Business Metric #4 of N: “Leads” (marketing)

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Summary:

In this post, we will discuss about a common metric used by Sales & Marketing teams called “leads”.

Description:

In simple terms,

Leads = number of individuals (or companies) that have expressed an interest in your goods or services.

why do we want to measure this?

For a business to grow, it’s important that the sales & marketing department work to make sure that there is a growing interest in company’s goods or services. It’s important to track this metric to make sure that it’s a positive upward trend!

Word of caution: It’s important to also note that this metric on its own can be misleading. It might be a good idea to also track “conversion ratios” (converting leads or potential customers into actual customers) to make sure that high-quality leads are being generated.

where can you get this data?

Depending on the channel that you use to capture potential customer’s information & the technology maturity of the company, it varies. I’ve seen CRM systems used to report “leads” data and I’ve also seen manual excel files that are used to generate leads report.

Are there any sub-categories?

Yes, it’s usually subdivided into 1) Marketing Qualified Leads and 2) Sales Marketing Leads.

usually, Marketing Qualified lead (MQL) is someone who has shown interest in your product or service but you don’t know if they fulfill your qualifications to buy your products or services. out of all MQL’s, those leads that qualify your criteria and are identified are someone who is ready to buy your products or services becomes your Sales Qualified Lead (SQL) and sales department get’s ready to engage with these leads to make them an actual customer.

Marketing Funnel Sales Qualified Lead

Conclusion:

In this post, we saw a high level overview of a business metric used in marketing and sales called “leads”.  As mentioned earlier, don’t report on just “leads” – it can be misleading for marketing & sales executives since upward trend in number of leads doesn’t necessarily result in increased sales unless the quality of new leads is same or better. Marketing and sales executives would really appreciate any context  (example: conversions) that you can provide to their “leads” report. I hope that helps!

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Business Metrics #3 of N: Inventory Turnover

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Summary:

In this post, we will a common metric used in inventory management called Inventory Turnover

Description:

In simple terms,

Inventory Turnover = Sales / Inventory

why do we want to measure this?

A business manager can analyze this metric to figure out the efficiency of sales and efficiency of buying.

A high over turnover equals strong/efficient sales OR inefficient buying process. It can also show loss in business due to lack of goods supply.

A Low turnover equals inefficient sales or marketing efforts and excess inventory.

How do you benchmark inventory turnover?

usually, it’s bench-marked against Industry average. You don’t want to benchmark a company selling Auto Spare Rates versus a company selling dairy products because company selling dairy products (perishable goods) would have a high turnover ratio since they move inventory fast.

Conclusion:

This was a high level discussion of a business metric “Inventory Turnover” commonly analyzed by business managers to keep an eye on their sales and buying efficiencies. of course, the use of the formula would involve interviewing business managers to understand how they measure inventory turnover but whatever the formula may be it should ideally be consistent across the organizations.

Here are some links if you want to research further:

http://www.investopedia.com/terms/i/inventoryturnover.asp

http://www.accounting-basics-for-students.com/cost-of-goods-sold.html

http://accountingexplained.com/financial/ratios/inventory-turnover

http://en.wikipedia.org/wiki/Inventory_turnover