Measuring the new normal: Seven funnel metrics to track nowBy: Phil Stern
2020 is on track to be a particularly tumultuous year for the global economy. Now, more than ever, we believe it is critically important that revenue leaders look to their company’s metrics to track trends and opportunities in the market, then react with speed and agility.
But it’s not enough to track metrics—you need to track the right metrics.
There are dozens of leading indicators that can help identify downturns and trends while also indicating when specific channels or segments are rebounding or trending up. By tracking the right combination of leading indicators, you will be able to:
- Better prioritize productive segments of your market
- Respond to changing demand in real-time
- Deploy capital efficiently
With that in mind, we have outlined seven critical metrics we believe every revenue leader should consider tracking to gain a clear view of how their funnel has changed. By tracking these seven metrics, you can understand the new timelines of your buyers, the new sales cycle for your teams, and the new way to forecast and predict the growth of your business.
1.Keyword search volume
Tracking organic search traffic for relevant keywords is a leading indicator of demand. Changes in search patterns can also provide insight into changes in buying behavior and prospect pain points that can inform your strategy.
Using your data, try answering these questions:
- Has search volume by keyword changed materially in the past week or month?
- Are you seeing a lift or decline in specific segments searching for solutions?
- Are you seeing a change to keyword costs or competition?
Search volume and patterns will help you forecast lead volume and ultimately forecast softening demand or a rebound.
Heads up: Even if you see major softening in volume for your top keywords, avoid turning off paid spend on your brand terms. Doing so gives your competitors the chance to bid on your branded terms at a discounted rate.
2.MQL volume and cohort conversion rate
What is your total MQL volume and run rate for the current month and quarter? How does that compare to this time last year? What about last month or quarter?
When you examine your conversion rate from MQL to opportunity, measure on a cohort basis (vs. in-period) to understand how this group of leads, acquired during COVID-19, is behaving compared to leads acquired before the virus. How do current conversion rates compare to waterfall conversion rates this time last year? This current cohort of leads and opps is likely to stand out from the pipeline created prior to this period.
Heads up: Given the current environment, it’s possible to see steady MQL volumes or even an increase in MQLs. The challenge is that in some cases, this does not equate to additional opportunities in your pipeline. In this moment, people are looking for knowledge, ideas and best practices to help them navigate. This may bring them to your website to download content or even sign up to demo your product, but these signals have a different meaning than they did two months ago.
3.Marketing and sales channel performance
It’s also likely that you will see shifts in the performance of each of your marketing and sales channels. Events and trade shows won’t have a major impact this year, and we’ve seen clear evidence that outbound programs are not performing at pre-COVID-19 levels. At the same time, companies have seen an increase in performance of social channels.
By tracking performance and changes to production by channel, you can optimize your investments and identify changes in the research and buying process.
Try answering questions such as:
- Have you noticed changes in performance (volume or cost of new leads and opps) by channel?
- What does the shift in your channel mix indicate about changes in your buyers’ process?
Heads up: Not all increases in channel performance create the same pipeline. For example, many companies are turning to webinars and virtual events and are seeing major upticks in attendance, then concluding they’re gaining an uptick in quality leads. Realistically, we have seen that people simply have more time while they work remotely, or if they were unfortunately laid off or furloughed, and they’re investing that time in personal and professional development.
4.Demo show rate
This metric helps you understand the rate that your prospects actually show up to booked meetings with your sales team. Given current uncertainties in budgets, you might see a spike in no-shows of your demos. Your prospects are facing major challenges in their businesses and viewing your product might be a priority one day and not the next.
Tracking this metric will allow you to size the difference in engagement at this point in the middle of your funnel and help your team create new forecasts for pipeline generation and future won deals. As you continue to track this, you will also have a clear view of upward trends, likely signaling higher intent and re-engagement from your prospects.
Heads up: Demo show rate for many sale teams was between 65-75% pre-COVID-19.
5.Total sales cycle duration
As the COVID-19 crisis unfolded, many teams saw sales meetings get canceled and deals get pushed. In other cases, depending on the product you offer, you might have seen an acceleration of stages. Regardless, the buyer’s journey is changing.
New timelines are emerging and because of that, it’s imperative to track the duration of your sales cycle, broken down by each stage. This will allow you to properly understand the new timelines and touchpoints required to advance deals and modify your forecasting methodology and sales processes to best fit.
Heads up: You are gathering new data points in real time. Understand that your first pass at new stage durations may not be accurate. However, it is still worth adjusting expectations now and iterating as more data comes in.
6.Pushed deal rate
At the end of most months and quarters a certain percentage of your pipeline that was forecasted to close in the current period pushes out to a future period. This is typical in sales and generally, if forecasting and pipeline management practices are tight, is predictable and small (maybe about 5-10% of total pipeline).
However, given changes to company budgets, sales cycles and buyer behavior, you can expect to see a higher rate of your deals push into future periods as your buyers grapple with major changes to their businesses.
Track this closely, in conjunction with sales cycle and stage duration, to create new forecasting and pipeline management practices for your teams. You will need to establish new benchmarks and educate your team on how their pipelines are changing.
Heads up: Pushed deals are not the same as lost deals. In diligent pipeline management, sales leaders help their teams clear unwinnable pipeline to gain the most accurate view on bookings. Only deals with a clear future task or event should be pushed out to future periods.
7.Average deal size and discount rate
Have you seen a meaningful change to the size of your deals? Are prospects who buy, buying lower tiers or smaller packages? Are you discounting more heavily? By how much?
If average deal size is lower than in prior periods, investigate whether you are discounting more heavily to win new business. Tracking this allows you to differentiate changes in prospect behavior (e.g. they are tight on cash so buying smaller packages from you) from your sellers’ behavior (e.g. feeling the need to offer discounts to close any business).
Heads up: Ensure you have guardrails built into your business governing acceptable discount rates for your sales team. Allowing your sellers to do “whatever it takes” to win business might support short-term goals but will likely instill bad habits impacting the long-term health of your bookings.
Why these metrics matter
Tracking the right set of metrics has always been important for managing your business. More than ever, tracking metrics like the ones listed above is critical not only for managing your company’s investments in sales and marketing but managing investments across the entire company.
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