June 29, 2017
I frequently engage with marketers who are interested in benchmarking. I field questions like: What are other organizations like mine measuring? How are marketing organizations like mine performing? What is a good value for average cost per lead (CPL)? What is the right model for sales stage conversions? What is the right goal for marketing contribution to revenue?
Often, I remember the line in Max Ehrmann’s The Desiderata about seeking validation from external destinations:
“If you compare yourself to others, you may become vain and bitter; for always there will be greater and lesser persons than yourself.”
Mark Twain sums it up this way:
“Comparison is the death of joy.”
(That one is not quite as relevant, but it is more fun.)
Of course, I understand the value that benchmarking provides. Marketers need to start somewhere to evaluate their own performance or when setting goals. They need something tangible, some stake in the ground, some aspiration, or some proof point. Sometimes, they need to provide evidence as they build their business cases for more budget or upgrades in talent or technology.However, when you are ready to truly understand your firm’s marketing performance, the only metrics that matter are the ones that reflect your firm’s historical performance against its current performance. Here’s why:
- A common set of performance metrics and standards doesn’t exist. Looking to other companies for benchmarks is like reviewing a firm’s annual report without generally accepted accounting principles (GAAP). Today, there isn’t a consistent understanding of, or agreement about, marketing benchmark inputs; there’s no standard “recipe” for how to define those numbers.
- Companies don’t attribute costs and expenses the same way. Let’s take CPL, for example. Some firms load their leads with expenses — assigning costs for headcount, content, and even channel investments against leads — which has an impact on the firm’s “C” (cost) portion of that equation. Even the “L” (lead) portion of the equation is mired in inconsistency. I recently talked with one firm only to find that no one shared a single definition of a “lead” – even within one company.
- Chasing a single metric will cost you in other metrics. Let’s continue with cost per lead as an example. If you told me that you were setting out to achieve the lowest average cost per lead, I’d consider it a safe bet that you could do it. Your other metrics would likely suffer, but if you’re incented to decrease cost per lead, it’s one of the easiest things you can do. Benchmarking encourages this type of single-metric myopia.
Ultimately, benchmarks are not as helpful for planning, execution, or management as you might think. Just because something worked for another company – one that you might even consider a “peer” – doesn’t mean its approach is right for you.Instead, measure your own relative performance against internal benchmarks. Where are you relative to your business goals? What does the trend data suggest about your performance? What are the indicators that you are progressing (or not) against your unique goals? This is the “managing” portion of performance management, because measuring is important, but measuring isn’t quite managing.