Marketers are increasingly being expected to provide answers to questions around marketing profitability.
As we wrote about recently, the mindset of being focused on measurable results in marketing has remained the same. What has changed is technology and how it empowers marketing operations managers to understand the customer journey, and transform marketing into a profit center.
In this post we’ll dive a little deeper and explain how to measure marketing profitability and marketing ROI. Why? Because no one enjoys surprises, especially when it comes to reporting questions asked during planning meetings.
Step 1: Determine your key metrics
You optimize for what you measure, so choosing the correct metrics is vital to accurately understanding marketing ROI. The first step is measuring pipeline.
Begin with setting up a monthly snapshot, i.e. a monthly report that measures your pipeline. You’ll need to start listing the key stages in your customers’ B2B buying journey. Typically you can start with the anonymous touchpoints or web session data, then lead, opportunity, customer and revenue data. For each of these stages you’ll measure pipeline generated by marketing source, i.e. where your customers come from.
You’ll also include expenses, cost per lead, cost per opp, cost per customer, revenue per customer, revenue per lead, and revenue per lead. Depending on your industry you’ll also include customer acquisition cost payback.
Your monthly ROI is new MRR minus expenses. While ROI is important, lowering customer acquisition costs is a competitive advantage for firms and a metric that should be managed.
Step 2: Determine the customer journey and your marketing attribution model
The next step in measuring marketing profitability is to define the key touchpoints in the customer journey. This step allows you to measure the performance of your most important touchpoints, allowing you to identify spots in your funnel where conversions rates are low, or slowing.
As marketers we are responsible for the entire B2B funnel. There will be stretches of time where we focus on filling the top, or improving conversion rates at the bottom of the funnel. Marketers are increasingly being held responsible for bottom-of-funnel metrics, so we’ve explained six bottom of the funnel best practices for B2B marketers.
To determine your key touchpoints, decide on which channel has the greatest impact on moving your customer forward. A signal of interest such as a form submission or free trial sign up are typical touchpoints that defines the prospect’s status (e.g. lead, marketing qualified or sales qualified).
Consider the accuracy of your attribution model when deciding which one to use. We've written extensively on the strengths and weaknesses of each marketing attribution model being used today.
Setting yourself up for marketing attribution success
There are many touchpoints in the customer journey. It is vital to understand which touchpoints signal interest. Where lead volumes are high and understanding intention is difficult, firms can use marketing development reps to help understand the prospect, who they are and how interested they are in purchasing.
A successful offer is dependent on knowing if the lead is ready. This is why a full understanding of the key touchpoints is so important -- it tells you when customers are ready for certain content or offers.
When you go to do marketing attribution you should weight your touchpoints accurately. The ones with greater weight are credited with more revenue because they influence customers, moving through the funnel.
Defining the customer journey with attribution is like exploration in the 15th century where navigating to the right destination was made difficult or impossible because every maps was inaccurate. For marketers, the map is marketing attribution, and it gives a full understanding of the customer journey and where the best leads come from.
For more help in deciding how much weight to give touchpoints, check out our recent blog post on accurately weighting touchpoints in B2B marketing attribution.
Step 3: Connect your marketing platforms
Accuracy in reporting and forecasting is why the entire marketing analytics sector exists. One of the most important steps in measuring marketing’s profitability is connecting customer experience platforms to the CRM.
Whether it’s content management platforms or marketing automation, technology that engages with your customers and prospects needs to be connected to revenue data. This connection enables you to accurately understand where revenue comes from, and compare the ROI of marketing sources.
Connecting customer experience technology to revenue data inside the CRM enables you to avoid miscounting leads and measure your account based marketing success. Accounts live in the CRM and if you’re going to target accounts on the customer experience layer then you’ll need the data between the two systems to be synced.
Step 4: Set up a dashboard
You now know the metrics you want to measure, how prospects journey through the funnel, and have established a connection to sales opportunity and revenue data in the CRM. You are now ready to measure marketing ROI and revenue. The last step is to create a marketing dashboard to keep decision making information accessible.
How marketing is moving the needle, i.e., whether marketing is being effective or not
Whether you are achieving your customer acquisition, retention, and value performance targets
Marketing’s financial contribution and ROI
We use Salesforce and built a dashboard that keeps our organization informed on marketing performance. We hold ourselves accountable and it’s the first step towards becoming a pipeline marketer.
Some important metrics to for including in your dashboard includes:
Percentage of sales revenue contributed by marketing
Lead contribution as a percentage of sales pipeline
Number of sales opportunities delivered to sales
These stats keep the ultimate goal of marketing (revenue) top of mind.
As a pipeline marketer one of your most important roles is measuring the true impact of your team. As marketers are being expected to increase their stake in revenue generation, measuring marketing ROI is an important activity.
Marketing analytics derived from your marketing attribution solutions makes this possible. Attribution modeling, choosing the right metrics, connecting martech platforms and measuring impact are tactics that define a great pipeline marketer.
It’s all part of the mission of turning your marketing organization into a profit center.