When it comes to measuring marketing ROI there are several approaches.
Despite having endless metrics and calculations, we’ve boiled it down to the most important questions B2B CMO's should ask.
By answering the following 5 questions, B2B marketing leaders can identify successful campaigns, troublespots in the funnel, optimization opportunities, and of course marketing ROI.
These are the questions we'll be covering:
What’s the Short Term Marketing ROI vs. Long Term ROI?
What’s the customer acquisition cost?
How much revenue are we generating?
Which campaigns are driving growth?
Where do conversions happen?
This article is for marketers who think about marketing ROI in all its mystery.
What’s the Short Term Marketing ROI and What’s Long Term ROI?
There are two distinctions for marketing ROI: short term vs. long term ROI.
The first measures how much you spent on a campaign and how much revenue it generated. The long term ROI refers to metrics less tangible like brand awareness, influence, and intent.
Long term ROI uses complex formulas to measure brand value and brand awareness. Measuring influence and awareness may depend on your budget and the size of your marketing investment.
It’s important to make this distinction because some marketers believe long term metrics should not be connected to revenue because the correlation is imprecise, even ridiculous.
What’s Our Customer Acquisition Cost?
As we’ve covered in a separate article, lowering your customer acquisition costs gives you a competitive advantage over competitors.
This metric should be tracked because high CAC is not sustainable. Even with positive ROI from marketing, high CAC means competitors can spend less to acquire more customers, and use that cost savings to outspend you, e.g. buying more media and producing more content.
B2B marketers and CMO’s can take this farther by measuring the CAC by customer segments. These reports provide guidance for targeting and retaining the most valuable segments and reducing costs for those groups that represent less value.
How Much Revenue Are We Generating?
The most basic question. It should be simple like the revenue to cost ratio, i.e. the incremental revenue driven by a marketing campaign divided by cost. Launch a campaign, remember how much you spent, and measure the incremental revenue generated.
But in B2B revenue doesn’t appear within neat timeframes. And leads interact with multiple campaigns before becoming sales qualified.
So the pressing question after how much revenue is: When can we expect revenue from our marketing campaigns?
To answer this question marketers track leads as they progress through the funnel. This allows them to understand average time to close.
This rate may vary from campaign to campaign, which brings us to our next question.
Which Campaigns Are Driving Growth?
To identify the campaigns that are driving growth, marketers should place leads into their respective campaigns. Campaigns can range from conference events to PPC campaigns.
Sales leads engage with multiple campaigns. To identify the most successful campaigns, place all leads in the campaigns they engage with in time ordered sequence.
Now, when you attribute revenue to each campaign and account for costs you can measure campaign ROI.
Using campaign ROI, marketers can invest at the right time and in the right campaign. They can also turn off campaigns that have low return.
Where Do Conversions Happen?
A critical component in marketing ROI is defining the key transition points. For example, when anonymous visitors become marketing qualified leads (MQL), and when MQL’s are handed over to sales.
The conversion rate at transition points is an important metric.
Without understanding conversion rates it is easy to miscalculate the campaigns or channels that are converting into revenue months down the road. Thus, it's important to track conversions for top of funnel channels like content marketing and SEO to avoid undervaluing the channels' full impact.
Marketers need to know where there conversions rates happen and don’t happen in order to optimize online channels and sustain a healthy pipeline.
Bonus: Can My Marketing Team Keep Up with The Pace?
Marketers might not have all the answers, but they can begin to ask the right questions. As your marketing team grows each member should be focused and passionate about answering the right questions, and playing an important role in growing a business.
In this article we covered the most important marketing questions for B2B CMO's of pipeline marketing organizations.
Long sales cycles and multiple simultaneous campaigns add complexity to marketing ROI measurement which is why B2B marketers seek B2B-specific marketing attribution software.