Without accurate marketing campaign analysis, any marketing department will find it hard to justify its existence. Higher management needs to know the resources employed are delivering the required return. How can marketing prove their positive impact on the business and ROI?
In an increasingly competitive B2B marketplace every department must prove its contribution. Manufacturing output is relatively easy to measure, as is the contribution of the sales department but what about the marketing department?
Measuring activity is easy. It is possible to measure clicks, opens, shares, impressions and a host of other signals but how do they relate to outcomes higher management can understand?
The corporate environment is competitive and everyone is keen to claim success and disassociate themselves from failure. In the mass of touchpoints that ultimately lead to a sale, marketing needs to find a way to prove its contribution. In an old (but still gold) post Annuitas state ‘The rest of the organization tracks and marches to the beat of the revenue drum’. Marketing must follow suit.
Measuring Marketing Contribution
For most businesses, the desired outcome is a sale but in B2B markets many customer touch-points are required to generate that sale. Sales cannot operate in a vacuum and support from various business departments (technical, production, quality, management and marketing) will be required in any sales process.
Marketing in B2B markets is a challenge. Although marketing will have inputs at various points many will be soft and can be dismissed as irrelevant by those who may wish to do so. There is a potential problem with data (discussed in detail below) and how relevant that data is to higher management.
The basic ROI calculation is (Return – Investment) / Investment over a specific period. The return could be sales, gross profit or some other variable.
Marketing ROI could, therefore, be measured using the formula (Sales – Marketing investment) / marketing investment over a period. However, some of the sales growth may be organic. That is, it would have come in regardless of marketing effort. Simple repeat business for example.
A more accurate calculation may be (Sales – Organic sales – Marketing investment) / Marketing investment over a period. At a top-level, this will deliver a number that should show, in broad terms, if marketing is delivering (or not). The problem is digging down from that top-level into the specifics of which marketing campaign activities deliver an ROI.
When relating marketing activity to results, and specifically to sales there is no perfect answer. One, relatively simplistic, but useful technique is to set a baseline based on past activity.
How many leads are generated at present per month and what is the average conversion (leads to sales). A variance factor may be added to this number (perhaps +5%) then it is relatively safe to assume that if leads increase beyond this level it must be due to marketing activity.
Leads can then be converted to a rough sales number and compared directly with the marketing costs of generating that sales number to give an ROI. The measure is far from perfect as sales numbers can be impacted by a wide range of factors beyond marketing control. However, it does give an indication that higher management and financial people understand.
Sales may wish to claim that the increase in sales numbers is due primarily to their activity and increased conversions. In return, marketing may argue (with some justification) that a major part of that success is due to increased lead quality.
Sales And Marketing Organisation
In the past, there was often a clear division between marketing and sales. Marketing generated the lead (at which point their involvement ended). Sales took that lead forward to the point of sale.
With the rise of inbound marketing, the sales and marketing relationship is more complex. A well organised sales and marketing department will have sales spearheading customer relationships. Marketing will be in close support delivering information (content) to help calm nerves, grease the wheels, overcome objections and help take the process forward.
Given their supporting role marketing campaign analysis and proving the ROI can be difficult. A clearly defined process is required that concentrates on outcomes clearly understood by higher management.
The Problems With Marketing Data
The aim of the marketing department is simple. They need to maximise the sales number while minimising the marketing expenditure.
They, therefore, need to know which of the multiple activities they undertake has the maximum impact and which are not worth the investment. Investing in the wrong areas or minimising the wrong costs will reduce the contribution of marketing.
There are many third-party tools available for measuring the impact of various elements of the marketing mix. How can marketing be sure that a positive change in whatever is measured is not the result of some transient event.? What about the long term fuzzy objectives like brand awareness?
Most measurement tools make various assumptions in their calculations. Without accounting for assumptions the data could be way off. There may be a widely held belief in a business that ‘X’ is an undisputed fact. The problem is assumptions can become recognised as facts over time (almost as part of the folklore) when they have no scientific basis.
It may be activity X appears to deliver excellent results but that could be impacted by activity Y? Some external environmental factor Z could have an impact?
There is no such thing as perfect information. Data can be used as a crutch or worse still an excuse. That shouldn’t have happened! The data said otherwise! With too much data, too much analysis a business can be slow to react to what is happening in the real world.
Marketing Campaign Analysis – A Potential Process
The problem is how to decide what to measure, how to measure it and how to provide clarity out of the mass of data collected. In our experience, the best measurement processes follow a pattern:
- Set required outcomes.
- Decide what marketing tools will be used.
- Measure adapt and improve based on accurate data.
Set Marketing Outcomes
It is important to not get caught up in simply reporting data, it is outcomes that matter. An outcome must be something tangible and understood (by all) as a benefit to the organisation.
As an example organic website traffic has increased by 23% this quarter is not an outcome, the number of leads generated by organic traffic has increased by 14% is. Or is it? What is a lead? Has it been agreed?
The best approach is to use a range of marketing tools working together to deliver the required result. The actual mix will generally be specific to each business and its market.
The tools must deliver data that support outcomes. Ultimately marketing responsibility is understanding the customer and their needs. The latest and greatest toolset and the data it provides is only part of the mix.
Marketing activity compared directly to sales is the ideal measure but as the sale always lags the activity (often by many months) in B2B markets it can be difficult.
Many touch-points lead to a sale.
Sales leads are one possible outcome to measure but what constitutes a lead must be quantified. Lead measurement can leave the marketing department open to attack by those who may be looking for somewhere to hide. It is too easy for others to claim the leads are of poor quality, or for the wrong products or from the wrong customers.
Adapt And Improve
It is only possible to make decisions on how to improve based on accurate data. Without it, there is a major risk of wasting time and effort on unproductive activities.
With a baseline established it is possible to drop poor performing activities and continue to fine-tune and improve those that are delivering results. A limited number of new marketing activities may be added to replace those dropped on a trial basis.
An Alternative Approach
A data-based approach is one technique for measuring marketing campaign effectiveness and ROI. At the other extreme, a ‘who cares about the specific cause if it is working’ approach may be employed. The business may run on something difficult to quantify – feel. There may be some very broad measurements of performance in place but that is all.
The risks of this approach are obvious. There is a lack of control. Costs could spiral with no checks and balances. If results hit a downward trend it will be difficult to establish what needs to be fixed?
A lack of data can lead to an increase in company politics. Did sales contribute the most to bringing in the order, or was it operations. Maybe the opportunity would not have existed in the first place if it was not for marketing. Did the design/engineering department come up with such an elegant, cost-effective solution to a problem that it sold itself?
On the plus side, a business run on feel tends to be more able to react to the market. They tend to be far less bogged down in data and closer to what is happening in the real world. However, businesses that succeed with this approach tend to have a specific organisational structure and culture. It tends to only work in smaller organisations or in larger organisations that can isolate specific groups or teams.
Both the ‘data’ and the ‘feel’ routes have their pluses and minuses. A mix of the two, measuring a trend (and accepting its imperfections) rather than an absolute measure of marketing campaign ROI may be a more appropriate goal.
The rough measures (or no measure) approach tends to lead to a business that is faster on its feet and more tuned in to its market but it has obvious risks. The business with perfect data (if such a thing exists) and the courage to act on that data given the external forces and internal politics that may swirl around should make excellent decisions. The trouble is those decisions may be too late.
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