In marketing-driven organizations, measuring ROI can be rather straightforward since marketing is generating the sales. In sales-driven organizations, measuring ROI can be more challenging, but not altogether impossible.
Before you begin measuring ROI, it's important to establish why you're measuring and what you are measuring.
What ROI are You Measuring?
Are you tracking touches, prospects, qualified leads, sales dollars, or profits?
The further along the sales cycle you can connect marketing efforts to the results, the better. For example, an increase in web traffic doesn't mean more prospects. More prospects don't necessarily equate to more qualified leads. Increased sales may not equal increased profits. The issue is that the further down the chain, the more variables and the more difficult it becomes to make the connections.
Why are You Measuring Marketing ROI?
This may seem like it has an obvious answer. However, accurately measuring marketing ROI requires a lot of discipline and effort across your entire organization.
It sounds silly, but what's the ROI of measuring your marketing ROI? Make sure you have one before embarking on this path. There are softer approaches to gauging your success, but you have to be ok leaving some money on the table. The question is, is this more or less than the effort required to recoup it? Also, even if you do uncover an ROI, it cannot fully encompass all the benefits of your marketing, only the ones connected to what you've decided to measure. Things like - saved time, more informed employees, improved internal communication, and fewer customizations will not be reflected in any numbers.
It's not to say that you shouldn't measure, just that there are serious caveats to consider, especially when using the data to make decisions.
Knowing why you are measuring ROI can also help you determine what approach you take. Some approaches require more or less effort. And, some approaches provide more helpful information than others. Finding the right balance for you requires understanding why you are doing it in the first place.
How Can You Measure ROI?
Once you've decided what and why you're measuring ROI, next you must figure out how.
- Tracking Touches
One of the simplest ways of gauging ROI is tracking touches - views, likes, visits, opens, etc. The issue with this is that all these measurements tend to be over or understated. (e.g. Brower plugins can hide traffic from your analytics.) The touches may also not equate to meaningful leads, much less sales. That said, for anything digital, such as websites, email, social media, online ads, etc., metrics abound. Despite the flaws in the data, this can be a quick way to make sure you're reaching people. - Tracking Prospects and Leads
This is as simple as having your sales force ask "How did you hear about us?" or "What made you decide to contact us?" The issue is that rarely is it one thing that prompts an interaction. For example, if a customer refers a lead to you, they may say, "Your customer told me about you." However, the lead may have looked at your website, perhaps downloaded a brochure, or checked out the latest on your LinkedIn page before contacting you. Or, someone you met at a tradeshow fills out a webform to get in touch. While it's important to know what's driving your business, it's also important to check your assumptions before relying on this information to make decisions. - Tracking Sales
Connecting your marketing spend to sales can be achieved through using a CRM such as Microsoft Dynamics CRM or Salesforce.com. Your marketing team tracks its campaigns and touches, records prospects, and how they contacted you. Then, your sales team records its contacts with prospects, leads, and tracks their proposals. When done correctly and thoroughly, you can track what sales and marketing efforts lead to sales and for what amounts. This allows you to tie your marketing initiatives to real dollars. It is perhaps the most highly recommended method of gauging marketing effectiveness. Despite potential inaccuracies, it can paint broad strokes of what's generating income.
While effective, this method has some serious caveats. First, it requires a lot of time, discipline, and coordination, not to mention the setup and management of the CRM. Second, the information is only as accurate as what is recorded. Third, it only speaks to sales dollars, not overall profitability. Some marketing initiatives can be loss leaders to increase sales and profitability in other areas. The danger of this approach can be fixating on the details and missing the overall picture. - Tracking Profitability
While this is the best measurement of marketing effectiveness, it is the most vague and difficult to do. The simplest way to do this is to define a goal, define a timeframe, identify the variables, and watch the trends. Let's say you want to increase repeat customer profits by 25% in 1 year. Adjusting for variables such as market fluctuations, new hires, and any infrastructure expansions, you should be able to measure the effectiveness. Let's say in prior years, you experienced a 10% increase annually. You can associate a difference to marketing. The issue with this approach is that there are a lot of variables and the timeframes involved can be too long to make quick adjustments.
In conclusion, tracking ROI in sales-driven organizations is not a cut-and-dry process. Deciding what, why, and how are key before attempting to measure the effectiveness of your marketing. Exercise caution when analyzing information. Data can be manipulated and not tell the entire story. That said, with a thorough understanding of the limitations, tracking marketing metrics can be a powerful tool to ensure you're staying on track and making the most of your marketing spend.
How Can Stratimar Help?
Do you want to do a better job of tracking the effectiveness of your marketing investment? Or, are you frustrated that while your marketing appears effective, it's not leading to business growth? Either way, contact Stratimar for a free consultation to see how our B2B industry experts might help you get more results from your marketing.
