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Marketing Metrics and ROI

The Definitive Guide to Marketing Metrics and Marketing Analytics

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The Definitive Guide to Marketing Metrics and Marketing Analytics

The Definitive Guide to Marketing Metrics and Marketing Analytics is one of my best pieces of thought leadership.  Seventy pages long, it covers everything I've learned about:

  • How to build marketing respect and accountability
  • Which metrics to use (and which to avoid)
  • The best ways to measure marketing program ROI
  • How to forecast marketing's impact on revenue
  • How to design the best dashboards for your business
  • And much more.

Video Introduction

Here's a short video I created to introduce the book:

Can't see the video? Click here to watch on YouTube.

Top 10 Tweetable Tips from the Definitive Guide

  1. Marketing without proper ROI measurements is like running a marathon, in an earthquake, blindfolded. Analyst David Raab writes in his paper, Winning the Marketing Measurement Marathon, “Marketing has always been a grueling and competitive sport – not unlike running a marathon. With the changes in the buying process, in media and technology, and managing expectations, it’s like running a marathon as the ground shifts beneath your feet. What was already difficult is becoming increasingly difficult. If you’re going to do it without measurement, it’s like running a marathon, in an earthquake, blindfolded.” Tweet this!
  2. Marketing reporting is less important than making the marketing DECISIONS that improve ROI. Don’t measure just what you can – measure what you can ACT on.  Ultimately marketing ROI should not be about “who gets credit”, but instead about what decisions the measurements allow to improve overall profitability of the program – and the company. Tweet this!
  3. Measure to find not just what works, but what works better; focus on “improving ROI” not “proving ROI”. Measuring marketing programs should not be a pass / fail exercise. Instead, focus your efforts on learning what you can do that will improve ROI. This isn’t about dropping low-profit programs; it’s about a holistic view of what works and where profit comes from. The best ROI may come from improving targeting or optimizing sales conversion. Tweet this!
  4. It’s possible to measure just about anything in marketing, but impossible to measure everything in marketing. Just because you can measure something doesn’t mean you should. Marketing measurement costs time and money, so focus your time and energy on the metrics that will support the most profitable decision-making. Tweet this!
  5. Don’t be an “arts and crafts” cost-center; marketing should be a revenue driver worthy of investment. It’s easy to measure marketing activity (inputs such as budget and programs), but hard to measure marketing results. Contrast this to sales, where activity is hard to measure but results are easy to see. Given this dynamic, is it any wonder that Sales tends to get the credit for revenue but marketing is perceived as a cost center? To build credibility, focus your measurements on the metrics your CFO cares about – things like revenue, cash-flow and profit – and position your budget in terms of investment instead of cost. Tweet this!
  6. Avoid “vanity metrics” that sound good, but mean little if anything about real marketing ROI. Many common marketing metrics – such as names gathered at a tradeshow, Twitter followers, and press release impressions – sound good and impress people, but don’t really have any strong correlation to revenue. It’s OK to track these internally if they help you make better marketing decisions, but avoid sharing them with executives outside of the department unless you have previously established why they matter. Tweet this!
  7. Focus on effectiveness (doing the right things) more than efficiency (doing possibly the wrong things well). The best ROI gains come from focusing time and money on doing the right things (such as targeting the right segments) more than on how well or cost-effectively you do them.  Kathryn Roy of Precision Thinking points out that metrics that show a CFO that marketing is impacting revenue are more likely to protect the budget than metrics that show how well the marketing department is operating internally. Tweet this!
  8. Program planning includes ROI planning:  1) what to measure 2) when to measure and 3) how to measure.  It’s important to quantify the expected outcomes from any marketing investment being planned, and to know exactly how you will measure the program against those goals.  You can also take specific steps to make marketing programs more measurable, such as setting up control groups or varying spending levels by geography to measure relative impact.   Tweet this!
  9. True marketing ROI requires understanding all the costs involved, not just top-line impact. Sometimes a marketing program that appears profitable won’t be if sales expenses and COGS (cost of goods sold) are taken into account. Even better, incorporate the full lifetime value of a customer into your calculation. The more your metrics can correlate to the net-present value of lifetime profits from incremental closed revenue, including all marketing and sales costs, the better.  Tweet this!
  10. Fundamentally, marketing measurement is about sales effectiveness, not marketing. The two most important questions you can answer about marketing’s results are: (1) what effect is marketing investments having on sales effectiveness and productivity and (2) how are marketing activities lowering the combined expense to revenue ratio for sales and marketing combined? By focusing not just on marketing is isolation, but on how marketing impacts sales productivity, you will get a much more comprehensive view of the true ROI of your activities. Tweet this!

Download Marketo's Definitive Guide to Marketing Metrics and Marketing Analytics.

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Lessons on How to be a Leader

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Lessons on How to be a Leader

An executive's journey of learning and growth is never ending.  I certainly try to find new sources of insight and knowledge, from "book learning", hands-on experience, and lessons from mentors.

Here are some of the lessons I've learned from various sources, including CMG Partners CMO's Agenda™ and Paul Albright, Marketo's former Chief Revenue Officer.

Be a business leader first

Thinking and acting like a business leader is one integral to any executive's success.  There is a difference in mindset between a CMO and a VP of Marketing: the former is a business leader, the latter runs a marketing department. As business leaders, CMOs must earn their seat at the revenue table, fuse long-term vision with a bias for action, and balance creativity with hard financial data and marketing measurement. Executives who run other departments should do the same: put the overall business ahead of their department and balance planning, execution, and measurement. 

Customer intimacy

Every successful marketing strategy originates with a deep understanding of the target market: their wants and needs, the language they use, where they go to learn, how they buy, and more. This often is led by marketing; they aren’t called "market-ers" for nothing! Marketo’s research provides support here: high-growth companies are significantly more likely than low-growth companies to incorporate customer satisfaction into their marketing executive’s compensation. 

Innovation and the innovator’s dilemma

Innovation is about transformation and reinvention.  According to CMG Partners, the most “forward-thinking marketing leaders don’t take the perspective of incrementally improving a product or service offering. Rather, they search for the critical customer pain points and re-imagine their business model to increase value delivery and capture across all stakeholders.”

But this can be difficult, especially since it usually means moving away from the exact things that made you successful in the past. Even if we’re not faced with major disruptions, yesterday’s novel approach quickly becomes today’s industry standard.

The effective executive continually asks, “How can I transform our marketing and our business?” To paraphrase Andy Grove, “if my company replaced me with a new, young hotshot, what would he be doing?  And more importantly, why aren’t I doing it?” (Source: Only The Paranoid Survive.)

This is a mindset of 180-degree turns and 100% improvement. With the iPad, Steve Jobs perceived what the customer wanted before the customer even knew it, and now Apple is promoting the post-PC era. Netflix built its brand around delivering DVDs in the mail and now is doing everything it can to make that business obsolete. As leaders, we must have a vested interest in conceptualizing and embracing strategies and tactics that are alien to us.

Managing a high-performance team

Paul Albright shared some of his experience managing teams in a webinar called Demystifying the Strategies of High Momentum Marketing and Sales. Here are some of the main points — plus my own perspective:

  • Cultivate an execution-driven culture based on facts and results. When math and metrics are your common dialect, your company will be characterized by less drama and fewer emotional decisions.
  • Speaking of math and metrics: Preparation + Perspiration - Interference = Potential
  • Set goals and targets for everything you do, and measure results against those targets. Put them on a dashboard for everyone to see so there is always a succinct view of what Marketing is trying to achieve, and where you stand.
  • Be data-centric and customer focused. Support your claims with facts, and always work from the customer’s perspective in.
  • Initiate: Take the offense and lead. Don’t follow the competition, make sure they follow you.
  • Think, Feel, Do. This applies to how customers will interact with our messages, and inspires how our marketing should influence their behaviors.
  • Be direct; take feedback; be real. Hire slowly and fire quickly. Fail fast: if it’s not going to work, move on.
  • Don’t suffer fools. If you don’t have an A-team, get one.

Where do you go to learn?  What are your favorite lessons?

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The Five Stages of Marketing Accountability

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The Five Stages of Marketing Accountability

The five stages of Marketing Accountability are:

  1. Denial“Marketing is an art, not a science. It can’t be measured. The results will come, trust me!”
  2. Fear“What if my marketing activities don’t impact the bottom line? Will I lose my job?”
  3. Confusion“I know I should measure marketing results, but I just don’t know how.”
  4. Self-Promotion“Hey, come look at all these charts and graphs!”
  5. True Accountability“Revenue starts in marketing.”

Read more in the original post on the Marketo blog: The Five Stages of Marketing Accountability.

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Defining the Modern CMO

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Defining the Modern CMO

The CMO Council report, Define & Align the CMO, says that the most successful CMOs bring a strategic long-term view, exceptional measurement and analytical capabilities, and financial management rigor to their role.

Other marketing executives may excel at marketing, with great experience building brands and executing programs. But without the skills to provide strategic and financial leadership to the organization, these executives do not deserve a C-level title. VP/SVP of Marketing describes their role just fine.

The modern CMO must play a role broader than just leading the marketing organization. The role must include driving revenue, leading innovation, and providing strategic vision. These growth champions must lead all four Ps – not just promotion but also product strategy, place (channel and distribution), and pricing.  And all this requires a greater focus on quantitative measurement and ROI.

Read more on this topic in my Marketo blog post, Are You a CMO or a VP of Marketing? 

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Earn a Seat at the Revenue Table

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Earn a Seat at the Revenue Table

One key thought that has driven much of my marketing thinking is this: marketing should be as accountable for revenue as sales.  This is especially true with modern buyers who use information abundance to seize control of the buying process and delay engagement with sales until much later in the buying process.

In late 2006, I wrote a series of articles about this process, which were then compiled into a single article for Revenue Performance How Marketers can Earn a Seat at the Revenue TableIn the article, I ask "What can marketers do in order to be seen as part of a machine that drives revenue and profits, not just the people who throw parties and buy swag?" The answer, I argue, is to recognize that at most companies, Sales is the function that owns the revenue pipeline. (Sales and revenue often go together, so much that some people use the words as synonyms.)  This means that marketing can earn their seat at the revenue table by acting MORE like sales with these key actions:

  1. Speak the financial “language of busiess”
  2. Forecast results, not just costs
  3. Make hard business cases for spending
  4. Align incentives
  5. Use standardized best-practice methodologies
  6. Do “more with less” using automation technology

Check out the entire article, How Marketers can Earn a Seat at the Revenue Table, for detailed explanations of each of these ideas.

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Marketing Budgets 101

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Marketing Budgets 101

One topic that seems to always fascinate marketing executives, and myself, is "how much should my company spend on marketing?"  This of course comes with the implied question, "how can I justify my marketing budget to fellow executives?"

I wrote about this exact topic on the Marketo blog on October 12, 2006, in a post named Benchmarking Marketing Budgets.  Check it out for some useful stats.  Then on January 21, 2007 I wrote a follow-up, How To Sell Your B2B Marketing Budget To Your CFO. Here, I make an important argument: the best way to justify your marketing budget is to think of it as an investment that incurs costs today but delivers benefits for many years.  When we think of the marketing budget as an investment, and not a cost, we not only help convince others that marketing is not a cost center, but we also let the marketing budget to be amortized over the entire “useful life” of the investment.  This in turns allows the company to make more strategic but still rational big bets on marketing.

Read the Marketo ebook Selling your Marketing Budget to your CFO for more on this topic.

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