Return on Marketing Investment Measurement that Works

Measure the Marketing Mix

Measure the Marketing Mix

I’ve seen a lot of buzz about marketing operations, marketing measurement and marketing ROI on blogs and Twitter lately. There are certainly very good reasons for organizations to put resources behind taking a hard look at the contributions of all of their departments including marketing. The buzz swings all the way to the left with people
claiming you can’t measure marketing and back out to the right with here’s how you measure it. What I’ve noticed is even those who claim to be able to measure, haven’t really detailed how. As we are building marketing plans and marketing strategy we must start to include measures of success that we can deliver on.

In organizations, the pressure can bring “old school” and “new school” marketing to a clearly drawn battle line. Many times I’ve heard the claim: you can’t measure __________ (fill in the blank) marketing, brand awareness, social media or anything else requested. I often wonder, do people really believe this? Or are these people just scared to be measured? This type of clear-cut measurement certainly puts a new perspective on whether or not you are a “good” marketer. It could equally be a result of people truly not knowing “how” to measure results effectively. It doesn’t help when there are a lot of theories about measurement and few true industry standards beyond “yeah we measure ROI.” Really?!? Who does it, how do they do it, when do they do it, what do you do as a result of it, and the big question…how long does it take them to pull the report together?

Many marketers are pushing the envelope at organizations and looking for ways to measure everything. The problem we are all finding is that we can measure almost everything and it’s easy to get caught with paralysis by analysis. What should you measure? How often? And what metrics really matter?

I recently read an excellent blog post called “Mapping the Marcom Mix to the Lead Funnel”. I was impressed with the thought process behind this as I have been doing a lot of work on integrating funnel management and marketing strategies for marketing and sales. This spawned what I like to call, a moment of brilliance! I admit they are sometimes fleeting, but occasionally things just align themselves in a way that provide previously unseen clarity. When I started to consider how all the activities map to the funnel, I immediately wanted to measure their impact.

So, I worked on creating a model to measure the Return on Marketing Investment. There were three core considerations to building a model that I believe would actually work.

Measure the impact of the entire marketing mix

Like many marketers I’ve tried to measure the success of individual projects and campaigns with varying levels of results. The challenge was measuring long-term, mid-term and short-term strategies and relating them to ROI.  Because, ROI is return on investment which naturally requires you to track directly to revenue mid-term and long-term strategies end up with a result that looks like it was a failure. With  strategies like Brand Awareness it is much harder to tie them to current revenue as the impact of your activities today may not pay off for several years,  yet we struggle because we are being held accountable for these activities today. Trying to measure each item individually can lead to poor decisions based on short-term results. What really matters is how is the entire marketing mix contributing to overall lead generation.  I believe the whole is truly greater than the sum of its parts in marketing.

Make sure your measures are actionable

I think it is mission critical that the data you surround yourself with represents items that you can clearly use to make better decisions. A bunch of foo foo numbers that aren’t clearly aligned with the input and the output just increase the confusion. Use measures that matter and can be used as a diagnostic tool and a success measurement tool and you’ve hit the sweet spot!

To be effective your marketing dashboard should:

  1. Enable you to identify failures
  2. Enable you to identify successes
  3. Enable you to see where those failures and successes lie within your mix and/or tell you where to dig deeper to figure it out

Don’t stop at the marketing team

In my previous experience, every position I’ve held had one purpose. To use marketing to generate more revenue and more profit for the organization. All of the best marketing in the world will fall flat if your sales team is not equipped to close the deal. Therefore, it is critical that you measure all the way through the sales organization. This is certainly not so you can point fingers at the sales team, rather it is an opportunity for more open discussions about the impact marketing is having on the organization and how sales is delivering on that impact. Never forget, we’re all in this together.

So what does this look like? As a visual person, I use graphics to help tell the story and here is what it looks like to me. Now to tie it all together, how does this deliver on the three considerations?

Measure the Marketing Mix

Measure the Marketing Mix

Measure the impact of the entire marketing mix

As you can see at the top of the funnel you are keeping track of all of the leads delivered from each type of source. I chose to do this independently by source. However, ROI is not calculated on one item, it is calculated based on all of the inputs and the resulting outputs. I went one step further, and decided to measure based on the time frame (short, medium, fast) to an anticipated purchase and the expenses for the lead nurturing that is being done for each of those groups. Certainly for you the break-down may be different. I’m a big fan of the old KISS (Keep It Simple, Stupid!) philosophy so I go with the core things that matter to both marketing and sales and that is their possibility of conversion or how “warm” are they.

Make sure your measures are actionable

The proof really is in the pudding here. By looking at this graph regularly I can identify several critical things in order to gauge success over time. First, are leads piling up in one of the tracks? If so, we aren’t moving them along effectively and need to take a look at our lead nurturing and/or sales activities in that group. Second, are there enough leads coming into the funnel to deliver the revenue we’ve forecasted for the period. Over time, you will get a better perspective of conversion rates and how many leads you need to generate a certain level of sales. This certainly helps when you need to ask for more budget $$$ to fill the pipeline. Third, from a budget perspective you can see where you spend your budget and whether or not it is delivering the leads you expected. Once you identify where the problems are you can do more investigation into that particular area simply by digging into the raw data behind the item with a simple click  instead of searching for the needle in the haystack.

Don’t stop at the marketing team

As you can see, leads are tracked all the way to revenue.  By measuring all the way through you can clearly see whether or not your marketing activities are having an impact on sales. If not, you have some work to do. If they do, how can you make it better? Or you may find that some of the activities you are spending a lot of money on are preventing you from being able to spend where you are generating the biggest results.

So go big, be bold. Measure it and see how your team stacks up. If you don’t like what you see, fix it. If you do, congratulations! Fuel an environment where old and new school thrive.

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2 Responses

  1. Great holistic view of Marketing ROI, Nichole! MROI needs to be viewed from a strategic perspective, not just a focus on silos of activity. Tracking and assessing the total impact of marketing end-to-end is integral to measuring what matters. As long as we begin with the desired outcome in mind, it’s possible to have a truly meaningful measurement process – one which is both actionable and a reliable guide to better decision-making.

  2. I completely agree with this model and it’s what I’m seeing with many customers I work with. Either they have this set up or they’re working towards it. Sirius Decisions has done many studies on this and found that the best performing companies follow this model. It means that marketing needs to look further down the funnel and sales needs to look higher up in the funnel. Both teams need to work together towards common goals.

    Check out this video from Dreamforce 08 where Cognos describes how they make this work:
    http://www.salesforce.com/community/crm-best-practices/marketing-professionals/sales-alignment/2008-mktg-exec-aligning-sales-marketing.jsp

    @chadhorenfeldt

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