Recently, I gave a workshop for a client on the Demand Factory™. It was going well with great engagement amongst the different teams as they tackled the big problems. There was that hope in the room that comes from seeing what’s possible when you connect all those systems and activities between sales and marketing to tangible results and revenue.
And although I should know by now to expect the question, it still caught me flat-footed:
“Do you have any industry benchmarks for companies like ours?”
The short answer is no. But the interesting and more insightful answer is, “Let’s go over why not.”
A brief history of demand funnel metrics
When SiriusDecisions developed the Demand Waterfall in 2006, it provided a structure for lead management and the ability to measure lead movement. For a deeper look into lead management framework and measurement, David Lewis does a great job explaining the all-important fundamentals in his book, Manufacturing Demand.
Before this lead management structure became the industry standard, there weren’t any industry “benchmarks.” However, those quickly came out as companies wanted to set targets and compare themselves to the best in class.
However, in the past four and a half years I’ve been with DemandGen, I’ve noticed that benchmarks are becoming scarcer and harder to find. In fact, the latest I can easily find are from a 2014 SiriusDecisions presentation. And just two years later, SiriusDecisions talks about the myth of the “best-in-class” waterfall benchmark.
In addition to all of this, marketing analytics have become dramatically more sophisticated as the increase in marketing technology has led to being able to more effectively track and measure different marketing strategies and tactics.
So, does the dearth of demand funnel benchmarks mean that there is no best-in-class goal for demand funnel metrics?
The value and danger of using benchmarks for goals
When a client asks us which benchmarks they should be using, they’re really trying to understand what goals they should be setting for each of their final lead stages. This can be very useful in determining resources, project timelines, and other types of necessary tactical details for implementing, executing on, and optimizing their Demand Factory.
And for that purpose, we can identify large ranges that they should be shooting for in different parts of their demand funnel. For example, with a properly configured lead scoring program, one could expect a Marketing Qualified Lead to Sales Accepted Lead conversion rate between 70% to 80%, and an Inquiry to Marketing Qualified Lead conversion rate between 2% to 30%.
However, there is potential danger in using benchmarks to drive goals for the performance of the Demand Factory. The main reason for this is that a different mix of marketing strategies can lead to a dramatically different expectation of conversion rates from stage to stage.
And this isn’t just the case with funnel metrics. Expected campaign metrics can vary widely depending on the campaign goal and target segment. A campaign targeting clients, for example, is going to have much better engagement statistics than a campaign targeting inactive prospects.
In the case of demand funnel metrics, a marketing and sales strategy that is targeting a higher lead volume will have different conversion rates than a predominantly account-based strategy.
I have one client, for example, who has a very large and strong sales development team. In their case, they look for a greater volume of lower qualified leads that can then be developed by their SDRs. As such, their conversion rate from Marketing Qualified Lead to Sales Qualified Lead can expected to be low compared to a strategy that sets a higher qualification from Marketing.
Goals in the absence of best-in-class benchmarks
Instead of setting goals against industry benchmarks, my most successful clients adopt a culture of optimization and continuous improvement. This works well when there’s already a funnel in place and you have some idea where to start.
But what should you do when you are just starting to build your Demand Factory?
In that case, the best option is to review your overall company revenue targets and then back into the required volumes at each stage to hit those targets. You can usually develop some sort of historical conversion rates from your existing data as a starting point in order to calculate these numbers.
From here, you can usually develop a tactical approach by identifying the specific strategies, campaigns, content, and other tools you will need to hit those volumes. Then, you can use your new Demand Factory to calculate your own benchmarks and to continuously improve upon your results.
Measuring beyond the benchmark
The tremendous amount of marketing technology available today has made it possible to measure every aspect of marketing and sales activities and tie it back to revenue. So, the next time someone asks about industry benchmarks, look within your own organization instead.
Want some help building out your Demand Factory, or simply fine-tuning what you already have in place? Contact us for a review and assessment of your demand funnel and performance!
Ryan Johnson develops and implements marketing automation strategies for DemandGen clients. As a DemandGen Consultant, he has helped clients across a wide range of industries to streamline and optimize their marketing and sales processes to drive measurable success and ROI.