HomeBlog A Truth About Marketing ROI

A Truth About Marketing ROI

October 26, 2015 | By Ross Graber

  • B-to-b marketers are under pressure to demonstrate how their efforts contribute to the business
  • Marketing leadership needs a means to evaluate effectiveness of their marketing’s functions
  • Evaluate each function based on whether it achieves its customized function goals and helps reach business objectives

Have you heard the one about the automotive executive who asked how much of the company’s revenue could be attributed to including brakes in their cars?

Me neither. I made up the scenario to illustrate the absurdity. You might as well ask the same question about the windshield wipers or a fan belt. Each serves as table stakes. They are essential components in a more complex system – a system that would fail otherwise.

B-to-b marketers are understandably under pressure to demonstrate how their efforts contribute to the business. Having worked with hundreds of b-to-b organizations on their marketing measurement, I can assure you there are right ways and wrong ways to understand marketing effectiveness.

Asking each marketing function to show how much revenue they’ve created is akin to asking how much revenue can be attributed to a braking system. Just like a car’s brakes aren’t responsible for discretely creating sales, neither is it fair to ask your events team or your PR team to claim revenue in order to justify their functions. This isn’t how marketing accountability works in b-to-b environments.

But marketing leadership absolutely needs a means to evaluate the effectiveness of their marketing’s functions. And performance measurement is the key. Here’s how to do it:

  • Set the strategy. To understand the contribution of any marketing function, you need to have a documented understanding of successful outcomes. Is marketing expected to source pipeline, accelerate opportunities, or help retain customers? To what degree? Setting strategy requires tightly defining success in advance.
  • Define departmental contribution. Different marketing functions play a different role in achieving marketing’s goals. Your PR team isn’t going to directly create revenue. But they can generate more reach into your target market by getting coverage placed on the most influential industry Web sites. The purpose of that greater reach could be to reduce the cost of your lead acquisition programs. Every function within marketing has things that they are expected to contribute; those need to be clearly defined.
  • Specify and connect performance indicators. So, those things that each department was responsible for – you’ll need a series of metrics that show whether they’re being achieved. If a function is expected to expand reach, start by establishing a reach metric. That metric then needs to be connected to the impact that is expected to have. For example, more reach will create lower costs per lead (also a metric).
  • Set targets and monitor progress. Once performance indicators are identified, establish what good performance will look like. If your PR function was charged with increasing reach, set a quantifiable target for how much reach needs to increase. Then determine whether reach is being increased to its targeted expected level. If not, perhaps the team’s activities need to be adjusted. But what if they are, and the business still isn’t seeing the lowered cost per lead it was hoping for? Now we need to shift into diagnostic mode to determine why it’s not working. Perhaps things have shifted in the business or the market that would require us to adjust our strategy or see whether a different course is needed.

What should be clear is that I am not recommending evaluating your marketing departments based on the amount of revenue they uniquely create (or even a ratio of revenue created to program costs). Instead, evaluate each function based on whether it achieves its customized function goals and helps the organization reach the business objectives that those functions are intended to support.

Assigning a unique revenue return to each marketing function is equivalent to assigning revenue returns to a cars brakes – it’s just not a useful approach. But that doesn’t mean that we can’t assess whether our brakes are effectively stopping our cars, or if our marketers are effectively accomplishing their objectives.

What are your thoughts?  Leave us a comment below.

Ross Graber

Ross Graber is a Senior Research Director of Marketing Operations Strategies at SiriusDecisions. He brings over 15 years of b-to-b marketing experience with focus spanning marketing measurement, demonstrating ROI, data management, process development, marketing technology, customer marketing and sales enablement. Follow Ross on Twitter @rossgraber.

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