Realistic SaaS demand generation goals help set the stage
Setting realistic SaaS demand generation goals is crucial to aligning sales, marketing, and the executive team. It's important that your goals address KPIs for your business and are achievable based on the advertising channels in your mix and the strategy behind each.
Demand generation sales metrics
Setting realistic goals around the number of leads, pipeline, and revenue will give you clarity of vision and the ability to reverse engineer your strategy. It's also essential that your goals have the potential of being hit from both a metric count perspective, based on historical metrics and channel objective.
When setting your lead goal, look at your Avg. Website Conversion Rate from all sources of traffic and siloed channels that correlate to your current strategy. Setting the stage of possibility using historical metrics will give you insight into what is possible for the future, if no major changes have taken place on your website.
Let's look at an example. You have an advertising lead goal of 200 leads per month, a paid media budget of $25,000, and an Avg. Website Conversion Rate (booked demos) of 1%. Is achieving 200 leads per month possible? To run this calculation, we'll have to use some logical assumptions. When looking at your historical Avg. CPC, we see that the Avg. CPC is $5.75. Knowing that we have $25,000 to spend, we can expect roughly 4,347 clicks from our paid media spend. If our Avg. Website Conversion Rate (1%) holds we can expect to receive approximately 43 website conversions. Wow, not quite the picture that we were hoping to achieve. What's a more realistic goal?
Reversing our calculation will help us back into a more logical lead goal. Let's multiple our lead goal by our Avg. CPC then divide by our Avg. Conversion Rate. This calculation will give you the media spend needed to achieve your lead goal.
(200 * $5.75) / 0.01 = $115,000
We see that it will take $115,000 of paid media spend to capture 200 leads with our current Avg. Website Conversion Rate and Avg. CPC. Wow, that's a lot of money! It may be time to reconsider our goal.
Much like setting realistic paid media lead goals, setting pipeline goals also required some basic calculations to ensure that you set realistic expectations of our SaaS demand generation strategy.
Let's look at an example. If you have an advertising pipeline goal of $500,000, a paid media budget of $25,000, an Avg. Website Conversion Rate (booked demos) of 1%, and an Avg. Deal Size of $10,000; is achieving $500,000 in pipeline feasible? Let's, again, use some logical assumptions from historical metrics to back into a realistic future. We know that you have a historical Avg. CPC of $5.75. From our calculations of your lead count based on a $25,000 paid media spend, we know that we can anticipate realistically obtaining roughly 43 leads from our paid media strategy. Two more assumptions are needed - you have an Avg. Lead to Opportunity Rate of 40% and an Avg. Deal Size of $10,000.
With these assumptions, the 43 leads obtained from a $25,000 paid media budget will result in 17 opportunities (deals) created and approximately $170,000 in pipeline generated. That's 34% of your total goal of $500,000. Reversing our calculation will help us back into a more logical pipeline goal. Let's multiple our Avg. CPC by our Pipeline Goal, then divide by our Avg. Lead to Opportunity Rate multiplied by our Avg. Website Conversion Rate multiplied by our Avg. ACV.
($5.75 * $500,000) / (0.40 * 0.01 * $10,000) = $71,875
Through this calculation we see that it will take $71,875 of paid media to capture $500,000 is pipeline with the current Avg. Lead to Opportunity Rate. It may be time to reconsider our goal, measurement criteria and validity of historical metrics.
Revenue is the holy grail of a SaaS demand generation strategy. Let's see how our paid media plan will realistically perform based on our current understanding of our business metrics.
You don't even have to run a calculation to determine that achieving revenue of $250,000 from a $25,000 spend is highly unlikely, based on the pipeline generated from our previous example, so let's change up the media spend to see how these numbers play out.
Suppose you have an advertising revenue goal of $250,000, a paid media budget of, now, $75,000, an Avg. Website Conversion Rate (booked demos) of 1%, and an Avg. Deal Size of $10,000; is achieving $250,000 in revenue feasible? Let's, again, use some logical assumptions from historical metrics in order to back into a realistic future. We know that you have a historical Avg. CPC of $5.75. We also are going to set the Avg. Opportunity to Customer Rate at 60% to be very generous.
We'll generate 130 leads, $521,739 in pipeline, and $313,043 in revenue with these assumptions. Nice! Reversing our calculation will tell us the minimum media spend required to achieve our revenue goal.
($5.75 * $250,000) / (0.40 * 0.01 * $10,000 * 0.60) = $59,895
Great! We could reduce our paid media budget by $15,000 and still hit our goal. Theoretically.
There are some massive considerations to be aware of.
- This theory considers last-click attribution only, not providing credit to touch points along the journey.
- Your Avg. Website Conversion Rate may fluctuate over time due to channel mix, how well you're filling your demand generation audiences, and other factors.
- If you're using Avg. Website Conversion Rates from booked demos only, consider other forms of conversion which may have a higher conversion rate.
- Marketing is not linear nor 100% binary - it's part art and part science.
Although these simple calculations paint a rather Grimm version of reality for your SaaS demand generation strategy, this exercise will help you set realistic expectations. Paid media alone cannot support a company's growth 100%. In this example, offsetting your lead goal with other non-paid media strategies may be a wise option. If you're not able to offset your lead goal with non-paid efforts, consider the impact on of what can be achieved by tracing leads to pipeline and revenue. You may see that paid media, even with your small budget, is a very wise use of your funds, but it was your initial goal that was not rooted in reality.
Marketing is not magic; it's a medium for communication.