I’ve been preparing content for a webinar next week with
NetProspex – 4 steps to measure marketing success and “ROI”. The topic is on
how to measure the marketing influence on the Sales Funnel. Because of the difficulties inherent in
measuring B2B marketing campaign ROI I recommend that people focus on measuring
influence instead. Here is the issue with
Campaign ROI in a nutshell.
Let’s start with a definition, and examine the challenges involved in measuring it. ROI for a single marketing campaign can be computed as:
The first challenge is the definition of a finite time period.
When to measure the ROI of a Marketing Campaign
So the campaign has been running a month, you sum up all the costs, add up your share of all the closed deals, and find that you have a negative ROI (at t=1 above). No surprise there, your sales cycle is 6 months or more! So you wait a year, do the same calculation at t=2, and the ROI is 10x. High fives all around. And you wait another year, and now the ROI is 25x. Pop the champagne. How do you ever decide what the real number is? You can decide when the campaign ends, but its influence could extend out a year or two thereafter, depending on some deals in the sales pipeline. The best approach is to establish a rule for your firm and follow it for all campaigns. Something along the lines of: the final Campaign ROI will be established at 2x the average sales cycle duration after a campaign has ended. After that, no share of the opportunity dollars are attributed back to that campaign. This brings us to the second challenge - share of opportunity dollars.
So if a closed won $100K opportunity can be shown to link back to 100 marketing campaigns, trade shows, white paper downloads, and website visits, do they all get an equal share of the opportunity value? Each gets $1000 credit in this case. Or are some campaigns considered more important than others (unequal weighting)? Perhaps tradeshows are worth 10x more than website visits but only 2x the value of a webinar attendance. And are webinar registrations worth less if the contact failed to attend? This could get messy very quickly. My advice, start simple, give all incoming responses an equal share. Out-going touches (such as sent an email) get nothing. Some CRMs assign 100% of the opportunity to each campaign in their campaign influence reports – how messy is that?
Attributing opportunity dollars to Marketing Campaigns
How do you attribute opportunity dollars back to a marketing campaign? Perhaps you have gone down the path of trying to specify a primary campaign source for each new opportunity. You will probably discover, as many have, that this method is fraught with problems and is unreliable. Most importantly, in the case of ROI, it vastly under represents all of the marketing campaigns involved in any one opportunity. So let’s start at the other end: link all campaigns to contacts and then link the contacts back to opportunities. Your marketing automation system links contacts to campaigns. Linking the contacts to the opportunities is not as straight forward. You want to be able to link all the relevant contacts on an account back to opportunities. Some folks may choose to only link back contacts associated with the opportunity, whereas others, recognizing that Sales folks often do not associate any contacts with an opportunity, may grab at all the contacts on an account. To pull this off accurately, you will need a marketing BI engine, because for every opportunity you have to be able to connect back to every relevant contact, and attribute a share of the opportunity dollars to every campaign they responded to. The BI engine relieves you from depending on good Sales behavior for connecting marketing campaigns with opportunities.
So the top line of the ROI equation has its challenges, and we haven’t even started the conversation about cost allocation to marketing campaigns. Let’s save that for a future conversation. In the webinar next week, I will discuss a better, more expedient method of measuring marketing influence on the Sales funnel. Chances are good this webinar will be available as a webcast in our resource center shortly thereafter!