Moneyball for Marketers: Marketing Automation’s Time in the Big Leagues
Appearing first in a book before being adapted into an Oscar-winning film, the term Moneyball was coined by author Michael Lewis to describe the player performance methodology used by a small-market baseball team like the Oakland A’s to compete with financial heavyweights like the New York Yankees. The A’s General Manager, Billy Beane (played by Brad Pitt in the film), measured players using new, data-centric metrics that flew in the face of conventional wisdom. Before Moneyball, baseball scouts relied on popular but flawed Key Performance Indicators (KPIs) like RBIs (Runs Batted In) and how a player looked (aka “gut instincts”) to judge his effectiveness. But technological advances and a better understanding of statistical correlations employed by Moneyball practitioners like Beane made these old scouting reports obsolete and uncovered hidden gems amongst the player rosters. So what does this have to do with Marketing Automation?
Your goal shouldn't be to buy players. Your goal should be to buy wins. In order buy wins, you need to buys runs.
Historically, sales people and marketers had KPIs they loved to track:
- Number of leads generated
- Lead conversion percentages
- Revenue per sales person
We asked Justin Gray, CEO and founder of LeadMD, on what KPIs are most outdated and here’s what he had to say about the traditional ‘net new’ leads metric:
“The ‘new leads’ of yesterday is equivalent to the ‘new names’ of today. Most marketers are still looking for new names each month. New names mean almost nothing. What happens when you know who all of your prospective buyers are? If buying lists taught marketers anything it was that buying contact information does not yield significant results. Interest yields results. The definition of “lead” should not be contact information–a lead must have interest. Look to marketing qualified leads (MQLs) as your first metric and don’t set qualification criteria for MQL’s that are industry or revenue based! Behavior and alignment to buyer persona are the only true indicators of lead qualification.”
These old KPIs are not necessarily “wrong” but they paint a wide brush over what’s actually going on with your sales & marketing funnel, which can sometimes lead to a misallocation of resources and the wrong strategy. Marketing automation tools enable marketers to track the costs associated with each channel and campaign, and allocate a direct cost to acquire each lead. And by working with your CRM tool, sales and customer success team, you can then attribute the lifetime value of the customer back to the lead. Here are some new KPIs you should consider if you want to be a Moneyball Marketer:
- ROI per Lead: The return on investment of each lead takes into account the cost associated with each lead, the lifetime value of the customer, the number of leads generated by the campaign/channel and conversion rate. Each individual metric can be misleading so do the math and track them all. For example, a channel that generates a lot of poor-quality leads may compare unfavorably in total campaign value to a smaller channel with whale-sized leads. Credit to Frank Passantino for his suggestions in a recent Marketo blog.
- Prospect to Pipeline: For each product-market fit, channel and campaign, there is likely a typical prospect to pipeline conversion rate. AG Salesworks and The Bridge Group conducted a study for 1,000 prospects and converted 32 of them into the pipeline, or 3.2%. Is 3.2% right for your organization? Look at your historical data and start benchmarking future channels, campaigns and sales people to your P2P index. Credit to William Tyree, CMO of RingDNA for this suggestion.
- ROI per Referral: This is a catch-all KPI to measure the effectiveness of each of your online channels (inbound, social), landing page or affiliate sites. Don’t just measure the traffic and conversion rate per referral. Some referrals provide great lead-gen but poor closing rates. Others may only benefit SEO. Group your referrals into cohorts based on benefit and measure them within their cohorts for an “apples to apples” analysis. Credit to Dave Snyder from Search Engine Watch for this KPI.
Ultimately, the measuring stick every company uses is profit. Don’t be blinded by the old KPIs and measure your top-line and bottom-line with Moneyball Marketing.
If we try to play like the Yankees in here, we will lose to the Yankees out there.
Now that you are using the right KPIs, what next? Just like the Oakland A’s couldn’t assemble a lineup the way the Yankees did, a Moneyball Marketer has to open up her repertoire to include data analytics, customer engagement and product development. Whether or not you want to call this growth hacking or not, a Moneyball Marketer’s playbook is different from a traditional marketer’s. Here are some tricks of the trade you should consider:
- A/B Test Everything Including the Product: One of the unique characteristics of Moneyball Marketing is the iterative relationship between marketing and product. For online marketers, this is admittedly old hat. But for marketers in more traditional businesses, having an endless positive feedback loop between marketing and product is still relatively new. A/B testing is a simplification of this relationship. Marketers can work with the product team to test different versions of the product offering, ideally in parallel. Based on the responsiveness of your leads and customers, refine the product based on customer feedback, measured product engagement and net promoter scores.
- Content Marketing as a Media Product: Content Marketing is not new. There’s real saturation but people are still innovating with content. One way to get creative with your content is to NOT talk about yourself. In a previous blog, I talked about the rise of Media Oriented Content Marketing—content marketing that exists as a standalone media product without explicit commercial interests. These content pieces are so good, people will share it or discover it on their own. Some recent examples include Chipotle’s beautiful ad about their organic ingredients, KISSmetrics’ helpful blog post about Google Authorship and ShareBloc’s very own contest to find The Top 50 Content Marketing Posts of 2013.
- Do Something New: Unfortunately, as Mark Suster says in his blog, growth hacking is all about what’s the new wave. If someone has widely blogged about a new way to market their product, it’s likely the effectiveness has already hit diminishing returns. Experiment and play around with your channels, product and allies to see what may work.
Marketing with a Moneyball mentality isn’t just generating leads and passing them onto sales. Take advantage of your new marketing channels and new KPIs and impact product and sales directly.
How can you not get romantic about baseball?
If there’s one take-away here, it should be to really stress your marketing automation and CRM tools to get the data you need, then whip your marketing and sales team in shape so they leverage that data into more sales, larger profits and happier customers. Moneyball for marketers isn’t relatively a new concept; just branded differently. Some call it growth hacking. Others may call it the Physics of Marketing. Statistician Bill James is often credited with starting the sabermetrics Moneyball movement, but Billy Beane is the man who popularized it. If Marketo’s Jon Miller is the Bill James of Marketing, make sure you are your organization’s Billy Beane.
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