“Does social media marketing give us a better Marketing ROI than advertising? If we increased marketing spend by 10%, where would we spend the money to get the maximum incremental ROI? “
These are reasonable questions from your CEO. As CMO/ VP Marketing you thoughtfully respond in terms of brand, customer experience and engagement rather than answer the question in terms of dollars and cents. This unfortunately re-enforces the old perception that Marketing is just a growing cost center that is unable to demonstrate its quantitative contribution to revenue generation.
Demonstrating Marketing ROI won’t be easy. However, this represents a golden opportunity for you to get in front of the issue, demonstrate C-suite leadership, and take your Marketing team to the next level.
Marketing ROI Is Not A Passing Fad
According to a study of 1200 CEO’s by Fournaise Group, 80% of CEOs do not really trust Marketing because they “are too disconnected from the short-, medium- and long-term financial realities of companies”. They believe Marketing has lost sight of their real job of generating customer demand for their products and service in a measurable, quantifiable and understandable way that the executive team can fully understand; Return on Investment (ROI). Ouch!!
Without some way to measure and compare the contribution of one marketing activity to another, you’re making a guess, albeit an experienced guess backed by market studies. It’s probably not an issue if you are leading a consistently high growth company:
- Firms with the right mix of marketing programs grew revenue 30% faster, with 50% less marketing expense as a percentage of revenue, than those companies with the wrong marketing mix, according to a recent research study by AAM.
- High growth firms generated over 62% of new business leads digitally, resulting in up to 15 times higher growth rate and 2 times more profitability than average growth firms, according to a recent study by Hinge Research Institute, Society for Marketing Professional Services, and Association for Accounting Marketing.
There’s increasing talk in the media that the next career step for a successful CMO/ VP Marketing is the CEO seat. However, if a CMO/ VP Marketing cannot demonstrate the Marketing ROI from their own marketing group, they may have a difficult time convincing the Board of Directors that they can reliably manage the P&L of an entire company.
Is The CMO Dragging Their Feet On Marketing ROI?
CMO’s are responding to the Marketing ROI request in different ways, with limited success:
- Educate and convince the CEO to measure Marketing’s contribution using marketing-specific metrics, rather than ROI. The challenge with this response is that every member of the executive team and Board of Directors, in your company and others, thinks and operates in terms of P&L, ROI, dollars and cents; not marketing-specific terminologies. Trying to convince all the executives and board members to adopt a different measure just for your Group is probably doomed to failure.
- Convince the CEO that more technology is needed to solve the problem. Unfortunately, 71% of the CEOs believe that Marketing is already too focused on technology (such as CRM, Marketing Automation, Lead Management and Analytics) to generate customer demand, yet still failing to deliver the incremental demand expected of them, according to the Fournaise Group study previously cited. If Marketing has not demonstrated any meaningful progress on ROI measurement, even with the help of technology, then it appears that you may be delaying implementation until a “perfect technology solution” can be implemented.
- Demonstrate to the CEO that Marketing is actually making progress towards ROI measurements with the adoption of multichannel attribution. Although it may help with ROI measurements, it’s prone to misuse. Multichannel attribution is like peanut butter; it spreads ROI credit across all the channels and campaigns making it more difficult to distinguish the “stars” from the “dogs”.
- Claim that lack of support by other functions is preventing Marketing from making progress, such as the Sales Group not following up on Marketing leads in a timely fashion, or that the IT Group is not providing adequate technology support. Even if that’s true, finger pointing will not only cast you as being defensive, it will also make it more difficult to gain cross-functional support for other Marketing priorities.
Marketing needs to demonstrate leadership on revenue. Without demonstrating quantitative progress towards Marketing ROI, some executive team members will conclude you might be dragging your feet.
Is The Marketing Staff Dragging Their Feet On Marketing ROI?
There have been an increasing number of blog posts and social networking discussions lately claiming that most marketing activities cannot be measured in terms of ROI, such as advertising, content marketing, search engine optimization and social media. The reality is that all of these marketing activities can be measured for ROI:
- Advertising ROI can be measured by testing the revenue impact over time in representative geographic markets. For example, in a recent New York Times article, MegaRed described how they used ROI to compare two different marketing initiatives. They conducted an 8 week advertising campaign with Facebook advertising, was able to identify the revenue directly generated by this campaign, and was able to compare it to their ROI from television ads which they measure every year or two.
- Search Engine Optimization ROI progress can be measured every 3 months. For example, a critical component of SEO is selecting targeted keywords for the company’s content and distributing the content throughout the internet. By measuring the visitors that are driven to the company website via these targeted keywords and via referral traffic, you have the basis to measure SEO ROI. If SEO is not making meaningful ROI progress every quarter, or if the ROI after 12 or 18 months is not as high as other lead generation techniques, you may want to make some changes.
- Contenting Marketing ROI can be measured with the help of Marketing Automation and well-designed campaigns. For example, you could measure how well the content strategy moved website visitors into leads, leads into prospects, prospects into qualified prospects, and qualified prospects into customers.
- Social Media ROI can be measured with the help of Marketing Automation, analytics and well-designed campaigns. How many “likes”, “followers” or “social mentions” from a particular campaign ultimately became customers of the company?
Are these perfect solutions? No. Are they much better than no ROI measurement. Absolutely!
The marketing staff and its contractors are clearly pushing back.
- They don’t understand why ROI is important?
- They don’t know how to measure it?
- They are worried they could lose their job if they are working on a low-ROI activity?
- They don’t see a real commitment from management to change things?
Whatever the reason for push-back, as CMO/VP Marketing you need to ensure that your team gets on board, otherwise, you will make very little progress towards implementing ROI measurement within Marketing.
Get Your Marketing Team On Board with Marketing ROI
You need to demonstrate real progress within your group towards executing Marketing ROI. Here is a potential approach to getting the team on board:
1/ Meet with your staff to ensure they understand why ROI measurements are needed to demonstrate Marketing’s contribution to the company’s bottom line.
- Explain how demonstrating Marketing ROI will make it much easier to justify the marketing expense budget and to enlist the active support from other functions, particularly Sales.
- Assure your staff that marketing activities will not be based solely on ROI.
- Some strategic initiatives like social media or mobile may not have a strong ROI at this stage, however, they will be required to demonstrate progress towards an acceptable longer-term ROI.
- If existing campaigns are scaled back or discontinued due to poor ROI, that it is your intent to re-assign marketers from poor ROI activities to higher ROI activities based upon their personal performance and abilities.
2/ Start to create a culture of designing campaigns/initiatives with performance and Marketing ROI measurements built in from the start.
- Establish a simple ROI methodology that is consistently applied to all marketing activities. Measure the true cost of marketing, including labor hours/cost; start out with a simplified approximation of labor cost by requesting that your staff submit weekly estimate of time spent by channel and campaign; The results will probably be a real eye-opener for everyone.
- Use pilots and proof of concepts where appropriate to demonstrate ROI of campaigns and initiatives.
- Use of A/B Testing to maximize ROI from existing campaigns.
- Carefully monitor any use of multi-channel attribution to ensure consistent and thoughtful application whenever it’s used.
3/ Encourage teamwork across the various Marketing departments in helping each other design ROI measurements into every marketing initiative and campaign.
- Focusing your team on developing campaigns that demonstrate cost-effective revenue production is an excellent opportunity to break down any existing marketing silos and improve multi-channel campaigns. Over 65% of marketers say that silos exist within the group and it obscures a holistic view of campaigns and initiatives, according to a recent study by Teradata and Forbes Insight.
The above 3-point plan will help you demonstrate to the CEO and the rest of the executive team that you are taking aggressive action to measure Marketing ROI.
However, to accurately measure how much revenue is generated by any specific Marketing initiative, channel, or campaign, you will need some additional help from the executive team.
The Root Cause Preventing Accurate Revenue Measurement
Marketing Automation software is good at automating process, and excellent at highlighting processes that are broken, as many companies have painfully learned.
The process between Sales and Marketing is broken. A huge effort goes into getting agreement on the definition of a marketing lead, the definition of a sales lead, the right lead scoring algorithm, and a cross-functional SLA.
While there may be a problem with Sales and Marketing alignment, it is not be the root cause that is preventing Marketing Automation from delivering increased revenues.
If Marketing and Sales were in agreement about the target buyer, the targeted buyer personas, and the target buyer’s decision process, then it would not be this difficult to agree on the definition of a qualified lead!
If there is not consensus on the target buyer journey and buyer decision process, there cannot be consensus on the definition of a buyer-ready lead.
The buyer journey and buyer decision process has changed in the last 5 to 10 years due to internet, social and mobile engagement. The buyer’s team does most of their research online, so by the time they are ready to speak with a vendor, they are 50% to 70% through their buying process, and have already selected a potential solution and a short list of vendors.
If the company’s revenue strategy and process has not kept pace with the buyer changes over the past few years, Sales will be struggling to get involved early in the buyer process like they used to, Marketing will be struggling to develop qualified leads that are sales-ready, and they’ll be plenty of finger pointing to go around. Sound familiar?
Get The Executive Team On Board With Your Vision and Strategy
To grow revenues and profit, the right product, the right marketing and the right sales strategies need to be put in place to attract potential new buyers and thoughtfully move them quickly through their decision process towards ultimately becoming a delighted repeat customer of the company.
Measuring Marketing ROI is simply an element of a broader company vision to quantitatively understand how its revenue strategy is performing and be able to make appropriate changes as the marketplace changes.
You need to demonstrate progress to the CEO and executive team in delivering Marketing ROI as part of a broader vision to improve your ability to actively manage the company’s revenue strategy and accelerate revenue growth, ROI and profit for the company:
- Identify the steps that you are taking within Marketing to demonstrate progress towards measuring Marketing ROI, then conclude by identifying two key challenges where you need executive support:
- Improve the company’s revenue process to measure and improve the revenue generated from marketing leads.
- Transform your group into a more technical-savvy marketing organization to improve Marketing’s ability create and measure activities that demonstrate Marketing ROI.
- Request active support from Sales and Product Management for a CMO-led initiative to determine the prevailing target market buyer, the targeted buyer personas, and the target buyer decision process.
- They have a significant role in developing and embracing the findings to better align the company’s revenue process with the company’s target buyer.
- Key findings would be used to improve ROI measurements of existing Marketing campaigns and to increase ROI from the company’s (prior) Marketing Automation investment.
- Request active support from IT, HR and Finance to help Marketing execute effective ROI measurement reporting.
- Your CIO manages the company’s technology infrastructure and expertise, and can help Marketing deploy analytics, big data, third party cloud applications, and other technologies to better understand Marketing ROI.
- Your CFO can help develop and validate Marketing’s ROI measurement approach.
- Your VP/HR can help you respond to the changing skill set requirements within Marketing and help Marketing develop or hire tech-savvy marketers who are able to design and manage campaigns with demonstrated ROI.
- Commit to regular reporting and follow-up on this C-suite initiative
- Publish progress and challenges to the CEO and executive team on a monthly basis.
- Present a strategy and roadmap for better managing the company’s revenue strategy, as part of the company’s annual strategic planning and budgeting process, or some other pre-specified timeframe.
The Critical Need For CMO Leadership In Marketing ROI
The Marketing ROI issue is not going away. You need to get in front of this issue before it starts to impact your ability to make progress on other marketing priorities, including the budget.
This is an opportunity to demonstrate Marketing Leadership in delivering accelerated revenue and profit growth for the company by more effectively managing the performance of the company’s revenue strategy (and, by also starting to implement ROI of Marketing activities with the help from the executive team).
In any case, your final action plan would need to be customized to address the unique challenges and opportunities of your situation, as defined by your company’s history, culture, leadership, organization and financial performance.
CMO Next Steps
You need to initiate and manage the ROI initiative within Marketing, develop and lead a plan with Sales help to solve the “lead to revenue” chasm, and deliver progress within a reasonable timeframe to the CEO.
You don’t have the time to do this and still deliver on your fiscal operating plan. Nor can you simply dump it on the desk of your Marketing Ops person to handle, they’re already over-loaded. This is also too important of an issue to bring in consultants whose main contribution is to leave a thick Powerpoint presentation behind when they leave. Even if their plan makes some sense, who’s going to lead the transformation effort both within your organization and cross functionally?
This is the time when you bring in the right consultant as your “lieutenant” to help you effect sustainable change within your organization and within the company. The consultant should of course have functional experience in Marketing; preferably someone who has “walked in your shoes”, understands multichannel marketing, is comfortable with marketing technology and has a track record in accelerating revenue growth. Equally important, for this particular situation, is that the consultant have real world executive experience within the Sales function, and working cross-functionally at the C-level, in order to proactively help them deliver the kind of support that you need in both the short term and longer term.
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