I have a bone to pick with SMART goals. Maybe you do too.
SMART goals became a buzzword many years ago, and back then they made perfect sense. You can’t set a meaningful goal without including criteria that will help you analyze the outcome.
And after years of using them, I discovered it doesn’t really matter how clear the goal is if you don’t know how to get there. You could have an objective that satisfies all aspects of SMART planning, and still fail by a long shot.
There is a better way of doing this. It’s time to start creating SMARTer goals, and we’ll show you how. But first, let's set an important ground rule...
Marketing & Sales Need to Agree On Average Customer Value.
You cannot set a realistic growth goal without knowing how many customers it takes to get there.
This isn’t always easy to calculate if you work in an industry where customer spending is all over the spectrum. We've talked to clients that have customers that spend as little as $30 a month on weight loss supplements, and as much is $5,000 a month for data co-location services.
As a first step, you need to dedicate time to defining your ideal buyer profile and buyer personas. These two terms often get confused by marketers, so let’s clear that up.
Ideal Buyer Profile vs. Buyer Persona
Our friends at Next Collision explained it best. An ideal buyer profile is a description of the company or customer type that makes the best fit for your products and services. The profile may include industry, company size, annual revenue and other criteria that your best customers share.
A buyer persona, on the other hand, is a profile of actual people who manage the research and purchasing process among your customers, including direct insights what influences their decision-making.
While an ideal buyer profile gives you high-level characteristics that indicate a good fit, a buyer persona tells you what the people involved in the purchase care most about.
Once you have a clear picture of who your best customers are, and what they spend with your company every year, you can determine how many customers it will take to hit the goal in your B2B marketing strategy.
1. Set Your Revenue Goal
Let’s say your company supplies mid-size manufacturers with robots they use on their production line. Your company finished at $10 million at the end of last year, an increase of eight percent. What is a good goal for this year? I would say a 15 percent increase would be about right.
Our goal is to increase revenue by $1.5 million this year.
Side note: Don’t forget to factor in your customer churn rate when thinking about the revenue goal and its impact on the bottom line. If churn rate is high, you may have greater challenges than just lead generation. Remember, it always costs more to find new customers than it does to keep the ones you have.
2. How Many New Customers Do You Need?
If you followed through on point number two above, you should know what the average customer spends annually. If spending is all over the map, determine whether you can segment your customers into groups of people who represent the greatest opportunity for growth.
For our purpose here, let’s say the average customer spends an average $100,000 a year with your company. That means you need 15 customers to nail your goal.
3. How Many Opportunities?
An Opportunity is a lead that has progressed through your pipeline, and your sales team has identified as a true opportunity. Before calculating the number of opportunities you need, you first have to know what your average closing rate is.
Companies with strong sales teams can usually close about half of the good opportunities that come their way.
In this case, you would need at least 30 opportunities to get 15 customers.
4. How Many Sales Qualified Leads?
As opposed to Opportunities, Sales Qualified Leads (SQLs) that have met criteria your sales team looks for to justify reaching out to them directly. Oftentimes, these leads will have already initiated contact with your company by requesting a demo or a consultation.
How many of your SQLs turn into Opportunities?
For now, let’s assume half of them will shake out. You will need 60 SQLs to hit 30 opportunities.
5. How Many Marketing Qualified Leads?
Moving one more rung up the ladder brings us to Marketing Qualified Leads (MQLs).
These leads have demonstrated they meet Marketing's definition of a sales-ready lead, determined by specific attributes and behaviors. These behaviors might include filling out certain forms or downloading assets from your website that signal they are entering the consideration stage of a purchase.
Until you have better metrics to go by, we will again assume you will need double the number (120 MQLs) to reach 60 SQLs.
6. How Many Top-of-Funnel Leads?
Now we have reached the top of the sales funnel, where the first conversion turns a ordinary website visitor into a lead.
A lead is someone who has shown they are interested enough in what you offer that they are willing to give a little personal information about themselves. In many cases, this interaction occurs on a form or a chat engagement.
Again, we will double the number needed to hit 120 MQLs, giving us 240 leads.
7. Search Volume
This last metric allows us to roughly calculate how much website traffic we will need to convert 240 leads.
The average session-to-contact conversion rate for most websites is between a point-twenty and point-thirty percent. Therefore, you need about 120,000 visits to convert 240 leads at a point-twenty percent conversion rate.
If your current website traffic is in the neighborhood of 70,000 visits per year, you will need:
- 50,000 additional visits a year, or about 4,200 extra visits a month
- Sales-ready website with conversion paths set up to generate leads
- Marketing strategy that will increase your website traffic from visitors that match your ideal buyer profile and your buyer persona.
Keep In Mind…
These numbers will not work out perfectly!
You may find two-thirds of your SLQs become Opportunities, but only a quarter of your MQLs become SQLs.
The only thing you can do is monitor every aspect of the buyer’s journey and constantly test ways to optimize the process, boosting your conversion rates at every stage. As your campaign matures, you should be able to fine tune the process and achieve greater ROI.
This is a SMARTer, more reliable path to goal achievement. Try giving it a shot. It sure beats overworking yourself without any sense of what’s waiting for you at the end.
Our Marketing Goal Setting Template will auto-calculate the metrics outlined above, helping you determine the KPIs needed to achieve your company's revenue growth target. Get it here>>
Mar 5, 2018 6:33:05 PM
