What Your Demand Generation Metrics Are Telling You

Demand generation campaigns, as their name indicates, are intended to increase the demand for a product or service. To see if a demand generation campaign is working, marketers need to look at specific Key Performance Indicators (KPIs). As such, we’ll take a close look at some of the most common demand generation metrics.

By understanding these metrics, marketing teams can discover what is working in a campaign and where marketing efforts need to be increased to improve what isn’t. Doing so can lower marketing costs, increase a campaign’s return on investment (ROI), and ultimately develop strategies to create campaigns that successfully generate higher demand.

Reading and Understanding Your Demand Generation Metrics

Demand generation seeks to create demand for products using data-driven campaigns. These types of campaigns can include programmatic advertising, content marketing, Pay-per-Click advertising (PPC), social media marketing, Search Engine Optimization (SEO), events, podcasts, webinars, and more.

After you’ve created and run demand generation campaigns, you need a way to figure out which campaigns are working. For the ones that aren’t working, you have to figure out what it is about them that isn’t performing well. To find these answers, analyzing demand generation campaign metrics can be helpful.

Some of the metrics for a demand generation manager to analyze include:

To better understand demand generation marketing metrics, we’ve provided detailed definitions and examples as well as ways to analyze them. With this, you can improve your campaigns and overall strategies. By the end of this article, you’ll also learn how to work with a strategic partner to help you with demand generation and more. 

Return on Investment (ROI)

The Return on Investment KPI is one of the most important marketing metrics for any marketing campaign. The ROI metric can help you understand the success or failure of your demand generation campaign. To calculate ROI, the revenue generated as a result of the campaign is divided by the cost of the campaign.

The ROI is typically calculated at the end of the sales cycle when all revenues and expenses have been added to the calculation. A negative ROI means the campaign costs more money than it generated in sales. A positive return on investment means the campaign successfully brought in more money than it cost. If the marketing campaign brought in a higher average profit margin, the campaign was successful.

Cost per Lead (CPL)

A Cost per Lead (CPL) is a metric that measures the cost to acquire a lead, which is someone who expressed their interest in a product as the direct result of a demand generation campaign and who may eventually become a paying customer. After some portion of the demand generation event, a person may have filled in a form indicating they would like to learn more. These interested leads can then go on to become customers.

To calculate the CPL, the total cost of the campaign is divided by the number of leads the campaign generated. For example, if the demand generation campaign cost $25,000 and 450 leads were generated, the calculation would be:

$25,000 / 450 = $55.56

In this particular example, the CPL is $55.56, meaning that it costs $55.56 for each lead generated by the campaign. Different campaigns can be compared to see if there are less expensive leads developed from better campaigns.

Cost per Acquisition (CPA)

The Cost per Acquisition (CPA) metric is a KPI that measures the total customer acquisition cost for customers acquired through the demand generation campaign. The CPA takes into account all the expenses involved in acquiring leads and turning them into paying customers, including all the sales and marketing costs.

To get the CPA, the total cost of the campaign is divided by the number of new customers acquired as a direct result of the campaign. For example, if the demand generation cost $25,000 and 45 new customers were acquired, the calculation would be:

$25,000 / 45 = $555.56

In this particular example, the CPA is $555.56. Here, 450 leads were generated and 10% of the interested leads converted into paying customers. In total, it cost $555.56 for each customer attracted by the campaign.

Marketers can look at the CPA to gauge the effectiveness of their campaign and its ROI. A higher CPA means it is more expensive to acquire new customers, which could lead to a lower ROI.

Marketing Qualified Leads (MQLs)

A lead is any individual that has shown some interest in a product or service. A Marketing Qualified Lead (MQL) is an individual who has shown a significant amount of interest in the product as identified by the marketing team. This type of lead is considered most likely to convert to a paying customer compared to other leads. They are considered “hot leads” compared to “cold leads” who are less likely to convert.

Marketers score leads based on the level of interest they have shown and how much they have engaged with the brand and campaign. Engagement includes website visits, providing an email address, content downloads, likes, shares, and social media interactions. Users who engage have a higher chance of becoming a customer and, thus, they are more qualified leads.

To improve this metric, marketers can target leads and deliver higher quality content that resonates with the specific user based on the marketer’s knowledge of the user base and their pain points. This can be done with content marketing and other types of advertising that target leads to turn them into more qualified leads and, ultimately, paying customers.

Sales Qualified Leads (SQLs)

Similar to an MQL, a Sales Qualified Lead (SQL) is an individual who has shown a high chance of becoming a customer. They are further down the demand generation funnel than MQLs. An SQL is a lead identified by the sales team as having a high likelihood of converting to a paying customer based on the lead’s engagement and interaction with the sales team.

Tracking SQLs allows your sales team to target high-quality leads, directing their efforts to potential customers who have expressed a higher interest in the product. To calculate the SQLs and come up with high-quality hot leads, sales teams can define what constitutes a qualified lead.

Once an SQL is defined, your sales team can present a number that represents the amount of SQLs currently in the sales funnel. Marketers can use this number to gauge the effectiveness of their demand generation campaign. The SQL number can also be measured against other KPIs, such as conversion rates, to see if these hot leads are becoming paying customers or not. If not, there is a problem somewhere in the funnel that needs to be addressed.

Customer Lifetime Value (CLV)

The effectiveness of a demand generation campaign can be measured by the Customer Lifetime Value (CLV) metric. CLV is the total value of a customer over the whole length of the relationship with the business. This includes the customer’s initial purchase, any subsequent follow-up purchases, and any future purchases the customer may make. The longer the customer stays with the business, the higher value the customer is.

The two models companies can use to measure CLV are Predictive CLV and Historical CLV. Predictive CLV uses machine learning to forecast new and existing customers and their expected value. Historical CLV uses past data to predict CLV.

To calculate CLV, first, get the Customer Value figure. For that, take the average purchase value and multiply it by the average number of purchases. Then multiply the Customer Value by the Customer Lifespan. This calculation could be written as:

(Customer Value * Customer Lifespan) = Customer Lifetime Value

Marketers can use the CLV metric to calculate the total cost of acquiring a new customer, including marketing and advertising, and to find the correct amount of money to spend on acquiring these customers. CLV can also be used to identify the ideal customers that bring in the most revenue over the longest period for the company.

This number can be improved by finding areas where customers can be engaged and retained better, such as customer support and loyalty rewards programs.

The Length of Marketing Cycles

The time it takes for a lead to convert into a paying customer is known as the marketing cycle length. Marketers should consider the length of marketing cycles to see how long it takes leads to move through the sales funnel.

This data can also be used to gauge the success of demand generation campaigns. A successful campaign will result in shorter marketing cycles, meaning that leads are moving faster through the sales funnel. The goal should be to reduce the time spent in a marketing funnel.

The Contribution Toward Revenue

The amount of revenue generated by the demand generation campaign is measured by the “contribution towards revenue” or contribution margin. It is critical to know how much revenue a demand generation campaign is producing to figure out whether it is profitable and if the campaign is bringing in a high ROI.

A high contribution to revenue means the demand generation campaign is successful. If it is not producing any additional revenue and is costing more than it is generating, then the campaign is not profitable and is failing. Marketers would need to figure out where it is failing and work on improving that area.

The Average Deal Size

The average deal size is the average amount of money a customer brings in or the average transaction size. Calculating this metric is as simple as knowing the total revenue generated and dividing that number by the number of deals. The calculation can be written as such: 

Total revenue generated as a result of the campaign / Number of deals = average deal size

For example, if a campaign generates $101,000 and there were 201 deals, the average deal size would be:

$101,000 / 201 = $502.49

In this hypothetical example, the average deal size is $502.49. The demand generation campaign can be considered more effective if it attracts customers with larger average deal sizes.

The Close Rate per Channel

The percentage of leads who convert to customers using a particular marketing channel is known as the close rate per channel or conversion rate per channel. A high close rate for a marketing channel shows that that campaign in that particular channel is successfully attracting customers.

Marketers can use close rates to see how effective their campaigns are in turning interested leads into customers who close the deal, becoming paying customers. By concentrating on the most effective channels, marketers can optimize their demand generation campaigns and boost their conversions.

Optimize Your Demand Generation Efforts With a Strategic Partner

Understanding the metrics above can help you to build better campaigns and develop stronger strategies to target your audience and generate more demand. Knowing and analyzing demand generation KPIs can help marketers optimize their campaigns to make accurate, data-driven decisions. With this, marketers can spot areas for improvement and modify their strategies by looking at the metrics detailed above. 

Of course, monitoring all these metrics in-house and adapting to performance can be a daunting task to ask of many marketing teams, which can often be light on resources or lack the technical expertise to dive deep into data. To help with this heavy lift in maximizing demand generation efforts and boosting revenue, a partner with emerging tech solutions, media access, and strategic expertise can help. With solutions for advanced data science, in-depth analytics, holistic demand generation strategies, real-time optimization and more, a partner like AUDIENCEX can provide the resources, knowledge, agility and scalability that any demand generation campaign needs to be successful.

We work to streamline and simplify the complicated world of online advertising, with custom holistic strategies for full-funnel performance marketing, guided by AI-enabled data science, predictive analytics and continuous optimization, all leveraged throughout the digital landscape with our omnichannel programmatic platform.

Connect with our team at AUDIENCEX to learn how we can help you better understand your demand generation metrics and develop high-ROI campaigns that span channels and platforms to drive engagement and results throughout the sales funnel.