ABM has become a key marketing strategy for B2B marketers over the years. And there is no doubt that ABM has proven to be effective in increasing conversion rates and ROI.
The most important part of an effective ABM is the metrics that you need to measure to keep a watch on the performance.
In this blog, I will talk about key metrics that you should measure to understand the effectiveness of any ABM campaigns.
1. Total Addressable Market (TAM)
TAM refers to the total revenue opportunity available for a product or service within a specific market.
To calculate TAM you need to multiply your annual contract value by total no of potential customers
TAM = ACV x Total no of potential customers
For example if a company whose product costs $10000 annually and their total number of potential customers is let’s say 5000 then the TAM will be
TAM = $10000 x 5000 = 50 million dollar per annum
2. Influenced pipeline
Unlike traditional marketing, ABM focuses on engaging a few specific accounts. So it is important to analyze how many of those targeted accounts got influenced or impacted by your ABM efforts.
This might be tracking whether your personalized content is contributing to your pipeline or not. Here you need to track things like form filled, content downloaded and content shared.
Influenced pipeline is calculated by dividing the number of accounts engaged by TAM and multiplying the result with 100.
Influenced pipeline % = No of accounts engaged/ TAM x 100
3. Pipeline Generated
This means the total amount of potential revenue that is currently in the sales pipeline.
By tracking these metrics, the team can understand how many new opportunities are created, how these opportunities are progressing through the pipeline, how much potential revenue can be generated etc.
If you generate pipeline revenue consistently then it means that your ABM campaign is connecting with your target accounts and driving value add.
4. Conversion rate/ Win rate
Conversion rate or win rate refers to the percentage of target accounts which has moved through the sales funnel and got converted to a paying customer.
Conversion rate is calculated by dividing the total number of conversions by the total of targeted accounts engaged.
Conversion rate/win rate = No of accounts converted / Total number of target accounts engaged x 100
For example if 10 accounts has got converted to a paying customer out of total 50 accounts which got engaged then the win rate will be:
=10/50 x 100 = 20%
5. Pipeline Velocity
Pipeline velocity refers to the speed at which a lead moves down the pipeline.
A lower pipeline velocity means that there is a friction in the pipeline and the sales and marketing team need to identify the friction and address the solution together.
Pipeline velocity is calculated by multiplying the number of SQLs in the pipeline with conversion/win rate and ACV and then dividing it by Length of the sales cycle.
Pipeline velocity = No of SQLs x ACV x Win Rate / Length of the sales cycle
For example if a company has 50 SQLs in their sales pipeline, their win rate is 20% , ACV $25000 and sales cycle is 90 days then their pipeline velocity is:
= 50 x 25000 x 20 / 90 = $277777.77
6. Churn Rate
It is the rate at which a company loses its customers.
These metrics help businesses understand the health of their customer base and their ability to retain them.
Churn rate is calculated by dividing no of lost customers by the total number of customers the business had at the beginning of that period.
Churn rate = Total no of lost customers/ Total numbers of customers at the start of that time period x 100
7. Customer Lifetime value (CLTV)
Customer Lifetime value refers to the net profit that a company can generate from a customer over the entire time of their relationship.
This metric helps businesses decide on how much they should spend on acquiring new customers or retaining the existing one.
The more the CTV the less you need to spend on acquisition cost.
CLV = Average monthly recurring revenue x Average time duration a customer stays with a business
For example if the average MRR of a company is $5000 and the average time period of a customer to stay with the brand is 9 months then the CTV is:
=5000 x 9 = $40000
8. Customer Acquisition Cost (CAC)
CAC is the total amount spend in customer acquisition
CAC = Total cost of sales and marketing / New customer acquired
For example if the company has spent $500k on marketing and $400 on sales and have acquired 500 new customers by the end of the fiscal year then the CAC will be:
=900/500 = $1.8 per customer
9. Average Deal Size (ADS)
This metric is used to measure the average value of each size made by the company.
By tracking the average deal size, a business can understand how much the customers are willing to pay for their product.
ADS = Total value of the deal won / Total no of deals
For example if a company closes 10 deals in a given month and the total value of the deals is $50000 then the ADS is:
= 50000/ 10 = $5000
10. Length of sales cycle
Sales cycle length is the total time a company takes to complete a sale.
It is an important metric for businesses as it can impact the overall revenue and success of the company. For example if the length of the sales cycle is higher for a company as compared to their competition then there are gaps in the sales processes which need to be addressed immediately.
Sales cycle is calculated by dividing total number of days taken to close each deal by total no of deals won.
Sales cycle length = total number of days taken to close each deal / total no of deals won
For example if a company has closed four deals taking 30, 45, 60 and 90 days time then the sales cycle length would be:
=30+45+60+90 / 4 = 56 days
