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When measuring the impact of marketing campaigns, many chief marketing officers (CMOs) are in a Dickensian struggle: It's the best -- and worst -- of times due to the proliferation of digital marketing tactics and the vast amount of available customer and marketing performance data.
It's the best of times because marketing results are potentially measurable, transparent and closely connected to sales. It's the worst of times because marketers can track everything, said Peter Isaacson of Demandbase, a business-to-business (B2B) marketing cloud firm. "But many marketers measure the wrong things -- such as cost per thousand impressions, open rates, etc. -- which have almost nothing to do with the end result of what you're looking for, which is driving revenue."
This lack of consensus on what to measure undermines marketing's influence in driving company strategies. Forrester Research reported that only 9% of CEOs rely on marketing data to set corporate direction.
"You could optimize the heck out of a particular metric, but it may have zero impact on the company," said Ellie Mirman, vice president of marketing at Toast, an all-in-one point of sale and restaurant management company. "If a specific marketing program is having an impact, you should be able to see that difference in the overall revenue of the company."
So, how do companies make sense of this tangle of metrics?
Separating strategic KPIs from nonstrategic metrics
Many firms divide marketing metrics between a limited number of strategic key performance indicators (KPIs) closely tied to the company's business goals and all other, nonstrategic metrics. Mirman divides metrics into two groups that answer what and why. Strategic marketing KPIs -- such as the number of new customers, revenue and leads -- measure marketing performance and deliver the what while the second group examines why things happen and includes Web traffic, conversion rates and all other traditional marketing metrics. When measuring overall marketing performance, Mirman focuses primarily on the first group.
Mayur Guptaglobal head of marketing technology and innovation, Kimberly-Clark
"The most important thing in measuring the effectiveness of marketing is understanding the drivers of the business and measuring those," said Keith Alshiemer of open source software and services firm EnterpriseDB. "Without that, it's a generic KPI that varies for different reasons such that it's hard to draw conclusions." The most important metric, he said, is the extent to which marketing is creating the kind of progress a business strives for -- whether that is increased sales or revenue, more new customers and so on.
But it always comes back to the business. "For every investment, you should always be thinking about the business need you're trying to solve," said Mayur Gupta, global head of marketing technology and innovation at Kimberly-Clark, at the recent Martech Conference.
What to measure?
Which KPIs are right for you and how should you track them? It depends. But start with the end result in mind: What is your business trying to achieve? How should the marketing department help the business grow and how can it predict future growth? Note that KPIs are not one-size-fits-all and will vary based on business type, the age of the company, target market, sales cycle and complexity, and other factors.
While Toast's Mirman tracks sales and leads, Demandbase's Isaacson measures performance, mainly based on the number of opportunities or meetings that his team delivers for sales. But he also tracks lift (target accounts active on the website), close rate (percentage of prospects that closed), annual contract value (revenue) and funnel velocity (the number of days from inquiry to deal close).
Amy O'Brien of The Chartis Group, a healthcare consulting firm, connects overall marketing and topical marketing campaign efforts to overall revenue and deals won, recognizing that Chartis's consultants and sales teams play a major role in closing deals. O'Brien also compares total costs of marketing activities against revenue in order to obtain a complete picture of the return on investment.
Revenue attribution is often a key component of KPIs. Companies attribute revenue in different ways, wrote Kim Ann King in The Complete Guide to B2B Marketing. She said that the most important things to know are the lead source and all touchpoints that may convert a prospect into a customer. Attribution models include "first click/first touch," which "attributes the conversion to the first click or marketing touch the buyer encountered," said King. Similarly "last click/last touch" attributes "the conversion to the last click or marketing touch the buyer encountered."
For complex enterprise sales, Nadim Hossain of B2B marketing attribution and forecasting vendor BrightFunnel, believes that companies should use account-based, multi-touch revenue attribution that takes into account all of the marketing touchpoints that a customer can potentially go through -- such as attending webinars or tradeshows, downloading white papers, etc. -- at an account level. He believes this provides a more accurate picture of where the business stands and enables better forecasting.
Think beyond sales; you should be able to track how marketing impacts other aspects of the business. Mirman said that if you're a software as a service company, you should measure the initial sale and calculate its effect on customer retention, lifetime value (based on how long the customer remains a customer and how many additional products they purchase from your company), and renewals.
Once you know your metrics and KPIs, you need to put them to use. The obvious starting point is to implement a marketing automation platform to run campaigns, which should be integrated with a CRM system that records and stores customer data. Next, ensure that the flow of leads through the system supports your metric and KPI needs.
Metrics predict the future
Marketing metrics can -- and should -- influence corporate strategy.
For Beth Cincotta, marketing manager at golf car distributor Country Club Enterprises, newly implemented marketing metrics are helping the marketing department become more strategic to the business. For example, new metrics show which product lines are driving the most sales and profitability. Detailed marketing campaign and pipeline metrics are highlighting the most profitable marketing tactics while identifying slow-moving sales opportunities. All told, Cincotta expects that the new marketing metrics will drive tactical and strategic decisions today and well into the future as well.
BrightFunnel's Hossain said that companies must focus on multi-touch revenue attribution, funnel velocity and forecasting. Hossain said that CMOs earn strategic seats at the table when they have data that can forecast future revenue up to three quarters in advance based on marketing expenditures. That said, multi-touch attribution can be complicated and even subjective if different types of metrics have greater priority.
"Data is one of the best ways to analyze successes and failures, prioritize marketing initiatives, and communicate marketing's impact on the rest of the organization," Mirman said. Data quality matters, too, she said; source data, such as CRM records, need to be cleansed of errors and inaccuracies, and CRM field definitions need to be clear to every user to make sound business decisions.
While Mirman keeps a constant tab on metrics such as lead counts, she measures KPIs on a monthly basis, which provides enough time to see trends. If KPIs are measured sooner, the data is too variable, she said.
Isaacson added that sales and marketing must be aligned. For example, they both must share the same definition of what constitutes a marketing-qualified lead. Otherwise, companies risk having marketing meet or exceed its goals while sales is seen as underperforming due, in part, to a lack of support from marketing.
Keep it simple and focus only on the most important KPIs that draw a direct connection between marketing and revenue -- anything more will confuse people. "Any time you complicate metrics, you lose sight of what you are trying to do," Mirman said. She added that more complicated methods often lead to results that are incremental at best, which is contradictory to the CMO's goal.
"If you can't explain it simply, you don't understand it well enough," said Kimberly-Clark's Gupta.
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