Setting goals and goal values is one of the most important things you can do with Google Analytics, second only to actually installing it properly. With goals and goal values, you can infer the economic value of nearly any activity on your website. Without goals and goal values, you’re relegated to vanity metrics.
Today, let’s look at how to calculate a B2B goal value, or the value of a complex sale. I say this because B2B vs. B2C is largely a meaningless distinction; complexity of the sale matters more.
In the complex sale, customers typically pass through the following stages:
- Prospect: someone interested in interacting, but no commercial intent. Examples would be a newsletter subscriber, white paper downloader, or webinar attendee.
- Marketing Qualified Lead: someone who has expressed commercial intent. Example would be someone asking for a demo of our product or for someone to contact them. This is typically what we’d call a goal in Google Analytics.
- Sales Qualified Lead: someone who is a qualified buyer; they have purchase intent, budget, and authority to make a decision.
- Opportunity/Deal: someone in active negotiations to buy from us; we have made our sales pitch and we are one of possibly several brands the buyer is courting.
- Closed Won: someone who has signed, sealed, and delivered a contract or made a purchase.
Note that while this does fit B2B, it also equally describes complex B2C sales such as automotive and real estate sales.
How do we calculate a Google Analytics goal value? We work backwards from the bottom of this structure to arrive at an inferred goal value.
Let’s start with the customer. What’s the value of a customer to you? For example, if you’re a SaaS business, the customer’s value is their monthly subscription value multiplied by how long the average customer stays subscribed to you. The same is true of a services business, from public relations to housekeeping services. This is customer lifetime value, or CLTV.
What does it cost you to acquire a customer? From advertising to marketing to sales staffing, how much in total does each customer cost to obtain? This includes the costs of trade shows, marketing software, CRM software, the hours and commissions paid to sales professionals, etc. This is the customer acquisition cost, or CAC.
Our net customer value (NCV) is CLTV - CAC.
CLTV - CAC =NCV
Let’s say a customer’s CLTV is $100,000 but our CAC is $10,000.
CLTV - CAC = NCV
$100,000 - $10,000 = $90,000 = NCV
That’s the true value of a Closed Won deal.
Next, how effective is our sales team? What’s our sales closing rate (SCR) between Deal and Closed Won? If our salespeople close 1 out of 4 deals they’re given, then the effective net deal value (NDV) is the NCV multiplied by 25%. Why? Because for every 1 deal they win (NCV), they lose 3, so the value of the one win is spread over four deals.
NCV x SCR = NDV
$90,000 x 0.25 = $22,500 = NDV
How many sales qualified leads become deals? After all, just because someone is qualified doesn’t mean they’ll buy from us. We may have had an input call and prepared for a deal, but then our sales lead chose another company before we ever had a chance to pitch. If we lose 1 out of 4 deals between qualification and pitching, we multiply our NDV by this deal closing rate (DCR) to find our sales qualified lead value (SQLV).
NDV x DCR = SQLV
$22,500 x 0.75 = $16,875 = SQLV
How many marketing qualified leads are truly qualified?
If you remember in Glengarry Glen Ross, Jack Lemmon’s character Shelley Levene protests at one point, “The leads are weak!”, summarizing the often antagonistic relationship between sales and marketing. Suppose only 1 out of 4 marketing qualified leads were actually sales qualified (our qualification rate, or QR), meaning they had budget, authority, and need for our product or service. That’d be our marketing qualified lead value (MQLV).
SQLV x QR = MQLV
$16,875 x 0.25 = $4,219 = MQLV
For some of our Google Analytics goals, like people asking us to contact them or requesting a demo, we would use MQLV as our goal value. People did what we wanted them to do, which was to ask us to reach out.
We still have other digital activities, like newsletter subscribers, white paper downloads, etc. that we know have some value. Suppose 1 out of 100 email newsletter subscribers eventually asks us to contact them. That’s essentially our prospect qualification rate (PQR) leading to a prospect value (PV).
MQLV x PQR = PV
$4,219 x 0.01 = $42 = PV
Thus, in the scenario above, even a prospect has value, and we can set the appropriate value of that prospect as a goal and goal value in Google Analytics.
Do this exercise in accordance with your sales and marketing processes; some companies will have even more stages in their pipeline. Others will have fewer. The goal is to identify which digital activities have value, then calculate with reasonable accuracy what those values are.
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