How can marketers balance short- and long-term ROI goals?
A little while back I came across a statistic from the Lenskold Group that was downright alarming: 44% of my fellow B2B marketers had “no idea” what a 10% budget increase could do for their companies. In all likelihood, that 44% will soon be facing a different and altogether more unpleasant proposition. “What will happen now that my budget has been decreased by 10%?” After all, you can’t expect your executive team to place value on something you’re unable to quantify.
Being caught in a crisis of credibility is not the unavoidable fate of the modern marketer. There’s a way out of the perception that marketing exists solely to prop up sales or churns out glossy brochures. Make sure that your strategic decisions and your ROI goals are tightly aligned from the very beginning stages of marketing program development.
Measure the right outcomes
There’s an almost infinite number of possible metrics to track—so which should you choose? The first step in aligning your ROI goals to your marketing strategy is to figure out which metrics belong inside the marketing department, and which to take to the C-suite.
Your board isn’t interested in email click-through rates or whitepaper downloads. Instead, CEOs, CFOs, and the board care about growing revenue and profits. You can align your marketing objectives with revenue and profit outcomes by asking yourself some basic questions:
- How much faster are we growing now versus last quarter? Last year?
- How much profit was made last quarter versus this quarter?
- How much revenue and profit can I forecast for the next quarter?
- Why am I confident in the above answers?
That’s not to say that soft metrics like brand awareness, impressions, organic search rankings, and reach aren’t important. They do matter. But only to the extent that they connect to hard metrics like pipeline, revenue, and profit, and connect to them in a quantifiable, forward-looking fashion. By speaking the same quantitative language as the CEO and CFO, marketers will better communicate marketing’s value and impact to the executive suite.
It’s also important to distinguish between what can be measured and what should be measured. It’s easy to fall into the trap of measuring what’s easily measured. Measuring things like page views, press release downloads, and search engine rankings create a corrosive focus on soft marketing KPIs instead of hard revenue growth and short-term ROI over long-term marketing accountability. This exercise will inevitably result in the continued perception of marketing as a cost center rather than a revenue-producing asset.
Set the right expectations
How often have you planned a marketing investment with a qualitative rather than quantitative outcome in mind? Often marketers err in favor of the former, when the first logical step in committing any spending is to quantify the expected outcomes. When planning any marketing investment, assign up-front goals, benchmarks, and KPIs for each marketing program. Then, define your objectives and select measurable metrics to support those goals.
Getting into the habit of setting quantifiable expectations will help you identify the key profit drivers that most affect the model—and your profits. You’ll be able to create what-if scenarios to see how changing parameters may vary the results and impact profitability.
And, you’ll be able to establish the targets to use in assessing actual results. So rather than seeing collateral or event attendance as the goal, you’ll look at ROI targets that ladder up to long-term profits and the actual financial health of your organization. These could include targets as simple as:
- How many incremental sales are generated
- How much revenue each sale produces
- The gross margin percentage
- The total marketing and sales investment
Ultimately, aligning marketing strategy to short- and long-term ROI targets requires a fundamental shift in mind-set. It requires commitment from the highest levels of any organization, discipline, and investment in the right systems and tools. You may even find that it requires a rethinking of marketing incentives and compensation. The journey may not be easy, but the results—in terms of peer respect and impact on profits—will be worth it.
********************
Jon Miller, Marketo
Jon Miller, VP of marketing content and strategy at Marketo, used to think he was going to be an academic. As a Harvard undergrad studying physics, he worked summers at Lawrence Livermore National Laboratory with a Q clearance—the highest level of security clearance at the Nuclear Regulatory Commission. But while at MIT for graduate school, Miller realized he was spending more time working for a degree than actually doing science. He took a year off, became a management consultant, and found himself working at Gemini Consulting, Exchange Partners, and then Epiphany. Marketo—which he cofounded—has a special role in his life. The company was incorporated the same month his son Beckett was born. “I started my most important journeys at the same time. So when I’m not working on Marketo, I’m working on my greatest project: my family.”
Check out the other answers:
