Whenever I see a pretty pie graph, scatter plot or radar chart, I immediately think, does this pretty graphic contribute in some manner to our financial results? Or am I looking at the financial equivalent of lipstick on a pig?
Visualizations and sexy charts are the crack cocaine of today’s marketing. Highly addictive. Easy to generate. Inexpensive, thanks to increasingly affordable dashboard software and visualization tools. And most concerning, often these vanity metrics are driving business direction unrelated to the financial success of an organization.
If you’re making business decisions based on likes, follows, retweets, marketing qualified leads (MQLs) and similar numbers, read on. It’s time that the form of your analytics follows function.
The Democratization Of Data And The Obfuscation Of Business
Our business decisions can be informed by the recent democratization of data and the ability to create beautiful visuals — as long as you align activities to results well. Think I protest too much? Let me share a quick story:
There was no sales conversion from those MQLs — not a single deal was being closed from these “leads.” Equally unsettling, LeadGenius had one-and-a-half FTEs in sales doing nothing but contacting MQLs to disqualify them as quickly as marketing could throw them enthusiastically over the fence to the sales organization. In other words, we had 20 pages of vanity metrics extolling the “success” of marketing’s demand generation process that had no connection whatsoever to revenue results.
Don’t get me wrong, I believe in marketing and demand generation. But our system was broken, and decisions were being made based on inconsequential data that was beautifully presented. Within weeks, I shut down the whole operation. We’re now spending 20% of what we had spent before but are closing exponentially more business as a result.
It’s Just Math And The Vital Few
I think about results as a simple math equation. Go back to your grammar school math where X + Y = Z. The left side of the equal sign includes activities that should yield various outputs to the right side of the formula. Inputs and outputs will vary a bit for every business, but the alignment of activities to results, both tracking and accountability, should be consistent across all businesses.
Most critically, “Z” is about the essential financial reports of any business, such as a profit and loss statement, balance sheet and cash flow statement. As much as I rely on these essential reports, LeadGenius does require additional metrics and KPIs (key performance indicators) to give us a more complete picture of our business. In our case, we use two dashboarding apps to measure gross bookings, gross renewals, gross margin, new logo acquisitions and deal size, and we track changes month over month and year over year.
Getting to where we are today took months of trial and error and slashing pretty graphic after pretty graphic. Our business operations team must have created more than 100 different visualizations when we started down the path of creating LeadGenius’ grammar-school math equation. But these hundreds of visualizations either weren’t telling us anything or the data was so disconnected from what we were trying to measure downstream in our financial reporting package that it was inconsequential. It took us maybe three months before we figured out the “vital few” metrics we needed — and they amounted to no more than a half dozen reports of “X” and “Y” activities.
For all the pretty visualizations the operations team created, we ended up with the six least attractive — including an old 20th-century data table with no color whatsoever. But they do the job. And that’s the point; they tell us a better story than a multitude of beautiful graphs. Of course, the metrics and story differ for each company. Our metrics probably bear little resemblance to what a manufacturer or some cloud-hosting startup needs to track. The key is that your metrics tell you either qualitatively or quantitatively what’s driving your buying success equation.
The Challenge Of Finding Non-Financial Marketing Metrics That Matter
I concede that what I’m proposing a marketing department do isn’t easy and can be highly subjective. Matching activities to outputs and results, despite enormous efforts to make it scientific is still a bit of a black art. We market and sell in a multichannel world. The process isn’t linear, and the number of influences, marketing techniques and content sources keeps growing. But if we can chart what triggered interest, kept someone coming back and, ultimately, closed a deal, we can align our sales and marketing effectively. These are the metrics that drive the numbers we see on our P&L and cash flow statements.
Business metrics are not just for the CEO, CFO and/or the Board. I’ll go so far as to suggest that they’re important to every department and every employee. By all means, embrace today’s ability to pivot and graph, and create eye-popping, impressive visualizations of data that was inaccessible a few short years ago. But in the process, don’t let the beauty of the visual overwhelm the importance of the underlying data and how it speaks to the important measurements of your business’ success.