Recently, I’ve been traveling the country, meeting with over 70 marketing executives to discuss best practices in marketing analytics and measuring and improving marketing ROI. Helping me lead these discussions is Jim Lenskold, president of the Lenskold Group and someone I’ve long admired as a thought leader in the space.
I’ve learned quite a bit in the course of these discussions, and found that the following lessons came up again and again. In the spirit of making them easy to share, I’ve boiled each one down to 140 characters or less. Please enjoy, and share the wisdom!
- Marketing without proper ROI measurements is like running a marathon, in an earthquake, blindfolded. Analyst David Raab writes in his paper, Winning the Marketing Measurement Marathon, “Marketing has always been a grueling and competitive sport – not unlike running a marathon. With the changes in the buying process, in media and technology, and managing expectations, it’s like running a marathon as the ground shifts beneath your feet. What was already difficult is becoming increasingly difficult. If you’re going to do it without measurement, it’s like running a marathon, in an earthquake, blindfolded.” Tweet this!
- Marketing reporting is less important than making the marketing DECISIONS that improve ROI. Don’t measure just what you can – measure what you can ACT on. Ultimately marketing ROI should not be about “who gets credit”, but instead about what decisions the measurements allow to improve overall profitability of the program – and the company. Tweet this!
- Measure to find not just what works, but what works better; focus on “improving ROI” not “proving ROI”. Measuring marketing programs should not be a pass / fail exercise. Instead, focus your efforts on learning what you can do that will improve ROI. This isn’t about dropping low-profit programs; it’s about a holistic view of what works and where profit comes from. The best ROI may come from improving targeting or optimizing sales conversion. Tweet this!
- It’s possible to measure just about anything in marketing, but impossible to measure everything in marketing. Just because you can measure something doesn’t mean you should. Marketing measurement costs time and money, so focus your time and energy on the metrics that will support the most profitable decision-making. Tweet this!
- Don’t be an “arts and crafts” cost-center; marketing should be a revenue driver worthy of investment. It’s easy to measure marketing activity (inputs such as budget and programs), but hard to measure marketing results. Contrast this to sales, where activity is hard to measure but results are easy to see. Given this dynamic, is it any wonder that Sales tends to get the credit for revenue but marketing is perceived as a cost center? To build credibility, focus your measurements on the metrics your CFO cares about – things like revenue, cash-flow and profit – and position your budget in terms of investment instead of cost. Tweet this!
- Avoid “vanity metrics” that sound good, but mean little if anything about real marketing ROI. Many common marketing metrics – such as names gathered at a tradeshow, Twitter followers, and press release impressions – sound good and impress people, but don’t really have any strong correlation to revenue. It’s OK to track these internally if they help you make better marketing decisions, but avoid sharing them with executives outside of the department unless you have previously established why they matter. Tweet this!
- Focus on effectiveness (doing the right things) more than efficiency (doing possibly the wrong things well). The best ROI gains come from focusing time and money on doing the right things (such as targeting the right segments) more than on how well or cost-effectively you do them. Kathryn Roy of Precision Thinking points out that metrics that show a CFO that marketing is impacting revenue are more likely to protect the budget than metrics that show how well the marketing department is operating internally. Tweet this!
- Program planning includes ROI planning: 1) what to measure 2) when to measure and 3) how to measure. It’s important to quantify the expected outcomes from any marketing investment being planned, and to know exactly how you will measure the program against those goals. You can also take specific steps to make marketing programs more measurable, such as setting up control groups or varying spending levels by geography to measure relative impact. Tweet this!
- True marketing ROI requires understanding all the costs involved, not just top-line impact. Sometimes a marketing program that appears profitable won’t be if sales expenses and COGS (cost of goods sold) are taken into account. Even better, incorporate the full lifetime value of a customer into your calculation. The more your metrics can correlate to the net-present value of lifetime profits from incremental closed revenue, including all marketing and sales costs, the better. Tweet this!
- Fundamentally, marketing measurement is about sales effectiveness, not marketing. The two most important questions you can answer about marketing’s results are: (1) what effect is marketing investments having on sales effectiveness and productivity and (2) how are marketing activities lowering the combined expense to revenue ratio for sales and marketing combined? By focusing not just on marketing is isolation, but on how marketing impacts sales productivity, you will get a much more comprehensive view of the true ROI of your activities. Tweet this!
Liked this post? Please share your tweetable lessons about Marketing ROI in the comments and I’ll tweet them out!
To learn more about marketing analytics, follow me @jonmiller2 or check out our Modern B2B Marketing posts about Marketing Accountability.
Read more: Tweetable Lessons Learned from Content Marketing World
As a sales business, we measure every marketing activity in terms of ROI – and indeed if we can’t track the ROI, we don’t do it. As you allude in point one, if it’s not measurable, how do you know if you’re not wasting your time or not. And it’s not just digital marketing activity either – that goes for printed marketing materials or ‘traditional’ activities supported by printed items. Take a look at this article for more info on tracking ROI on printed materials http://www.webmartuk.com/print_brain/print-data/measuring-roi-from-your-print-marketing-materials/