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. http://marketing.infocat.com

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. http://marketing.infocat.com

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:

• 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. http://marketing.infocat.com

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. Marketing 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. http://marketing.infocat.com

Buying Cycle – Moving to Decision and Purchase

Continuing the review of the customer buying cycle, this post explores the Decision and Purchase steps in the B2B customer buying process.

In the Decision step, the buyer evaluates the short list of potential solutions to determine which one to buy. The evaluation process usually includes a number of requirements for each potential vendor to qualify the suitability of their solution. Although not explicitly listed in the evaluation criteria, trust plays a major role during this decision process – whether the prospective buyer trusts the vendor company, product, salesperson and others they have met, to deliver what they want. Trust and credibility should have been developed by sales and marketing prior to this step and reinforced during the decision process.

Sales should be in control of all interactions with the prospective buyer at this stage and Marketing should support sales as needed:

• Remove the prospect from the regular outbound marketing process – coordinate specific marketing activity with sales to support the decision process
• Ensure that any inbound marketing processes are aware of the prospective buyer’s status should anything for that company come in
• Support sales with competitive intelligence, win/loss analysis, landmines to set and competitor landmine responses for the short list contenders
• Customer references are usually requested at this stage – proactively managing the references engagement process is critical to ensure a favorable review.

The prospective buyer could decide not to proceed with any purchase for a variety of reasons.

If the buyer does select your product/service/solution, the next step is to proceed with the Purchase step. Sales are in control of the purchase process and marketing should only engage with the prospective buyer as directed by sales. Although marketing are usually not directly involved with the purchase process, there are previous decisions from marketing and product management that significantly influence the purchase decision:

• Packaging – how the product/service/solution is packaged, sold/licensed, various buyer options, terms, conditions, etc.
• Pricing – how the product/service/solution is priced and current pricing.

Ensure that sales were previously trained on all aspects packaging, pricing and what aspects are negotiable or not. Getting feedback from sales and customers on any pros and cons of packaging and pricing should be part of your continuous improvement process to be responsive to changing market conditions and customer expectations.

Regardless of the outcome from the decision and purchase steps, be sure to collect win/loss data for learning, analysis and future use.

The next post looks at the Implementing and Implemented steps in the post-purchase phase of the customer buying cycle.

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Buying Cycle – Interest, Research & Consideration

The previous post covered the first two steps of the buying cycle to move prospective buyers from the sidelines to awareness. This post explores the next three steps of Interest, Research and Consideration in the B2B customer buying process.

During the interest step, the prospective buyer makes the connection between a problem or opportunity and the need for a particular product/service/solution. This may happen from either direction:

• An internally known problem or opportunity that needs to be resolved. The prospective buyer initiates the interest. This is what most marketing and sales organizations tend to look for, but it may only represent a small part of all potential opportunities.
• An external source instigates the solution need for an overlooked problem or opportunity. Most companies have many unresolved problems and opportunities but don’t take action because of entrenched processes and/or daily workload priorities. If your marketing and sales outreach can instigate the interest, you’ll have the inside track for the sale.

Now that the prospective buyer has identified the need, the next step is research to determine the right product/service/solution for their needs:

• Internally, to determine and get agreement on the specific requirements of what would be the right solution for the problem or opportunity. Companies frequently use consultants, mavens or other trusted sources to assist with defining requirements. Marketing needs to ensure that these third parties have a good understanding of your solution.
• Externally, to determine a list of possible solutions and suppliers. This is usually a long list of all relevant possibilities. If you have educational and authoritative materials readily availability from multiple sources to support this research activity, you can shape the requirements to align with your value proposition.

Once the buyer has the requirements of what is needed and a long list of possible solutions and suppliers, they’ll move to the consideration step. This is where sales and marketing usually become actively involved with the prospect, but can also be a point of disconnect. The buyer wants to get more information, do comparisons and analyze which are the top 2 or 3 most suitable solutions to move into the next step for making a decision. Some common disconnects for sales and marketing to consider during this step:

• The buyer is looking for specific information which may only be accessible from your company after providing registration information on your website. If they register, does marketing respond to their specific circumstances or are they just dropped into the lead generation process?
• Sales want to get into selling mode, but what may be most beneficial for the prospective buyer is consultative guidance from industry/domain experts in your pre-sales organization. Showing the knowledge and expertise your company can provide is the most effective sales approach during this step.
• The buyer gets disconnected from the underlying business objectives with information overload during the comparison and analysis process. Discussions with the buyer should focus on the business problem or opportunity and the value your solution provides.

Interest, awareness and consideration are separate process in the buying cycle that buyers typically work through. Recognizing these steps in your marketing, sales and lead management processes can help you better connect with prospective buyers.

The next post explores the Decision and Purchase steps in the B2B customer buying process.

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Buying Cycle – Sideline Goldmine

Last week I posted the first in a series blogs about how marketing and sales should engage with the customer’s buying cycle to uncover and align with opportunities from the prospective buyer’s perspective. This post delves into the first two steps of Sidelines and Awareness in the B2B customer buying process.

There are two distinct groups of prospective buyers with different characteristics:

1. Existing Customers who have bought something from you previously but are not considering any additional purchases.
2. Prospective Customers who fit your target market but have never bought from you before and not actively looking to buy anything related to what you’re selling.

The vast majority of your prospective buyers are on the sidelines not actively looking to buy anything related to what you’re selling. The opportunity is to move them to the next step of awareness using tactics such as:

• Monthly newsletters to existing customers and opt-in subscriber list that highlights the potential value of your various offerings.
• Educational white papers and eBooks to create awareness about the challenge or opportunity these companies face and potential solution approaches.
• Article marketing in relevant publications and online properties to create awareness and establish credibility.
• Regular webcasts with educational value to create awareness, develop thought leadership and establish credibility in the target market(s).
• Salesperson calls or visits to existing customers – not specifically to sell something – just being visible and engaged is a great way to generate awareness.

Prospective buyers in the awareness phase are aware of the general category or type of product/service/solution you are selling, but have not identified a need for it yet. The opportunity is to move them to the next step of interest:

• IMO, one of the most effective methods to stir prospective buyer interest is the “others like me” approach.
• Show them how other companies similar to theirs have solved problems and achieved greater success.
• Show them how others in roles like theirs have achieved personal recognition and success by making their companies successful.
• Use selected case studies and video testimonials specifically targeted to the interest you want to generate.
• Depending on the service/product/solution, assessment or benchmarking tools for prospective buyers to gauge themselves against best in class peers are also effective for generating interest to move to the next step.

What methods have you found to be effective for identifying and moving prospective buyers along the buying cycle in these early phases?

The next post explores the Interest, Research and Consideration steps in the B2B customer buying process.

Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com