How do you measure Marketing ROI?

Last week’s post about What C-Level Execs want from Marketing discussed the top 3 C-level executive priorities from the eMarketer review of a research study conducted by Heidrick & Struggles. This post looks at ‘Improve Marketing ROI’ which is the 4th highest priority in this survey.

Return on Investment (ROI) is a financial metric generally defined as:
ROI = (Gain from Investment – Cost of Investment) ÷ Cost of Investment
It may be relatively straightforward to calculate the ROI on each specific marketing program or campaign – e.g. a marketing program costs $100k, generates $200k of revenue which represents 100% ROI. But how do you measure ROI for Marketing overall from a C-level perspective? If the marketing budget is a typical 2.5% of total revenues for B2B companies, does that mean the ROI is 3,900%? Not likely.

The big variable is what constitutes the ‘Gain from Investment’ created by Marketing. IMO, this is the crux of most of the conflict and frustration for C-level executives and Marketing to define the value in consistent and measurable terms for Marketing ROI.

Marketing can and should track the ROI of each campaign and program. This essential starting point provides lots of tangible data for analysis and reporting, but it’s an incomplete view. Some sales may only occur long after a campaign is done, but were nonetheless originally influenced by the interest and awareness created by that campaign. How about interest and awareness created from all campaigns and programs that generate sales not attributed to a specific marketing program? How do you account for these?

Then there are all the valuable but intangible gains that marketing creates. Conditioning the target market(s) with press releases, articles, advertising, etc. Developing credibility with various influencers such as industry analysts, consultants, mavens, etc. Customer loyalty and retention programs that may only pay off in future years. Many others. These are all important, necessary and valuable gains generated by marketing, but difficult to put a $ value on for calculating ROI.

"Marketing is inherently about producing results - either financial or otherwise." – Geoff Smith

A better approach is to use a balanced scorecard or marketing performance management (MPM) framework to measure and manage Marketing ROI across all areas that marketing spends time and resources on. This would be based on agreed goals and strategic objectives with C-level executives for each area for marketing. Then establish metrics or key performance indicators (KPIs) for each element. This will produce a more balanced and equitable view of the ROI produced by marketing across all areas for C-level executives that directly relates to the performance of everything Marketing does.

Now that you’ve established what and how you’re measuring marketing performance and ROI, you can work with C-level executives on objectives to improve performance and ROI in specific areas and elements.

How do you measure and report Marketing ROI to C-level executives?

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC.

What do your C-Level Execs want from Marketing?

In my blog post last week I ended the customer buying cycle series discussing the need for separate marketing strategies to address new customer acquisition versus existing customer retention and unlocking the lifetime value of customers.

Two days after that post, eMarketer reviewed a research study conducted by Heidrick & Struggles on the focus of C-level executives in 2009. Interestingly the top 3 priorities for US senior executives are:

  • Acquire new customers
  • Increase customer retention
  • Increase customer lifetime value
That puts Marketing squarely in the hot seat to enable and drive results for these top business priorities during these difficult economic times. Although not part of this research study, the disconnect for me is that other research shows that so many companies have cut marketing budgets over the past 6-9 months. So, while the top business priorities are clearly goals that marketing needs to drive, they have fewer resources and reduced budgets to accomplish it.

Although these 3 priorities have broad applicability, they may not be specifically what your C-level executives are thinking at your company. I would suggest that, if you haven’t recently done so already, marketing leadership do their own survey of C-level executives of business priorities for the next 12-18 months for your company, and then develop your strategic plan to deliver on those expectations.

“Marketing is too important to be left to the marketing department.”
– David Packard (co-founder Hewlett-Packard / HP)

Once you have your specific top priorities, you’ll need to show your C-level executives:
  • Specific marketing strategies for each
  • Current marketing campaigns and programs in each area
  • How Sales is being enabled to bring in deals in each of these areas
  • How other areas in the company are aligned in support of these plans
  • Results from these campaigns and programs
  • What’s working, what isn’t
  • What needs C-level attention
The 4th highest priority in this survey is ‘Improve Marketing ROI’ – an interesting topic that has frustrated many C-level executives and marketers that I’ll explore further in my next post.

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC.

Buying Cycle – You have a customer – now what?

This last post in the customer buying cycle series, explores opportunities for marketing and sales to engage with existing customers to drive more deals.

Even though the customer has bought and successfully implemented your product/service/solution, the buying cycle continues with the customer focused on achieving the benefits and value that initially drove them through the earlier steps of the buying cycle. While a customer may not specifically be in the market to buy something at this time, the outcome from this phase of their buying cycle will determine whether they buy more from you in future and what recommendations they make to anyone who asks.

During the achievement step, responsibility for customer success is primarily with support and professional/consulting services. An effective way for marketing to connect with the customer and monitor progress during this step is to ask for a case study. Since case studies are designed to highlight customer achievements, several responses from the customer are possible including:B2B Buying Cycle

  • It’s too early, no documented achievements yet – this gives marketing the opportunity to follow-up on a regular basis to monitor the situation.
  • It’s not going well / we’re having problems / no case studies until our problems are resolved – although negative, marketing can help bring attention to the situation to get it resolved, and continue to follow-up and monitor.
  • Customer agrees to do the case study as requested – confirmation of achievement you can now put on record and publicize to attract more customers. Also opens the opportunity to develop a mutually beneficial long term business relationship with the customer.
The last step in the customer buying cycle is to have a loyal customer. If your business and product/service/solution creates value for your customer, a loyal customer will create value for your business:
  • Lifetime customer value – the total revenue from loyal customers over the relationship lifetime can be many times the initial purchase
  • Loyal customers are more willing to be positive references you can use to win other deals
  • Loyal customers will promote your product/service/solution in their business dealings generating referrals
It takes significant time, effort and resources for most B2B companies to acquire net new customers. But that’s just for the initial sale – it takes more time, effort and resources to unlock the much larger lifetime value of a customer.

IMO, the key consideration for B2B marketers is that you have two very different audiences and therefore need two different marketing strategies that translate into specific campaigns and programs for each audience:
  1. New customers – how to find and acquire net new customers – this is the lifeblood that feeds the long term viability of a business.
  2. Existing customers – how to develop customer loyalty that unlocks the significant lifetime revenue stream – this is the major source of revenues and profits for the long term.
A key consideration from this series of posts is that the customer buying cycle begins long before your sales cycle and continues long after the sales cycle is done. How do your marketing strategy and sales cycle connect with your customer buying cycle?

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC.

Buying Cycle – What happens after you close the deal?

Continuing the customer buying cycle series, this post explores what may be the most perilous phase of the buying cycle for customers – what happens after the purchase is concluded.

Regardless of what type of product/service/solution the customer has bought, the next phase is to install/implement the solution in their business in a manner that meets the customer expectations of why they bought the solution. From a customer perspective there are two distinct steps of implementing and implemented in this post-purchase phase of the buying cycle.

During the implementing step the vendor delivers the product/service/solution and the customer commences with implementing the solution as part of their business. Depending on the type of solution this step may be a few days, several months or years. B2B Buying CycleMarketing and sales have typically moved on to finding the next deal and the vendor or third party services/consulting team is in control of the account. While marketing would not engage with a customer in regular marketing activities during this step, it should still closely monitor the situation:

  • Welcome the customer to your community – get them plugged into available resources, services, newsletters, forums, etc.
  • You want all customers to be referenceable – stay in contact and monitor progress
  • Things can and do go wrong in this step – keep a close watch on forums and social media outlets for any signs of dissatisfaction
  • Competitors may still be trolling around – it’s tough to win a deal, stay engaged to make sure you keep the deal.
Once the solution is actively running in an operational mode as part of the customer’s business without outside assistance, it’s considered implemented. Vendor engagement with customers typically shifts to support services as the primary point of contact. Every customer should be a prospective buyer for more:
  • Define what ‘more’ means in your business – product, add-ons, users, services, up-sell, cross-sell, etc.
  • Run specific marketing campaigns and sales programs to sell more to existing customers
  • Get the customer into your reference program
  • Stay in contact via newsletters, forums, customer groups, etc.
  • Ensure that support services are trained to recognize opportunities for selling more.
Staying engaged after the sale in an appropriate manner correlated to the buying cycle steps is the first step to harvest the potential lifetime value of each customer.

How do you stay engaged with customers after the sale?

The next post is the last in this series covering the Achievement and Loyal Customer steps of the customer buying cycle.

The next post explores the

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC.