How to Measure Marketing ROI
Let's talk about marketing ROI.
It's a real challenge to measure the performance of your marketing programs in B2B. I've found that is directly related to the fact that there are actually two kinds of ROI measurement for marketing, and most people are using the one that's not really suited for what they're trying to measure.
Financial ROI for marketing
The first method is Financial Ri for marketing. That's the one we all know and typically try to apply to marketing.
It's a currency or a money based measure, designed to show growth in an investment.
It comes from the CFO world, and it's complicated for marketing because you have to translate from dollars into marketing units and activity - and then back into dollars - to show the benefit.
It also is hard to get buy-in for your results from Sales and other parts of the organization. That's because your sales people are not CFOs, and they want to see how marketing is helping them with their metrics, their commitments for the sales funnel.
A third challenge with financial ROI for marketing is that - for B2B especially - it takes too long.
If you wait to see the impact of a marketing program on your company's financial results - the revenue, or profit or another number like that - it could take months or even years to see that impact.
You can't wait that long to understand the value of a program in order to have it improve over time.
Where financial ROI for marketing fits
There are places for this kind of measurement for marketing.
One example: measuring the overall strategic impact of your marketing. Roll up your total investment in marketing and figure out how marketing as a whole is impacting your company's revenue or profit.
That's a really useful way to use this metric.
Also, if you're a larger company and you have a pretty sophisticated marketing organization, it may make sense for you to take the time and the effort to build this engine that will show you your marketing ROI in financial terms.
Finally, if your business is eCommerce-related, or it's driven by really quick-turn purchase cycle for B2B, that might be a case where this measure works well because it doesn't have some of the issues that I talked about.
But for most of us, if we want to measure the performance of a marketing program, we need to do it in a different way.
Marketing Program ROI
I'm going to call this marketing program ROI. What's different is that we're going to measure the performance of marketing in marketing units.
Marketing's purpose is to improve the customer experience on their journey, so that they have a different perception, they buy more or buy longer. All of the things you want to change about your customer's experience and behavior - marketing's job is to help you do that.
So to measure marketing more effectively, I recommend focusing on the marketing - the customer behavior that you want to see happen - which is going to be more measurable, more tangible and happen faster than trying to translate it into financial terms.
To achieve this, you need to be very clear and figure out for each program:
What are my expectations?
What do I want to see change in my customers' perception?
What behaviors can I measure?
How well did I deliver these?.
So it's less about a percent number that a CFO would love to see, and more about "Did I do what I expected to do with this program?"
It's somewhat of a pass/fail measure; of course, you can see if you over achieved, but it's really about doing what you set out to do when you decided to spend that marketing money.
I hope you find this method of measuring ROI useful. I've written more on this process, how you can get it done, in a LinkedIn article. Take a look at that to get more information.