Your demand generation marketing efforts are what bring new customers into the purchase funnel. For most, they’re the first touchpoints.
The goal of a demand generation strategy is simple: get as many people within your target audience to know about you as possible, remember you, consider your brand, and eventually buy from you.
In today’s article, I’ll break down the metrics you have to know to maximize brand awareness and customer interest.
The Metrics to Track in 2024
Broadly speaking, we can break all the key metrics you should know into four stages, based on your sales funnel:
- Top-of-funnel metrics measure the impressions you generated and traffic you brought in.
- Middle-of-funnel metrics include MQLs, SQLs, the ratio between the two, and the costs of lead generation and customer acquisition.
- Bottom-of-funnel metrics are primarily concerned with the length of your marketing cycle and sales funnel, your conversion rate at each stage, and the average value of those deals.
- Post-funnel metrics describe the overall value of your demand generation efforts, the return you’re getting vs. how much it contributes to revenue, and how valuable your customers are in the grand scheme of things.
Let’s dive in.
Impressions and engagement
Demand generation strategies are aimed at increasing brand awareness and generating interest in your product or service. So, the most crucial first metrics to look at are:
- How many people saw your ads, landing pages, or other content. This tells you how efficiently you’re getting your brand in front of others, compared to what you’re spending to do so.
- How many people engaged with those ads or content. With this, you’ll understand the extent to which you’re actually reaching your target audience.
How you calculate reach and engagement at the very top of the funnel depends on the platform. For social media, it’ll be views, likes, shares, and comments. For PPC or display ads, it will be clicks, and click-through rates (CTR).
Website traffic
Most of the time you run paid ads, post on social media, or share content, you’re ultimately trying to get people to your website or landing pages. The amount of traffic your website receives is a vital demand gen metric.
- New users tell you how many people come into contact with your brand through an ad or other marketing effort and visit your website for the first time.
- Pageviews, dwell time, and average session duration show you the extent to which those visitors actually engage with your content.
- Bounce rate tells you how many people leave almost immediately.
You can track new users by channel on your Google Analytics dashboard.
With the traffic acquisition report, you can also see levels of engagement, bounce rates, and several other metrics. You can view this report per-channel for a broader view or per-campaign for a granular look into which specific emails and ads are bringing in traffic.
That way, you can see which of your demand generation efforts are driving the highest volume of engaged visitors.
Marketing qualified leads (MQLs)
To succeed in creating demand, you need high volumes of site traffic. But the success of your full-funnel marketing strategy depends on whether those visits turn into leads and sales.
An MQL is a lead who has shown enough interest in your product or service to get more information from you.
After landing on your website, they might:
- Subscribe to your email list
- Fill out a form for an ebook or webinar
- Engage in live chat
- Request a demo
If you brought a user to your site with top-of-funnel tactics and they were interested enough to take action, it shows your ad targeting and content are doing their jobs. If you generate a high number of MQLs in proportion to the traffic you bring in, you’re in a good spot.
How you track MQLs will depend on the platforms you use, but you’ll normally find it in your CRM as they’re handed off to your sales team.
Sales qualified leads (SQLs)
SQLs are leads your sales team has qualified and moved into the sales pipeline. While MQLs have only engaged with your ads and marketing content, SQLs have physically spoken with a member of your team. They’re qualified to buy from you and are ready to move forward with the sales process.
Like MQLs, SQLs are a key demand generation metric to track in the middle of the funnel. Knowing the number of SQLs you have tells you how successful your marketing is at bringing in high-quality leads, and the potential value in your pipeline.
Like MQLs, you’ll be able to visually track SQLs in your CRM pipeline.
MQL:SQL ratio
For the full picture of how many SQLs you’re generating vs. the overall number of leads that enter the funnel, you need to know your MQL:SQL ratio. This tracks the conversions of leads at the middle of your funnel and indicates whether your marketing is targeting and attracting high-quality leads.
The calculation is simple:
MQL:SQL Ratio = # of MQLs / # of SQLs x 100
The higher your MQL:SQL ratio, the more efficient your marketing team is at generating demand for people who are interested, willing, and able to buy your product.
It’s another critical metric to track in the middle of the funnel because it aligns marketing and sales teams. If your MQL:SQL ratio is low, there’s a disconnect between how you’re creating demand and the actual selling points of your product.
Cost per lead (CPL)
Your CPL tells you how much your marketing is costing you in relation to the number of leads you’re generating. As a basic example, if your marketing team spent $10,000 on an ad campaign and generated 100 leads from it, your CPL would be $100.
The formula is simple:
CPL = Marketing Spend / Total Attributed Leads
In your CRM, marketing automation, or PPC platform, you can track your CPL by channel, campaign, or for your overall demand generation program.
Customer acquisition cost (CAC)
Similar to CPL, CAC tells you how much it costs in marketing and sales expenses to acquire a new customer. The difference is CAC includes more costs than just lead generation (which is straightforward to track by source.
CAC can include:
- Salaries for your marketing and sales teams
- Paid software and tools
- Event or conference costs
To calculate CAC, use the following formula:
CAC = # Customers Acquired / Total Marketing and Sales Expenses
Although CAC isn’t solely focused around your demand generation goals, it is a valuable metric for understanding the overall efficiency of your marketing and sales efforts in bringing in new customers. A high CAC may indicate inefficiencies in your demand generation strategy, such as targeting the wrong audience or overspending on certain tactics and channels.
Average deal size
Your average deal size is the average amount of revenue you generate per customer. It’s an important SaaS KPI at the bottom of the funnel because it helps you understand the potential ROI for each lead or customer that enters your pipeline. In ecommerce, it’s referred to as average order value.
Average deal size will be available in your CRM, but you can also calculate it manually:
Average Deal Size = Total Sales Revenue / # of Deals Closed
This metric really comes in handy when you’re assessing your CAC and CPL, which are subjective metrics.
In SaaS marketing, for example, the average CPL is more than triple that of ecom, and SaaS CACs can be well into the thousands. But SaaS deals are far more valuable than one-time ecom sales, which makes the average value of the sale a critical piece of context.
Marketing cycle length
The marketing cycle is the average length of time it takes for a lead to move through your funnel and become a customer. It’s also known as “time to close” or “sales cycle length.”
It’s one of the key demand generation metrics to follow at the bottom of the funnel because it gives you valuable insights into the resources required to turn your generated demand into a closed sale.
The marketing cycle differs by industry and company, with factors like price point and sales complexity playing a role. In SaaS, the average is 84 days, but enterprise sales will last considerably longer.
Your CRM will display your average marketing cycle length, which you can track against the number of touchpoints required to close a deal. Based on the level of engagement and interest generated from those leads, certain demand generation efforts may result in shorter or longer sales cycles.
Churn rate
Churn rate is among the most valuable key performance indicators in SaaS and other subscription-based models. It tells you the percentage of subscribers who cancel their plans over a given period.
It’s a bottom-of-the-funnel metric because it measures how your demand generation efforts have led to long-term customer retention and revenue. If your targeting and messaging are off, you’ll bring in the wrong customers. By extension, more will cancel.
To calculate churn rate, use this formula:
Churn Rate = # of Customers Lost / Total # of Customers at the Beginning of the Period
You shouldn’t look at customer churn without also looking at revenue churn (the amount of recurring revenue lost from customer churn). You may only have a 3% annual customer churn rate. But if all the customers leaving are your most valuable ones, the problem is worse than it seems.
Conversion rate by stage
You measure conversions differently at every customer touchpoint.
- At the top of the funnel, it’s a clickthrough rate on an ad.
- In the middle, it’s a form to download a lead magnet, book a call, or convert an MQL to an SQL.
- At the bottom, it’s moving from a product trial to a paid subscription or closing a deal with your sales team.
- At every stage, it’s how potential customers interact with your content marketing.
By tracking conversion rates at each stage of your funnel, you can identify areas of weakness and optimize your demand gen efforts accordingly. Let’s say you have a high CTR on your paid social campaign, a low MQL:SQL conversion rate. In that case, you either need to improve your lead nurturing process or evaluate the quality of leads that ad is bringing in.
Customer lifetime value (CLV)
CLV measures the total amount of revenue an average customer generates for your business over their entire time as a paying customer. It’s calculated by multiplying the average value of a customer by their average lifetime.
CLV = Customer Value x Average Customer Lifetime
To calculate your customer value, take your customers’ average purchase frequency and multiply it by the average amount they spend per purchase.
CLV = (Average Purchase Frequency x Average Value of Purchase) x Average Customer Lifetime
While the average customer lifetime value is a post-sale metric, it’s still crucial to measuring demand generation because it tells you how much you can afford to invest in sales and marketing efforts. If your CLV is over 3x your CAC, you can continue to scale your demand generation strategy.
Contribution to total revenue
There’s no magic number for how many touchpoints you need to create demand, bring in a lead, and move them along the funnel. But there are always multiple, which is why calculating marketing ROI requires you to attribute a percentage of total revenue from a conversion to individual campaigns and tactics.
There are a few ways to do this:
- Single-touch attribution (look at the first or last touchpoint as the most impactful for a sale)
- Multi-touch attribution (look at multiple important touchpoints in a linear, time decay, W-shaped, U-shaped, or custom path, assigning a % weight to each)
- Full path attribution (a start-to-finish Z-shaped overview of every marketing touchpoint in the customer journey)
As a very basic example, a company using first-touch attribution would credit its lead magnet with 100% of the revenue generated from a sale. But that’s misleading — other marketing efforts also influenced the lead to convert.
A W-shaped, custom, or full-path attribution model will work best to understand the true value of your demand-generating activities in the grand scheme of things.
Payback period (CAC payback)
The payback period is the amount of time it takes for your business to recoup its customer acquisition costs on a new customer. It’s calculated by dividing your CAC by your average revenue per account.
Payback Period = CAC / Average MRR or ARR Per Account
Your CAC payback period represents the break-even point for your sales and marketing efforts. You need to retain your customers for longer than this period for your campaigns to be profitable.
Return on investment (ROI)
There are two essential components of ROI in demand generation: the cost of investment (marketing budget and expenses) and the return on that investment (revenue generated).
ROI = (Revenue – Cost) / Cost x 100
To calculate the ROI of a specific campaign or tactic instead of your whole program, you’ll have to attribute a portion of the revenue generated from that campaign to the total revenue and subtract its cost.
Different attribution models are better suited depending on your specific marketing goals. For instance, if you’re focusing on nurturing top-funnel prospects, a linear model might be more appropriate, while a last-touch model could be more suitable for the ROI of conversion optimization.
It’s worth mentioning that demand generation ROI isn’t tied to revenue 100% of the time (though that is the ultimate goal). For instance, part of your GTM strategy might be promoting your new product to current customers to increase upsell and cross-sell revenue, months before its release. You might get a few opt-ins, but what you’re really after is the exposure.
How to choose demand generation metrics (and act on them)
It’s easy to get overwhelmed by the vast amount of data available. To stay focused, prioritize metrics that offer the most significant insights and discard those that are less impactful. ‘
For instance, if your campaign is designed to enhance lead quality, prioritize metrics like lead conversion rates and customer lifetime value in addition to website traffic numbers.
Collecting data is only the first step, though. Use the data to identify what’s working and what isn’t and implement changes to your campaign.
Conduct controlled tests to understand the impact of your changes. Avoid changing multiple variables at once or running several tests simultaneously, though (this will make it difficult to determine which changes are driving results).
To make things easier, hire us to handle advanced data tracking and analysis. We’ll help you identify the metrics that make sense for your business, then set up dashboards and integrate them with multiple data sources for a holistic view of your demand generation efforts.
Book a call with our team to get the ball rolling.
