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How to Calculate Cost Per Opportunity
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Knowing which question you're being asked has a big impact on how to calculate the answer. Let's illustrate this by looking at this typical marketing budget, which is allocated roughly 45/45/10 across people, programs, and technology: “But those benchmarks will be hard to find.” Why?
My marketing professor once said, The answer to every marketing question is, "It depends." Thus, the important part is knowing on what. “So, how do you calculate the cost/opportunity? Well, it depends! On what? On the specific question you're trying to answer.” An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)?
My marketing professor once said, The answer to every marketing question is, "It depends." Thus, the important part is knowing on what. “When people ask about cost/opportunity, they usually have one of two things in mind:” An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)?
So, how do you calculate the cost/opportunity? Well, it depends! On what? On the specific question you're trying to answer. When people ask about cost/opportunity, they usually have one of two things in mind: “An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)?” A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them
An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)? “A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them” Knowing which question you're being asked has a big impact on how to calculate the answer. Let's illustrate this by looking at this typical marketing budget, which is allocated roughly 45/45/10 across people, programs, and technology:
This begs a potential rathole question which I call the low-hanging fruit problem. Most demandgen marketers argue that picking oppties out of the market is like picking apples out of a tree. First, you pick the easy ones, which doesn't cost much. But the more apples you need, the higher up the tree you have to go. That is, the cost of picking the 1,000th apple is a lot higher than the cost of picking the first one. That is, the average cost of picking 1,000 apples is less than the incremental cost of getting one more. “As CMO, a key part of your job is to always know the incremental cost of generating 50 more opportunities.” There is an oppty shortfall and someone asks how much money you need to fill it. You should answer instantly.
That's what you might call "agile marketing." And you get agile by doing the math in advance and having the incremental spending plan in your pocket, waiting for the day when someone asks. “To make things easy, unless and until you have a spending plan that answers the cost of getting 50 more oppties, just use your average demandgen cost/oppty and uplift it by 25% to adjust for the low-hanging fruit problem.” Let's close this out by raising a common objection to using demandgen costs only. It sounds something like this:
And the best answer we have here, at our fingertips, for the incremental cost of an oppty is the average demandgen programs cost/oppty. In our example, that's $3,250. So, to generate 50 more oppties would cost $162,500. That's good news because it's a whole lot less than $450,000 and because it's correct. “In short, cost/oppty = total demandgen cost / number of oppties.” This begs a potential rathole question which I call the low-hanging fruit problem. Most demandgen marketers argue that picking oppties out of the market is like picking apples out of a tree. First, you pick the easy ones, which doesn't cost much. But the more apples you need, the higher up the tree you have to go. That is, the cost of picking the 1,000th apple is a lot higher than the cost of picking the first one. That is, the average cost of picking 1,000 apples is less than the incremental cost of getting one more.
My marketing professor once said, The answer to every marketing question is, "It depends." Thus, the important part is knowing on what. “When people ask about cost/opportunity, they usually have one of two things in mind:” An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)?
So, how do you calculate the cost/opportunity? Well, it depends! On what? On the specific question you're trying to answer. When people ask about cost/opportunity, they usually have one of two things in mind: “An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)?” A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them
An efficiency question -- e.g., how efficiently does marketing spend convert into sales opportunities (oppties)? “A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them” Knowing which question you're being asked has a big impact on how to calculate the answer. Let's illustrate this by looking at this typical marketing budget, which is allocated roughly 45/45/10 across people, programs, and technology:
A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them “Knowing which question you're being asked has a big impact on how to calculate the answer.” If this marketing team generated 1,000 oppties, then the average total marketing cost/oppty is $9,000 = $9M/1K oppties. You might argue that's a good overall marketing efficiency metric and try to benchmark it. But those benchmarks will be hard to find.
A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them “which is allocated roughly 45/45/10 across people, programs, and technology:” If this marketing team generated 1,000 oppties, then the average total marketing cost/oppty is $9,000 = $9M/1K oppties. You might argue that's a good overall marketing efficiency metric and try to benchmark it. But those benchmarks will be hard to find.
A cost question -- e.g., how much it would cost to get 50 more oppties if we needed them “which is allocated roughly 45/45/10 across people, programs, and technology:” If this marketing team generated 1,000 oppties, then the average total marketing cost/oppty is $9,000 = $9M/1K oppties. You might argue that's a good overall marketing efficiency metric and try to benchmark it. But those benchmarks will be hard to find.