In our last post we spoke about the basics of closed loop reporting - what it is and why you need it. Now, we want to dive a little deeper into what you should include in your reporting to get your inbound marketing funnel delivering.
Quick recap - why is closed loop reporting so important for startups?
There are two reasons:
- It shows you quickly where your conversion funnel is falling short
- It shows you whether your marketing budget is bringing return
By knowing your basic numbers (website visitors, number of leads and number of customers with the corresponding conversion percentages), you can elevate the right efforts and make the most out of your marketing spend. It's a basic part of your inbound marketing strategy.
Step 1: Smart Goal
The first thing to do is set a SMART Goal:
- Specific (simple, sensible, significant).
- Measurable (meaningful, motivational).
- Achievable (agreed, attainable).
- Relevant (reasonable, realistic and resourced, results-based).
- Time-based (agreed, realistic timeframe to achieve the goal).
Here’s an example:
“We want to increase our customers by 10 x from 6 a week to 60 a week by the close of the financial year (Date)”
When it comes to closed loop reporting, you are generally focussing on your customer number. This means it goes beyond marketing. You will want to includes your salesperson as well as anyone responsible for the operational side of the sale (invoicing, distribution etc) and get the entire team to agree, stand behind the goal and the delivery needed to reach the goal.
Ensure that you include the numbers in your sheet that you want to achieve and by when. In our example of wanting to reach 50k in monthly sales by September, we have completed the achievable number of visits to reach this goal matched to the conversion rates to lead, number of leads and customers.
Step 2: Timeframe
Closed loop reporting works when you measure change over time. Step two means deciding on your timeframe. This is closely linked to your goal. If it’s a short term goal, you will want to measure more frequently than monthly.
It’s a good idea to include data from past weeks or months if you have this data available. This will help you see the big picture and recognise trends sooner. For example, you are doing monthly reporting and started in May. Could you still get the numbers for January - April and include them already?
Step 3: Visits
If you are not measuring visits to your website, set up Google Analytics now. Login and apply your timeframe, for example January 1st to 31st and look at the number of sessions during that time. Some people like to record sessions while others go with users. A session is counting the period of time that users are active on your site. Users counts the number of visitors who had at least one active session during the timeframe you’ve set. The choice here is up to you, just stick to one or the other. Either will give you the needed insights and trends.
Step 4: Leads and Conversion
Next up are the number of leads you’ve gathered in that period. Your startup will have to define what consists of a lead. Some count any new contact to their records as a lead, for example a blog post subscription that will only give you an email address. Others will count someone as a lead when they have shown more intent, for example if they have downloaded a content asset and have provided more contact details. Make sure to define what a lead means to your startup with your marketing and sales people.
If you are not capturing your leads in a database, CRM or online marketing tool where they can easily be segmented based on the timeframe for your reporting, you will need to work closely with sales. Sales will need to provide you with accurate lead numbers. Just as with setting the right goal, throughout this process it’s vital that marketing and sales work together.
Include your number of leads and calculate the conversion rate from visit to lead.
What’s a good rate? There is no easy answer. If your product has a long sales cycle and high value, then your conversion may be lower. Measure over time to see what’s realistic and to understand what a good or a bad rate looks like
Step 5: Customers and Conversion
Just as you did for leads, you will want to add the number of closed new customers during the timeframe you selected. Again, if it’s not possible to pull this data from a CRM, work with sales to get the number from them. Here calculate the conversion rate from lead to customer.
How high should the conversion be? The higher the better :-) Generally, it is substantially higher than the conversion rate from visitor to lead. As with visit to lead conversion, compare various months or weeks to gain a better understanding of trends in order to understand what a good and a bad month looks like.
If your startup relies on repeat sales, cross selling or upselling, you might want to add additional columns to your table where you split new customers and repeat business while still having one column for total deals closed.
Step 6: Total Sales Value
Simply add the total sales value from all customers closed in the timeframe. If you are the startup with repeat sales etc and you are splitting your customers, consider splitting this column also looking at the total, new business and existing.
Step 7: Percentage Increase
This is the percentage increase in total sales value based on the timeframes you are comparing. Here’s the thing...as a startup you might have large fluctuations in sales in particular during your initial phases. That makes me personally not a huge fan of this number. However, as your business grows and stabilises, it becomes a great indicator as to when things are starting to go well or fail. So keep measuring this one.
Step 8: Average Sales Price
This column tells you whether you have set the right price and were able to maximise the sell for each customer. If you are selling software at a bronze, silver and gold level, you will want to see your average sale price ideally in the gold area. Measuring this, by simply dividing the total sales value with the number of customers, allows you to track whether your closed deals are at the average value they should be.
Step 9: Monthly Marketing Expenditure
You can either look at marketing expenditure here or expand it to also include sales expenditure. Key here is to figure out what you are spending on attracting visitors, lead and customer conversion. Include:
- Any advertising spend (Adwords, Facebook Ads etc)
- Any marketing tools (Mailchimp, HubSpot, Hootsuite, Hotjar etc)
- Any sales tools (Sales Pro, Salesforce or other CRM etc)
- Any design spend (images for a new campaign, infographics etc)
- Any cost associated with content creation (blog writer, copywriter)
- Etc etc
You can also include the cost of marketing and sales staff to get a complete picture.
Remember to break the cost down into your timeframe. If you are reporting weekly, break that monthly bill down by week as well.
Step 10: Cost per Acquisition
So what does it cost you to acquire a customer? Look at your expenditure and divide your new customers into it.
A strong cost per acquisition is consistently lowering or staying at a constant acceptable level. The question is really, are you closing enough customer to justify the spend. In our example (download here), May was a pretty tough month where the cost per acquisition shot through the roof as few deals closed.
You can already see here how to use the report, right? When you start seeing trends of numbers going up or down, you need to react fast to either increase what you are doing (more if it works!) or change tack (stop what doesn’t).
Step 11: Avg Profit Margin Per Sale
Okay, you could argue this is not accurate as all overheads are not included and how would it then be considered profit. And yes, you’d be right. Leave the actual profit to your PL. Here we use the term to keep an eye on what your average sale price looks like after you’ve removed your cost per acquisition.
You recall that we measure the average sale price to get a feel of whether we are maximising each sale. We look at cost per acquisition to ensure it stays nice and low. What happens when you need to spend more to increase the average sales price? This is where our profit margin per sale comes in. If you look at cost per acquisition in isolation, you might hit the brakes on a campaign that is delivering a higher sales value which warrants the spend.
Do I really need to report on all of this?
Ideally, yes. By reporting on these numbers, seeing patterns emerge and understanding exactly what you need to achieve (visits / leads / conversion/ sales value etc) to reach your goal, you will stay on track and more importantly you can react.
If you see a positive trend, check why numbers are improving. Perhaps a piece of content is getting a lot of hits; how can you exploit this and promote it more heavily?
If you see a negative trend, check why numbers are dropping. Perhaps you are not attracting the right audience, perhaps there is a flaw in your lead nurturing.
You could in fact expand this sheet based on visitor source. So how does your organic traffic convert compared to your social media traffic? What channels yields results? This is amazing data but very hard to compile manually like this. You’ll need to consider an inbound marketing reporting tool. But, before you go out and purchase, start with this and see whether you can justify the spend based on your profit margins.
Remember, closed loop reporting sheds light on every aspect of your conversion funnel and whether you are getting a return for your marketing investment.