Mar 5, 2018 6:33:05 PM
I have a bone to pick with SMART goals. Maybe you do too.
SMART goals became a buzzword 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.
Marketing & Sales Need to Agree On...Average Customer Value.
You can't build a path to goal achievement 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 managed service providers with customers that spend as little as $30 a month on hosting fees, and as much is $5000 a month for data co-location services.
In cases like these, 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.
Our friends at Next Collision explained it best. A buyer profile is a description of the company type that makes the best fit for your products and services. The profile may include industry type, company size, annual revenue and other criteria that your best customers share.
A buyer persona, on the other hand, is a fictional representation of actual people that manage the research and decision-making process among your customers. While a buyer profile gives you high-level characteristics of the company, a buyer persona gives you insights into how the people in that company make buying decisions.
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 your goal.
No matter how hard marketers try to generate great leads for businesses, the reality is a some of them will be no good. You will always find a few businesses that have no resources, ambitions, or motivation to move forward with your paid solution, and there is nothing you can do about it.
If your marketing campaign is well planned and executed though, there is no reason why you should not have plenty of good prospects to work on when all is said and done.
With all of this in mind, let’s set two additional ground rules right now:
Now that marketing and the company leadership have come to an understanding about the three points above, we can start hammering out SMARTer goals for your B2B marketing strategy.
Let’s say your company supplies mid-size manufacturers with robots they use on their production line. Your company finished at $100 million at the end of last year, an increase of eight percent. What is a good goal for this year? I would say a 12 percent increase would be about right.
Our goal is to increase revenue by $12 million this year for a total of $112 million.
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.
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 with buyer persona research, gaining insights into how to market your products and services to people who represent the greatest opportunity for growth.
For our purpose here, let’s say the average customer spends an average $200,000 a year with your company. That means you need 60 customers to nail down your goal.
An Opportunity is a lead that has progressed through your pipeline, and your sales team has identified as a true sales 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 120 opportunities to get 60 customers.
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.
Only time will tell how many SQLs will turn into Opportunities. For now, let’s assume half of them will shake out, and will need 240 SQLs to hit 120 opportunities.
Moving one more rung up the ladder brings us to Marketing Qualified Leads (MQLs). These leads have demonstrated they are more sales-ready than the average lead, determined by specific actions they taken on your website. These actions might include filling out certain forms or downloading assets 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 (480 MQLs) to reach 240 SQLs.
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, where the user will give their email address in exchange for a valuable piece of content.
Again, we will double the number needed to hit 480 MQLs, giving us 960 leads.
This last metric allows us to roughly calculate how much website traffic we will need to convert 960 leads. The average conversion rate for most websites is between two and three percent. Therefore, you need about 50,000 visits to convert 1000 leads at a two percent conversion rate.
If your current website traffic is in the neighborhood of 40,000 visits, you know you’ll need to produce enough content to boots traffic and get you to that level you need.
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.