Marketing ROI

How often do you wonder if your marketing investment will pay off? Most companies still don't measure their marketing ROI. Even some of the biggest companies.

When I talk to potential clients about a new project, the topic of ROI is usually discussed. When a prospect asks about the ROI of what we offer, I often ask how they value their current marketing investment. More often than not, the answer usually boils down to something like "we don't really measure anything."

I have found that most companies do not measure their marketing ROI for one main reason - they don’t know how to do it. The ability to accurately measure your marketing ROI is actually a fairly new phenomenon in marketing history.

Most marketers are measured by activity, not results. But loop marketing relies on lead data, which allows sales teams to communicate what's happening to leads so that marketing can do more of what works and less of what doesn't. Unsurprisingly, the ability to trace leads from conversion to deal creates a marketing-sales link that wasn't there before.

Today, there is an evolutionary transformation of company marketing from a cost center to a profit center. Nowadays, all companies practice different approaches to marketing.

1. Traditional marketing (70% of companies). At this stage, marketing has very little influence, it does not take a place in the company's revenues and is seen as a department that does something beautiful. Management does not associate marketing activities with revenue opportunities, and reporting is activity-based metrics (e.g., number of ads, impressions, visitors, events, visits, social media interactions, etc.). Budgets are mostly blind spending.

2. Generation of leads  (12% of companies). Here, the main marketing goal is to attract potential customers. All leads are sent to the sales department. The expectation is that sales will pounce on and accompany each lead. The problem is that after a salesperson has gotten a few bad leads, they stop following any marketing suggestions and tend to start finding leads on their own.

This is what leads to friction between marketing and sales. Salespeople think marketing is an entertainer who has no understanding of quality leads. And marketing sees sales as lazy monkeys that don't follow leads.

Even when salespeople do follow leads, marketing doesn't have an understanding of what's going on because there is no automated feedback reporting system. Key marketing metrics at this stage include more activities based on activity such as emails sent, click-through rate, conversion rates, cost per click, etc.

3. Formation of demand
(12% of companies). This is the most difficult strategic path for most organizations. This requires strong leadership, and marketers can be very uncomfortable with the volume of reports.

Here, marketing automation and CRM form the backbone of a feedback reporting system that is at the heart of the changing role of marketing. Conversion in the sales funnel is becoming the focus of marketers' attention. Their work doesn't stop when leads are passed on to salespeople. Instead, marketing works with sales by providing relevant knowledge and analytics.

The metrics in this phase differ significantly from the previous phases, from activity-based metrics to income-based metrics. Key metrics here include the number of so-called marketing qualified leads (MQL) sent to sales, the percentage of MQL that are converted into opportunities, and sales.

4. Marketing income (less than 5% of companies). At this point in demand generation, there is everything with one big difference: the revenue generated and associated with marketing is now delivered in a repeatable, predictable and scalable system. Marketing can now show its past performance and predict marketing revenue based on budget level.

Let's go back to those 82% of companies in the first two phases: traditional marketing and lead generation. Many of them did not measure their marketing ROI.

To start somewhere, start with inbound marketing. Inbound marketing is a philosophy based on the idea that people value personalized, relevant content, not disparate messages. The methodology is to help companies attract, convert, and delight visitors and leads through a variety of channels such as social media, blogs, email, and more.

For most companies, inbound marketing is the foundation on which all other marketing activities should be built. And the center of this universe is your website.

The first steps to measure your marketing ROI can be to get the following metrics:

1) Average number of visitors to your site per month.

2) Average number of leads per month from your website. How many monthly leads do you get with your website? In particular, anyone who has provided you with their email address.

3) Percentage of verified clients. What percentage of them went to item 2, what percentage are verified to participate in the sales process?

4) Percentage of transactions. What percentage of verified customers become customers?

5) Customer Lifetime Value. What is the average customer life expectancy for your company?

When you have these five metrics, you will see how your marketing efforts can be directly linked to increased revenue.

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