There’s a well-known truism in business: You get what you measure. So if you aren’t measuring the results of your investment in marketing dollars—in terms of current and predicted future revenue and profit results—then essentially you’re investing blindly. Let’s say you follow the established norm for your industry and invest in marketing as a percentage of revenues. By not establishing a direct relationship between marketing investments and revenues, you do your organization a disservice. Your marketing efforts will be more successful if you insist that they are measured based on net contribution to the bottom line.
Marketing budgets should be divided into three primary areas:
- Product Marketing/Management
- Sales tool creation and production
- Driving new business opportunities (leads) into the sales funnel
- The ROI from Product Marketing is measured by win/loss ratio, successful product transitions, product margins, and on-time delivery of new products to the market. All of these can be measured in terms of revenues and profits as related to R&D and product marketing investments. Be sure to take stock of your successful projects completed on time and analyze the lifetime revenue per new product on the market.
- Sales tools, such as collateral, videos, websites, channel training materials, competitive analyses, industry segment analyses, even POP displays, are geared toward speeding prospects through the sales funnel. With lead generation databases and Sales Force Automation (SFA) tools, you can measure how fast prospects move to the finish line. You can assess the trends over time by prospect source, product interest, and channel. You can calculate the immediate value of shortening the sales cycle, or increasing the win rate. But confirm that your SFA collects the marketing information needed to accurately measure your marketing programs (e.g. average sales length cycle and win-loss ratio) and that your channel teams are rewarded for providing the correct data.
- Driving business opportunities into the sales funnel is the fundamental reason why Marketing Communications departments exist. They are not there to simply “build awareness”, “create a buzz”, or get local newspapers interested in a story. Monthly hit reports based on magazine readership or website visitors by themselves are virtually meaningless. Instead, measure your Marketing Communications ROI by driving the sales channel to report where ALL leads come from and relate this to revenue. Collect and track leads from events, seminars, trade shows, and direct mail, and insist on conversion mechanisms for website visitors.
The goal here is manifold: to know how many leads you need to get one new customer; to show how much the average lead costs based on source; and to understand the best source of high-quality leads and your total marketing cost of new customer acquisition. Then you can easily discern what it costs to generate the number of qualified leads you need—and to turn those leads into new business for your company. This is the bottom line for measuring marketing ROI. Once you measure it, you are now in a position to better control it for your company’s benefit.