From aligning the sales and marketing team to providing personalized campaigns to increasing the likelihood of converting a potential customer, ABM has become a key marketing strategy for B2B marketers. In fact, B2B companies now invest about a third of their marketing budget in ABM.
There is no doubt that ABM has proven to be effective in increasing conversion rates and ROI.
But how do you measure the effectiveness of an ABM campaign? Which metric should be considered for the purpose?
Don’t worry, we are here to help you. Let’s dive into the 9 ABM metrics you should measure to understand the campaign’s performance.
TAM (Total Addressable Market) refers to the total revenue opportunity available for a product or service within a specific market.
A common approach for calculating TAM is as follows.
TAM = (Total no. of potential customers) * (Annual contract value )
If a company offers a product that costs $9600 annually and its target customers are all SMBs in the US, which is 10,000, then the TAM will be 96 million dollars per annum.
TAM= 10,000 9600
While TAM isn’t directly an ABM metric to track, it provides key insights into the following:
This refers to the total amount of potential revenue that is currently in the sales pipeline.
By tracking the pipeline generated, teams can learn the following.
If you consistently generate more pipelines, it means the ABM campaigns are resonating with your target accounts and driving meaningful businesses.
Keep in mind that this metric may vary over time as opportunities progress through the pipeline. So, it’s important to track it regularly and adjust your ABM campaigns accordingly.
Close rate refers to the percentage of target accounts that have moved through the sales funnel and converted into paying customers.
The general formula to calculate a close rate is given below.
Close Rate=[(Total no. of accounts converted)/ (Total no. of target accounts engaged)] *100
So, if a company engages with 100 target accounts in an ABM campaign and only converts 20 of them, then the close rate will be 20%.
Close Rate= 20 100 100
Close Rate= 20%
By tracking the close rate over time, one can identify which aspects of the ABM campaigns are working and which are not. Furthermore, businesses can calculate the close rate at each stage of the sales funnel and identify inefficiencies in the sales process. This can help businesses refine their ABM strategy and maximize results.
Hence, use close rate as a critical ABM metric to measure and improve the ABM campaign’s success. The following are some best practices to optimize close rates and yield better results.
Pipeline Velocity refers to the speed with which a lead moves down the sales pipeline.
A lower pipeline velocity would indicate that there is friction in the pipeline. This friction needs to be addressed to avoid the loss of potential customers. You can calculate the pipeline velocity of your business using the following formula.
PV= (S *W *D)/ L
PV - pipeline velocity,
S - number of SQLs in the pipeline
W - win rate (%)
D - average deal size
L - length of the sales cycle.
So, if a company has 60 SQLs in their pipeline, with a win rate of 20% and an average deal size of $10,000, and the length of the sales cycle is 90 days. Then the Pipeline velocity will be $1333 per day.
Pipeline Velocity = 60 20% 10,000 90
Pipeline Velocity = 120,000 90
Pipeline Velocity = $1333.33 per day
To increase the pipeline velocity, focus on the following.
From a B2B perspective, it is the rate at which a company loses its clients or customers.
It is a crucial ABM metric as it helps businesses understand the health of their customer base and their ability to retain them. A business can calculate the churn rate by dividing the number of customers a company lost during a specific period of time by the total number of customers the business had at the beginning of that period.
So, if a company starts the quarter with 100 customers and loses 20 customers by the end of that quarter, then the churn rate will be 20%.
Churn Rate= 20 100 100
Churn Rate= 20%
A high churn rate is detrimental to a B2B company. It will result in revenue loss and increased expenditure to acquire new customers to replace lost ones. Following are a few ways to reduce the churn rate.
CLV refers to the total net profit a company can generate from a customer over the entirety of their relationship.
It is an important metric to measure as it helps determine the value of a customer and helps businesses decide on how much they should spend on acquiring new customers or retaining existing ones. The larger the customer lifetime value, the less you need to spend on acquisition costs.
When it comes to Customer Lifetime Value, there is no specific formula to calculate it. But if you consider the definition, “CLV is how much a customer is paying to a company over a period of time", then you can calculate CLV with the following equation.
CLV= Avg. Monthly Recurring Revenue * Avg. time duration a customer stays with a business
So if a company’s average MRR (Monthly Recurring Revenue) is $1000 and the average time period a customer chooses to stay with the company is 8 months, then the CLV will be $8000.
CLV= $1000 8
CAC, or Customer Acquisition Cost, refers to the total cost spent by a company to attract new customers.
The metric is calculated in a set period of time, and the formula for calculating it is as follows.
CAC= (Cost of sales and marketing/ New customers acquired)
So, if a company spends $400K on sales and $300K on marketing and generates about 700 customers by the end of the fiscal year, then CAC will $1K per customer.
CAC= $400K +$300K 700
Compare the Acquisition cost with the Customer Lifetime Value (CLV) to understand the business’s profitability. If the cost of acquiring a customer is higher than the revenue generated from that customer over their lifetime, then the business is likely to lose money. In this case, it’s time to reevaluate the marketing strategies or consider investing in alternative approaches to lower the acquisition cost.
This is a metric used to measure the average value of each sale made by a company.
By tracking the average deal size, a business can understand how much the customers are willing to pay/invest in their products/services.
ADS is often calculated monthly or on a quarterly basis and can be calculated by dividing the total value of all deals closed by the total number of deals closed during a given period.
ADS= (Total value of the deals won /Total no. of deals won)
So, if a company closes 10 deals in a given month, and the total value of the deals is $200,000, then Average Deal Size is $20,000.
ADS= $200,000 10
Sales cycle length is the total time a company takes to complete a sale, from the customer’s initial contact with the company to the final closing of the deal.
The sales cycle length differs from industry to industry. For example, according to Klipfolio, the average B2B SaaS sales cycle length is 83 days, whereas, for a B2C company, it will be a week or less.
It is an important metric for businesses as it can impact the revenue, profitability, and overall success of the company. For example, if the length of a sales cycle is higher for a company than its competitors, it indicates that there are inefficiencies in the sales process that need to be addressed.
If you want to calculate the sales cycle length, simply divide the total number of days taken to close each deal by the total deals won.
Sales Cycle Length= (Total no.of days taken to close each deal / Total no. of deals won)
So, if a company closed three deals, each taking 35, 55, and 90 days, then the average sales cycle length will be 60 days.
Sales Cycle Length= 35 +55 +90 3
Sales Cycle Length= 180 3
Sales Cycle Length= 60 days
Factors, with its ABM analytics feature, enables users to access a range of different tools and techniques for analyzing and presenting the data in a way that is easy to understand and use.
Ready to take your ABM campaigns to the next level? Look no further than Factors, and ensure your efforts pays off. Book a demo to understand how factors can take your ABM campaigns to the next level. Or sign up here to try Factors for free!
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