Marketing performance management is the organizational capacity for improving the ROI and effectiveness of marketing. It encompasses the planning process, performance measurement and establishment of predictive analytics.
To implement a strong marketing performance management function marketing teams must:
1) Align marketing teams to revenue goals and corporate goals
2) Establish accountability and measurability for revenue goals
3) Implement predictive capabilities for revenue
This article explains how to build a strong marketing performance management (MPM) function at your organization.
By following the three steps below marketing leaders can establish a strong cycle of measurement, planning, and execution that results in revenue growth and impact across the organization.
STEP 1: Aligning To Revenue
Marketing performance management entails creating processes and managing resources for the marketing team with the goal of efficiently achieving business objectives, primarily revenue. This means building and managing teams, allocating budgets, setting smart goals, and accurately tracking and measuring the right metrics.
As opposed to the execution of marketing, marketing performance management focuses on the strategic side—the planning and measurement phases of marketing.
Setting corporate revenue targets
One of the first steps in marketing performance management is identifying the broader business objectives, especially the revenue targets.
In order for the marketing function to put together a plan, you need to know what the ultimate goal is. If your corporate goal is to hit $100M in revenue this year, the marketing plan (e.g. budget and headcount) will be drastically different compared to if your corporate goal is to hit $50M.
The marketing team needs to know the greater objective so that it can align their plan. It’s a top-down approach to figuring out your strategic framework.
Aligning and committing marketing to revenue measurement and accountability
The next step is to figure out what role marketing plays in achieving the broader business objectives. A major roadblock to aligning marketing goals to business objectives is getting buy-in on revenue measurement from the marketing team.
Revenue measurement, and as a result, revenue accountability, can be daunting. Compared to activity volume or lead volume—something that marketers have more control over—being responsible for revenue is a big step.
But, it’s a big step forward.
It’s a big step forward because for a long time, marketers have had a diminished role in their organization. With revenue measurement and accountability, marketers are finally able to speak in the language of the CEO and their counterparts in sales and finance. They’ll get a seat at the revenue table, and they’ll be able to get more budget because they’re no longer justifying it with vanity metrics. In order to have a greater impact, marketers must align to revenue and commit to measuring marketing performance in terms of revenue.
At this point it’s important to note that it’s called marketing performance management, not marketing performance control. Organizations must be cognizant that external factors will impact marketing-generated revenue. Just like on the sales side, there will be periods where even the best efforts, the top performers, will miss revenue goals. Marketing performance management is about doing the best with the factors that marketing can impact. It’s a step that marketers must take if they want to have a greater positive impact in their organization.
The data bears it out.
According to the Marketing Performance Management Survey by Heinz Marketing, organizations are more likely to meet or exceed revenue goals when the marketing team is responsible / accountable for revenue (64.2% vs. 25.0%).
[Heinz Marketing - Marketing Performance Management Survey]
STEP 3: Gain Accountability To Revenue
Once teams are aligned to revenue, the entire organization can optimize for, and be accountable to, the same goals. Instead of marketers reporting on lead conversion and click-through-rate (CTR), they can now begin to report on the ultimate company goal: revenue.
Holding a team accoutable for revenue means being successful in full-funnel tracking, i.e. tracking an attributing revenue to every stage of the buyer journey. This allows every marketing action, whether it is generating leads or or converting leads into SQLs, to be measured in terms of pipeline and revenue.
Implementing Multi-Touch Marketing Attribution
To get started, it’s necessary for teams to implement a multi-touch attribution solution. Attribution connects each marketing interaction to down-funnel revenue, making it possible to report on individual campaign and channel performance with a single, unifying revenue metric.
The granular tracking provided by attribution, gives marketers a unique view into the entire customer journey. Segmenting and analyzing by channel, or even individual campaigns, shows the team which efforts are driving customers. Teams can then optimize for revenue, instead of engagement, which ultimately grows the business.
When reporting to the CEO on marketing performance, it’s a much stronger statement to say marketing drove $X amount of revenue last month, than to say marketing improved CTR to X%. The same is true when it’s time for budget approval.
Leading Indicators of Revenue
That’s not to say that engagement metrics like lead conversion or CTR aren’t important, they are, but they are not the ultimate success metric of revenue, they are leading indicators of revenue.
Tracking these metrics throughout the customer journey is helpful because they provide a full-funnel view of marketing interactions. Marketers can analyze the data to uncover trends that are great indicators the prospect will convert to a customer.
You can use this information to implement a lead scoring system. Scores can be based on a number of factors such as number of touchpoints or firmographic data.
For example, you may realize that prospects who use marketing automation and convert to an opportunity in less than 20 days are 3x more likely to become customers. In this scenario, a prospect with the right firmographics who converted in 15 days would be given an A grade. This grade tells the sales team which contacts/accounts are ripe for outreach because they are likely to close.
STEP 3: Develop Analytics & Forecasting Capabilities
Establish predictive capability for revenue
Leaders in business units outside of marketing have access to advanced planning tools. For example, the CFO uses Anaplan, the CRO uses Salesforce, and the CIO uses Apptio. But what about the CMO? CMOs today are stuck using simple spreadsheet tools like Excel to do forecasting and annual planning. And these tools lack analytic and forecasting capabilities for a major part of marketing performance management: annual planning.
Part of marketing performance management is measuring and improving the understanding behind key metrics like revenue. MPM establishes the forecasting needed to make tactical and strategic decisions. To develop these capabilities start by reviewing the current process for deriving estimated revenue across all channels.
If the process looks similar to below, consider the alternatives.
As we’ve explained, forecasting using average conversion rates has many weaknesses. Establishing predictive modeling for revenue requires adopting the view that every opportunity has a multiple probabilities, i.e. each potential contract value amount has a probability attached to it based on past deal sizes, the number of touchpoints, and the quality of touchpoints. These touchpoints are the training sets used to develop predictive models that minimize estimate errors.
The graphic below illustrates.
Channel Mix Modeling And Improving Marketing Planning
The results of improved revenue forecasting is the ability to create marketing plans and do channel mix modeling.
Marketing performance management is forward looking. MPM competency creates the ability to identify patterns and turn that knowledge into a plan. Marketing planning is most helpful when leaders can present multiple options with different channel mix models. In other words, present plans with different spend levels across channels with revenue forecasts for each plan. This allows leadership teams to understand and choose marketing’s contribution to corporate goals, and understand the risks involved with marketing investment.
The planning and analytics element of MPM delivers intelligence and fosters alignment. All of which are important for marketing leaders.
Reporting Marketing’s Contribution To Corporate Goals
Reporting results are an important part of MPM because it proves that alignment and performance are being achieved by marketing. It shows that the business is growing and marketing is a key driver of that growth. Reports such as revenue by channel and revenue by campaign are all examples of hwo to show marketing's contribution.
Reporting is an assessment of what can be done better and where marketing can improve. Managing performance involves identifying weaknesses and opportunities. The previous points made on this article ensures that any improvements marketing makes contributes to the success of the company.
Marketers should identify benchmarks, which are based on internal or external data, and report on whether marketing is surpassing or not achieving these benchmarks.
These benchmarks are created using past data on key metrics, which marketers competent in MPM can generate. Great marketing reports should be presented with explanations or theories that explains performance. They should be presented clearly and be summarized into a small set of takeaways.
With reporting being the final element in marketing performance management, the function will continue to grow in importance as insights and marketing performance drive competitive differentiation for companies. The understanding of customer preferences, the launch of new products, and the entrance into new markets means MPM processes must continue being established.
MPM focused marketing teams will thrive as new technologies and datasets become available to generate new strategies for improving the ROI of marketing.
To learn more about marketing performance management, download the ebook below.