LA HUG - Conversion Path Metrics
- 1. Adding Financial Metrics to the Conversion Path Calculating Lead Values
- 2. Hi, I’m Devyn I’ve been marketing since the dial-up days. My paid social media campaign was on MySpace. I learned how to do everything in this presentation by going to INBOUND in 2016. I went to college to be a High School Band Director. Vanity Metrics Vs Real Metrics
- 3. Information You’ll Need Gather the metrics you’ll need to perform the calculations Doing the Math The magic, career changing formula to calculate lead values Applying the information How to take this information to the next level Growth Tips How can you improve your conversion rates by being better What We’ll Go Over
- 4. Marketing is giving us bad leads. - Every sales team that misses their metrics
- 5. C-Suite when the sales team’s goals are met and they want a new ivory back scratcher
- 6. C-Suite when the Marketing Team asks for budget
- 7. Information You’ll Need It’s ok if you don’t have perfect numbers, but you can fudge to get started with the understanding that metrics will be tracked in the future. ● Customer Acquisition Cost ○ How much does it cost to get a new customer ● Customer Lifetime Value ○ How much does the average customer spend during their time with the company ● Sales Pipeline Definitions and Conversion Rates ○ Close rates, Opportunity to Demo Rates, etc
- 9. LTV Lifetime Value If your company only sells one off, then how much is the average customer order? If your company sells subscription services, find how much they spend on average, and determine the customer life span, then multiply the two numbers. If the customer spends $1000/year for 5 years on average, the LTV would be $5000.
- 10. LTV – CAC Customer Acquisition Cost The CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. This can be a pretty scary number if you are blowing money on marketing, and aren’t seeing much in return. For example, if a company spent $100,000 on marketing in a year and acquired 100 customers in the same year, their CAC is $1000.00.
- 11. LTV – CAC = NCV Net Customer Value Your Net Customer Value is what you get when you subtract your Customer Acquisition Cost from your Lifetime Value. This number can be scary, too. Sometimes, it can even be negative. This is usually the first wake up call for organizations when looking at their marketing spend.
- 12. LTV – CAC = NCV $5000 - $1000 = $4000
- 13. LTV – CAC = NCV $5000 - $1000 = $4000 NCV Net Customer Value
- 14. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR Sales Close Rate The Sales Close Ratio measures the number of prospects engaged by your sales team compared to the number of deals won. This number is a percentage.
- 15. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV Net Deal Value This is the measurable dollar value of every pitch or demonstration you give.
- 16. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 So if you net $4000 on every customer, and you are closing 1 out of every 4 people you pitch, every person you pitch is worth $1000. Even if they say no, it is still a win, because if 1 out of 4 people say yes, the more people you talk to the more money you make! Weak sales orgs don’t typically track this metric.
- 17. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV Net Deal Value
- 18. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR Prospect Conversion Rate This is the number of leads you get that turn out to be qualified to pitch, or give a demo. This number is a percentage.
- 19. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV Prospect Value Now we know the measurable dollar value of your qualified leads.
- 20. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 So let’s say you have killer conversion paths and 75% percent of the people you come in contact with are at the consideration or decision stages of your funnel. Each of your prospects are worth $750.
- 21. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 PV Prospect Value
- 22. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 PV x LCR Lead Conversion Rate This is the percentage of people who come in contact with your brand who decide to call in, opt in, fill out a form, or otherwise give you their information that were qualified prospects.
- 23. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 PV x LCR = LV Lead Value
- 24. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 PV x LCR = LV $750 x 0.01 = $7.50 You now have a monetary value associated with every hand raiser that comes in contact with your brand. Every person who you enters their information into your CRM is worth $7.50
- 25. LTV – CAC = NCV $5000 - $1000 = $4000 NCV x SCR = NDV $4000 x 0.25 = $1000 NDV x PCR = PV $1000 x 0.75 = $750 PV x LCR = LV $750 x 0.01 = $7.50 LV x LPCR = VV $7.50 x 0.10 = $.75
- 26. That was a lot.
- 27. How to use this information There are three ways to make more money. Get more customers, cut costs, or raise prices. Since the last two are probably out of your control, you need to focus on the first. You can use this data to inform your sales and marketing leadership where to improve your operations, and where to apply more force to your flywheel.
- 28. ● 1 Customer ($4k) ● 4 Opportunities ($1k) ● 6 Prospects ($750) ● 540 Leads ($7.50) ● 5,400 Visitors ($.75) Current Metrics ● 2 Customers ($4k) ● 8 Opportunities ($1k) ● 11 Prospects ($750) ● 1,100 Leads (7.50) ● 11,000 Visitors ($.75) Doubling the number of Visitors What can we change? 25% SCR 75% PCR 1% LCR 10% VCR ~$4,000 Monthly ~$8,000 Monthly
- 29. What else can we change? Let’s, instead, look at the playing with some of the conversion rates. If you use the data to tell a story, you can see that only 1 percent of the leads are qualified to become prospects. ● Students filling out forms ● People trying to sell you stuff ● Non-Targeted Messaging and CTAs ● Too many forms ● SPAMMERS
- 30. ● 1 Customer ($4k) ● 4 Opportunities ($1k) ● 6 Prospects ($750) ● 540 Leads ($7.50) ● 5,400 Visitors ($.75) Current Metrics ● 3 Customers ($4k) ● 11 Opportunities ($1k) ● 15 Prospects ($750) ● 300 Leads ($37.50) ● 3,000 Visitors ($3.75) Streamlining the Conversion Path What can we change? 25% SCR 75% PCR 5% LCR 10% VCR ~$4,000 Monthly ~$11,000 Monthly
- 31. ● 3 Customers ($4k) ● 11 Opportunities ($1k) ● 15 Prospects ($750) ● 300 Leads ($37.50) ● 3,000 Visitors ($3.75) Streamlined Conversion Path ● 6 Customers ($4k) ● 11 Opportunities ($2k) ● 15 Prospects ($1,500) ● 300 Leads ($75) ● 3000 Visitors ($7.50) Closing More Deals What can we change? 50% SCR 75% PCR 5% LCR 10% VCR ~$20,000 Monthly ~$40,000 Monthly
- 32. What can we change? Applying the formula to specific channels If you are able to isolate the customers based on channel attribution, you can apply the formula to calculate the value of specific channels and campaigns. (HubSpot is pretty good at this…)
- 33. Let’s say you look at your social media and find you have a VERY high number of hand raisers that convert from that channel: ● 25 Leads ● 13 Prospects ● 9 Opportunities ● 2 Customers 1% LCR 75% PCR 25% SCR ~$9,000 Monthly What can we change? Channel Metrics
- 34. Growth Tips ● More Visitors ○ Paid Ads ○ Social Media ○ SEO/Content Strategy ○ Video content creation ● Visitor to Lead Conversion Rates ○ Site redesign ○ Form management ○ Content Offers ● Lead to Prospect Rates ○ Retargeting Ads ○ Solid Email Marketing ○ CRM Segmentation
- 35. ● Prospect to Opportunity Rates ○ Sales and Marketing Alignment ○ Sales Enablement ○ Playbooks ○ Sales Sequences ● Opportunity to Close Rates ○ Better demo calls ○ Custom presentations ○ Consultative selling ○ Sales Training (Sandler, etc) Growth Tips
- 36. QUESTION TIME!!
- 37. Thank you Free Lead Value Calculator LinkedIn