KPIMarketing

Marketing Contribution to ARR

Percentage of new Annual Recurring Revenue (or total revenue) that originated from a marketing-sourced lead

What is Marketing Contribution to ARR?

Marketing contribution to annual recurring revenue (ARR) is the share of new ARR that came from deals marketing sourced. It shows how much of a subscription business's growth marketing is responsible for.

For companies that sell subscriptions, ARR is the headline growth measure. Expressing marketing's role as a share of it gives leaders a clear, financial view of marketing's contribution.

How this KPI is measured

Function: Marketing
Sub-function: Revenue Marketing
Industry: All Industries
Type: Lagging
Impact: Revenue
Unit: %
Measurement frequency: Monthly / Quarterly
Formula: (New ARR from marketing-sourced deals / Total new ARR) × 100

How to calculate it

Divide the new ARR from marketing-sourced deals by total new ARR in the period, and multiply by 100.

For example, if a company added 2,000,000 of new ARR in a year and 700,000 of it came from deals sourced by marketing, the contribution is (700,000 / 2,000,000) x 100 = 35%.

Agree how a deal is credited to marketing, and apply the rule to every deal. Keep it separate from deals that marketing only influenced, and review it over a full year, since deals take time to close.

Where it is used

Reporting to leadership
Show marketing's share of growth in terms the whole business uses.
Setting marketing goals
Agree a target share of new ARR for marketing to source.
Planning investment
Compare the ARR marketing sources with what it spends to judge efficiency.

How to improve it

Agree the attribution ruleSettle with sales and finance how deals are credited to marketing, and document it.
Record the source on every opportunityCapture the source when the opportunity is created, not later.
Measure over a full cycleUse a period that covers the length of the sales cycle so spend and revenue are matched.
Improve the highest-yielding sourcesInvest more in the channels that source the largest amount of ARR.
Read it with efficiency measuresCompare with cost of acquisition and payback to check that growth is affordable.

Tips and common mistakes

A share is not a target on its own. Marketing can source a lower share of a much larger total and still be doing well.
Make sure the ARR figure matches the one finance reports.
Separate new customers from expansion, since they have different sources and dynamics.

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