes a conversion, or customer, by each month, via each pipeline. The number of Conversions needed = desired revenue/lead value. Focus your ad dollars in the areas that more closely align with your needed conversions per month, per pipeline. Focus on the pipelines that make you the most revenue or bring you the most valuable leads.
Thanks for reading!