5 Growth KPIs Every Product Marketing Manager Should Know

Author: David Daniels, BrainKraft @ BrainKraft.com

How do you measure the impact product marketing has on your business? It’s a common question I get. Most of those questions are in response to pressure by bosses wanting attribution metrics. That is, data to prove that a given marketing effort has an impact on the business in a positive way.

Measuring a direct correlation is possible but it’s far easier to measure in the aggregate. That way you’re reporting on trends rather than incidents. You want to use KPIs that correlate to the business goals for the products you’re supporting. In other words, don’t measure things that don’t matter.

There are 5 basic KPIs I recommend you monitor. Each one brings something to the table to help you figure out what’s working and what’s not. This is a good starter list of KPIs, but it isn’t a complete list by a long shot. The list is limited in scope to what product marketing should focus on.

Customer Lifetime Value (LTV)

Customer Lifetime Value (LTV) is a high-level KPI. It’s a trending indicator, like your weight, cholesterol, or blood pressure. In this case though, a higher LTV is better. It means that each customer, on average, is spending more money with you. It means your business is getting healthier.

A declining LTV could be the result of competitive pressure or there could be excessive discounting. If all competitors are experiencing declining LTV it could be an indicator of a declining product category.

 

LTV = Sum (amount each customer spends until they leave) / # of customers that have left

 

Example:

LTV = ($250,000 + $375,000 + $225,000) / 3 = $850,000 / 3 = $283,333

What I like about LTV is it can be easily calculated from past data. Ask your Finance team to pull the data for you from the last few years and see where it’s trending.

Close Rate

The close rate tells you how many qualified leads actually close and become customers. A higher close rate is better. It means there is a higher efficiency in acquiring customers and it’s being done at a lower cost.

Lower close rates could be an indicator of a poor product-market fit or a sales enablement gap.

You need to decide where you begin the measurement of a close rate. Some organizations use a marketing qualified lead (MQL) as the starting point and some use a sales qualified lead (SQL) as a starting point.

 

To calculate the close rate using SQLs, your formula looks like this…

 

Close Rate = # deals closed / # SQLs

 

Example:

 

Close Rate = 320 deals closed / 1,000 SQLs = 32%

 

Average Cost per Lead (CPL)

The cost per lead is an indicator of lead gen performance. A lower cost per lead is good. A higher cost per lead is not as good. The goal is to generate the best leads at the lowest cost while increasing close rates.

You can calculate CPL based on MQL or SQL. The game for your sales team doesn’t start until there’s an MQL, so that’s the minimum threshold. Take the total cost of marketing programs to get MQLs and divided it by the number of MQLs acquired.

 

CPL = Money spent to acquire MQLs / # MQLs acquired

 

Example:

 

CPL = $500,000 / 850 = $588

 

Average Contract Value (ACV)

The average contract value is the average amount of money per transaction. Think of shopping at a grocery store. There are hundreds of people who go to the grocery store each day. If you take all the sales generated for the day and divided it by the number transactions, you get the average contract value.

 

ACV = Sum (value of deals closed) / # of deals

 

Example:

 

ACV = ($150,000 + $200,000 + $175,000) / 3 = $175,000

 

Customer Acquisition Cost (CAC)

Customer acquisition cost is like CPL only bigger. It adds the cost associated with going from awareness all the way to a close. A higher CAC is generally thought of as bad but that’s not  always true. The CAC can rise as long as the corresponding ACV goes up too.

 

CAC = Sum (all marketing and sales costs) / # customers acquired

 

All marketing and sales cost includes salaries, promotional costs, commissions, and any other costs associated with acquiring a customer. If you calculate your CAC on a monthly basis, you can monitor trends. It’s not an exact science because there’s an assumption that near term  marketing efforts turn into near term customers. It’s not perfect but it definitely trends over time.

 

Example

 

CAC = Sum ($50,000 marketing cost + $25,000 sales cost) / 5 customers = $15,000

 

It’s bad when the CAC is greater than the ACV, like the parody of SliceLine on the TV show Silicon Valley. You can’t make money if the cost to deliver pizzas is $10 and cost to buy them is $9.

In the example, we’ve calculated a CAC of $15,000. If the ACV is below $15,000 then you have a business decision to make. It might be a strategic play to accept deals that are under water to optimize for profit later. It might be a bad business model. Or, there could be leaks that need to be plugged.

 

Putting it All Together

Think of this list of KPIs as basic diagnostics, like when you visit a doctor. The doctor gets measurements from you to evaluate the status of your health. You know from experience the initial collection of data can result in more diagnostic tests to pinpoint an illness.

The reason I’m using this analogy is that I just returned from the doctor’s office. I have a small scratch on my cornea which was diagnosed after a secondary set of diagnostic tests. It occurred to me this is a perfect metaphor for product marketing KPIs.

Using multiple KPIs is important. It allows you to compare how KPIs correlate to each another. One KPI can be great while another KPI is bad.

 

Example:

Assume that you have a Cost per Lead of $300. Your finance team has decided the cost per lead is too high and you need to bring the cost down. Over 6 months your team has dropped the CPL down to $50. High fives are in order because it’s the lowest CPL you’ve ever documented. The CFO is thrilled. But he’s noticed something else.

You now have a Close Rate of 10%, which by any measure is abysmal. It used to be better. In January the close rate was 30% and trending higher. What went wrong?
You can’t diagnose the problem yet, but you have data to analyze. You graph the CPL against the Close Rate from the past 6 months.

Uh-oh. You see where the problem started and can figure out the right treatment to help the sick patient.

We can’t be absolutely certain there is causation to the correlation, but it sure does stink. It requires more investigation but now you have data, not a guess.

If you were tracking CPL against the close rate on a monthly basis, you would have spotted the trend sooner.

Summary

There is an endless supply of relevant KPIs. Don’t get lost in analysis paralysis. Pick a handful of KPIs that are meaningful to your business model and to the goals of your organization.

 

Planning a Launch: Communicate Globally, Execute Locally

By Rich Nutinsky, master instructor at Pragmatic Marketing

Planning and executing any product launch is daunting, but planning and executing a global product launch increases the size and scope by an order of magnitude. Not only are there differences in geography and language to consider, there is also the local calendar. And that’s just the beginning.
First, you have to identify the problem you want to solve. Does it exist for people in other geographic locations? Will your product universally solve that problem?
You will need to conduct market research to answer those questions. But remember, conducting research on your home turf won’t allow you to extrapolate information that is relevant to other geographies; the problem you’ve identified may not be an issue there.

 While there are plenty of variables, global launches generally fall into two main categories: phased and big bang. Big-bang launches, which indicate a simultaneous launch in all markets, are the rarest and most problematic. From a project-planning perspective, the more complex and larger an effort, the higher the probability of failure.
 It is virtually impossible to take a one-size-fits-all approach; most launch activities simply don’t lend themselves to a big centralized push across markets. Ideally, planning should be done locally and integrated into a comprehensive plan. If you plan for a launch in North America and expect to duplicate it in another region, you won’t be successful. It’s important to plan a variety of phased local launches that take into account the unique needs of each region. Here’s a sampling of what to consider in this phased approach.
Regional Considerations
Global launches are often staggered by geography, and the tasks that must be accomplished for each region will drive their launch dates. For example, are there language translations and content modifications to consider? What about legal registrations, trademarks and branding?
When I managed the global launch of a new line of products, something as simple as considering a region’s holidays and buying cycles created immense complexity around timing the launch. Planning and execution of messaging was also a challenge.
Naming the product was another challenge because for every jurisdiction we wanted to enter, we had to make sure that we could use the same product name. If someone had already registered that name or a domain, we’d be back at square one.
These challenges were unbelievably detailed and required assembling a team with global representation, including marketing resources from the different geographies.

“Depending on the geography, product categories may be in different stages of their life cycles.”

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Product Life Cycles
 All products and product categories go through a life cycle: new, growth, mature, decline. Where your product and product category are in their life cycles will affect how you go to market. If your product is in a new, innovative category, your approach to launch will be much different than if you are in a mature product category where a lot of people already have the product.
This is important because depending on the geography, product categories may be in different stages of their life cycles. Therefore, you will want to localize the approach, message and timing of your launch to coincide with the specifics of a particular geographic market. You might include some activities in Asia, for example, that you wouldn’t include in North America.
The Buyer
As you look at global markets, you will find that customers use different decision levers depending where they are. They will buy differently in the Middle East than in North America, and Latin America will be different from Asia.
For example, in some regions companies guard the identity of their actual decision-makers from vendors to gain an advantage during the buying process. In other regions, discounts are a routine incentive. Because the differences can be profound, it’s important to understand whether a strong relationship is required to buy, or whether the decision is a straightforward economic one based on ROI.
Many businesses also discover that buying in a government environment is much different from buying in a commercial market. Not only are the processes defined differently, but the roles and players may change as well. Navigating all the red tape can become as challenging as delivering a compelling value proposition.
Distribution Channels
With all these variables, it often makes sense to employ different distribution channels in different markets. For example, launching a product in Japan through a Japanese channel partner will involve a very different set of steps and activities than if you work with your direct sales force. And if you want to do a regional launch in Europe, multilingual and multi-currency availability are key. But in the U.S. it doesn’t mean a thing. When you go to market, the messages you want to deliver, the value propositions you want to create, must be localized by geography.
Major launches by companies like Apple may appear to be global. But if you look carefully, they usually kick off with a global marketing launch well in advance of the product’s availability. In terms of when customers can get their hands on the new product and how it is delivered, the timing is usually staggered because of the approvals that are required across a variety of jurisdictions.
At a software company based in northern Europe, we twice tried unsuccessfully to expand into North America before determining that we needed to have local resources in North America to be successful. Once we got established in North America, we focused on expanding into the Middle East and the Asia-Pacific region. Finally, we looked at Central America. Through that focus we were successful.
The bottom line?  It makes sense for most businesses to expand their footprint into markets one at a time. You need to consider the risk, complexity and localization involved in your launch. And even when you communicate globally, it generally makes a lot more sense to execute locally.