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IS IT TIME TO RETHINK THE WAY WE MEASURE B2B MARKETING SUCCESS?

By Justin Sharaf | Mar 3, 2022

CHANNEL: Digital Marketing

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PHOTO: TommyStockProject

This winter, I was talking with a real estate agent friend. We had both started
new jobs in 2021, and while our industries and day-to-day work is very
different, it was fun to compare notes.

One topic that came up was how we measure whether we’re doing a good job or not.
He told me his new firm was very data-driven and had scorecards for each agent
at the firm.

My friend was particularly proud of a recent month where he had a conversion
rate of over 100% and won an award at his new company! When I asked him how that
was possible, he shared the calculation his firm uses:

# of houses sold divided by # of new houses listed for sale



I don’t know how many houses he actually sold, but for argument’s sake, let’s
say he sold six houses in the month and had five new listings posted, for a
conversion rate of 120%.


BRINGING CONTEXT TO SUCCESS 

On the surface, a 120% conversion rate is excellent. My friend closed more
houses than he even listed! But digging a little deeper had the potential to
show that my friend was not in fact a star performer. 

What if I told you that the average time to sell a house is 35 days, and the
average time it took for my friend to sell those six houses was 92 days?
Wouldn’t that paint a very different picture of how “successful” my friend had
been during his “award-winning” month? This new information might suggest my
friend is actually a low performer. Sorry pal!

I thought better than to start explaining to him how this was an example of a
“Time Series” analysis and how “Cohort” was really a better measure of success.
But I made a note of the conversation to ensure I’d remember to use it for this
month’s article!

Related Article: The Challenges of Measuring Marketing ROI


TIME FOR A CHANGE IN MARKETING MEASUREMENT?

This real estate example is almost identical to how many companies measure
success in the B2B software industry. Instead of houses sold, we talk about won
deals, and instead of new listings, we talk about new opportunities, or going
even further up-funnel, MQLs (Marketing Qualified Leads).

So let’s talk about how this plays out in the B2B software industry. For the
purposes of this exercise, I’m going to talk about a theoretical B2B funnel.

At the beginning of each year and quarter, most companies set targets: Targets
for MQLs, opportunities created, pipeline, annual recurring revenue and other
KPIs. If the company hits the targets, it’s usually a good thing. If the company
misses the targets, it’s usually bad. Right?

Not so fast. Remember last quarter when you crushed your MQL target? Well, if
you are in B2B software, chances are those MQLs from last quarter will turn into
pipeline this quarter. While your CMO and head of sales are congratulating you
on creating a ton of pipeline this quarter and encouraging you to do more of
what you are doing right now, the real hero is whatever you did last quarter. Go
do more of that! What you are doing right now is not leading to your great
quarterly performance; what you did last quarter is.

Related Article: Place Your Marketing Bets in 2022


TIME SERIES VS. COHORT SERIES

Let’s break it down even more simply:

Time Series analysis provides a point-in-time view into what is happening,
without any understanding of how past activities impact current and/or future
performance.

A Time Series report would tell me how many MQLs you generated or how many
opportunities you created in October. It tells you nothing of the quality of
those MQLs or opportunities or what happened to them over time.

Cohort Series analysis looks at a particular window of time for an activity and
tracks the performance of that activity over time.

A Cohort Series report for MQLs in October would tell you what happened to those
October MQLs over the next X months. How many became opportunities and how many
were won and lost.

A Time Series chart might look something like this:

TS Chart 1




MQLs

Opportunities

Won Deals

Win Rate

October

1000

200

30

3%

November

1000

300

50

5%

December

1000

150

20

2%

A Cohort Series chart might look something like this:

CS Chart 1




MQLs

Opportunities

Won Deals

Win Rate

October

1000

300

50

5%

November

1000

150

20

2%

December

1000

200

30

3%

If you measure your business based on Time Series, you’d think that November was
your best month. You’d double down on all the programs and activities you did in
November. Because, of course, you create the most opportunities in November and
won the most deals in November! Your win rate was the highest in November, too.

But if you measure your business based on Cohort Series, you’d see that, in
fact, October MQLs were the best and resulted in the most opportunities and won
deals, and November was the worst.

You’d decide to double down on all the programs that resulted in MQLs in October
and you’d look at your November programs as failures because November MQLs had
the lowest win rate.

Related Article: Intent Data and the Gap Between Sales and Marketing


HOW TO SHIFT FROM TIME TO COHORT

Convincing your leadership team to measure performance based on Cohorts instead
of by Time Series can be extremely difficult. You’ll probably want to bang your
head against the wall after every conversation, if we’re being honest. But
ultimately, it’s the best way to measure success.

Here are some tips for how to convince others that Cohort is the way to go:

 * Remind your leadership team that a B2B Sales Cycle can often be six-plus
   months. A new marketing campaign is like a new sales rep. There is a
   “ramping” period, and performance cannot be fully measured for at least six
   months. Results during the incubation period should really be attributed to
   the previous campaign.
 * Show them the Cohort analysis. The chart I shared above is pretty convincing,
   isn’t it? I would be shocked if you don’t have similar cohorts in your
   business. You may have invested heavily in events in Q1 and in webinars in
   Q2, and the cohorts will likely look different. Data speaks.
 * Everything we do in marketing is about ROI, right? ROI in anything (stock
   market, housing market, crypto market, gambling) is measured using Cohort
   Analysis, so why should marketing be any different? The results of the
   campaign you ran in October should be measured over six-plus months, just
   like the money you invested in Amazon stock. Your business results are just
   like a portfolio of activities. When deciding where to invest next, you
   should be looking at individual performance of campaigns (stocks) over a
   period of time instead of looking at aggregate performance of a single month.

Understanding the benefits of Cohort Analysis is not easy. It’s not easy to
explain it either.

My last piece of advice is this:

Even if leadership doesn’t understand the difference or the value in Cohort
Analysis, don’t let that stop you from using it to make the best decisions
possible for your business. At the end of the day, you are getting paid to make
good decisions, and using Cohort Analysis will result in good decisions for you
and your business.

Start commenting...

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 * Eddie Jenkins
   
   Really great stuff Tim! Thank you for the information. I'm sure it's
   different for each company and each situation but i'd love to see what
   Governance looks like for something like this. There...
   
   Digital Transformation Isn't Just a Technology Issue, It's a Business
   Issue · 1 day ago

 * memery26
   
   > The potential of the metaverse to connect customers with brands in ways
   > that create an exceptional emotionally positive experience cannot be
   > understated.
   
   I wholeheartedly...
   
   4 Ways the Metaverse Can Enhance the Customer Experience · 1 day ago

 * Zimana
   
   Thanks for your comments - paying attention to downstream certainly
   influences on analytic choices for measurement and should be a key part of
   the campaign discussions. One quick side point: Hits...
   
   How to Set Up Conversion Events in Google Analytics 4 · 1 week ago

 * The Social Media Strategist
   
   I definitely agree.. when you are authentic and genuine your marketing speaks
   for itself.
   
   The Single Most Effective Marketing Tactic — That Modern Marketers Ignore · 1
   week ago

 * William van Strien
   
   Bonding the employees, and also with the company: culture, “working
   together”, shared values. Personally I do recognize this myself from employee
   perspective. I’m glad to be allowed in office...
   
   The Wrong and Right Way to Convince Workers to Return to the Office · 1 week
   ago

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Tags b2b, b2b marketing, b2b sales, customer experience, cxm, digital marketing,
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Recent Comments
 * Eddie Jenkins
   
   Really great stuff Tim! Thank you for the information. I'm sure it's
   different for each company and each situation but i'd love to see what
   Governance looks like for something like this. There...
   
   Digital Transformation Isn't Just a Technology Issue, It's a Business
   Issue · 1 day ago

 * memery26
   
   > The potential of the metaverse to connect customers with brands in ways
   > that create an exceptional emotionally positive experience cannot be
   > understated.
   
   I wholeheartedly...
   
   4 Ways the Metaverse Can Enhance the Customer Experience · 1 day ago

 * Zimana
   
   Thanks for your comments - paying attention to downstream certainly
   influences on analytic choices for measurement and should be a key part of
   the campaign discussions. One quick side point: Hits...
   
   How to Set Up Conversion Events in Google Analytics 4 · 1 week ago

 * The Social Media Strategist
   
   I definitely agree.. when you are authentic and genuine your marketing speaks
   for itself.
   
   The Single Most Effective Marketing Tactic — That Modern Marketers Ignore · 1
   week ago

 * William van Strien
   
   Bonding the employees, and also with the company: culture, “working
   together”, shared values. Personally I do recognize this myself from employee
   perspective. I’m glad to be allowed in office...
   
   The Wrong and Right Way to Convince Workers to Return to the Office · 1 week
   ago

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