Marketers may be too eager to measure their return on investment (ROI). Surveys show that measuring ROI) is the top challenge facing marketers. Although many marketers claim they measure ROI, they remain unconfident. Most believe the data they gather underestimates the contributions and value of marketing.
New research reveals why. Under pressure to prove ROI to secure additional funds and win recognition, marketers tend to measure their impact on ROI long before the sales cycle has concluded, according to The Long and Short of ROI study from LinkedIn.
The average B2B sales cycle usually takes place over six months or more, especially when marketers focus on brand building marketing objectives, the report states. Yet marketers tend to measure shortly after a program’s launch:
- 77% of digital marketers measure ROI within the first month of their campaign.
- Only 4% measure ROI over a six-month period or longer, which is more in line with a typical B2B sales cycle.
Wrong Metrics for the Task
When marketers rush to measure, they report metrics that are key performance indicators (KPIs), like clicks or website traffic. Those metrics can help measure and improve campaigns, but don’t measure ROI. For instance, the cost per click (CPC) KPI does not show impact of advertising dollars spent. A better option would be cost per lead (CPL) to measure lead generation success.
Marketers with short measurement timeframes tend to discuss budgets and reallocate funds monthly. They may increase funds for programs that show short-term gains but lack long-term impact, or they cut programs that might produce better long-term results.
The rush to measure leads to a lack of confidence in metrics and less motivation to share results with other departments. Almost 40% of digital marketers do not actively share ROI metrics.
“At best, this approach of not sharing ROI across the organization hides marketing’s light under a bushel — it siloes marketing efforts and doesn’t integrate them with the business as a whole,” writes Ami Trivedi, LinkedIn product marketing manager. “At worst, this approach can call into question marketing’s effectiveness, which leads to hamstringing of budget.”
Marketing Measurement Solutions
LinkedIn recommends these solutions:
- Calculate ROI over the sales cycle with the formula: ROI = return throughout the sales cycle divided by investment throughout the sales cycle.
- Some possible metrics to track include: marketing-attributed bookings, closed/won deals, average deal size, cost per customer acquisition, share of market.
- Understand the differences between metrics and how they match different stages of the buyer’s journey, including awareness, consideration and conversion (what many call the decision stage). For instance, impressions, reach, share of voice and brand sentiment measure awareness.
- Remember that ROI is just one metric and it’s a trailing indicator of performance. KPIs can help improve performance of campaigns underway.
Aligning Marketing and Sales
Many marketing veterans argue that aligning marketing with sales is key to demonstrating the marketing contribution to the organization.
Marketers often measure themselves by the number of leads, or marketing qualified leads (MQLs), they send to sales. But the sales staff care about the number of closed sales and have a different definition of good leads. It’s essential for marketing and sales to agree on the definition of a qualified lead and to share common goals and metrics that hold both teams accountable.
“Counting the number of MQLs from a given month can be a good indicator of moving in the right direction, but it’s not representative of the impact that marketers have on company growth and revenue,” writes Elizabeth Rivelli for SnapApp.
Rivelli recommends tracking percentage based metrics, such a percentage of sales pipeline generated by marketing, opportunities created by marketing, and closed deals generated by marketing.
Bottom Line: The common practice of rushing to determine marketing ROI leads to flawed findings. Longer measurement timeframes that align with the sales cycle are more likely to accurately report marketing’s ROI.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.
