Perhaps the best we can do with measuring marketing performance or ROMI (return on marketing investment)is to employ the age old statement made by John Wanamaker more than 90 years ago, "Half the money I spend on advertising is wasted; the trouble is I don't know which half". We like to think we can do better with modern tools like marketing automation integrated to CRM, the ubiquitous spreadsheet with pivot tables, etc.
Sure, we can attribute a closed opportunity to a marketing campaign or to a type of marketing activity, but it's only as good as a person's interpretation. At some point, someone has to decide how to attribute a closed opportunity. If the last touch before a closed opportunity was a trade show, does that mean the revenue should be associated with the trade show? In this modern age of buying behavior, we can never really know, nor should we try, to attribute revenue to one particular source. Thus, are we back to a modern version of Wanamaker's interpretation?
This is not to say we should not bother to measure. Rather than basing decisions on a hard core revenue attribution model, I suggest marketers rely on trends and benchmarks. These are my top 10 key performance indicators (KPIs) for evaluating the performance of marketing strategy and tactics. Note the first 5 are meant to be the metrics you use when presenting results to the external (external to the marketing team) stakeholders or your leadership team. The second 5 are meant to be used internal to the marketing team in evaluating activities, promotions, events, campaigns, etc.
For the c-suite stakeholders:
- Net Contribution. This is the best measure of effectiveness. Do not mistake net contribution for an absolute ROMI. It is a perfect measure of efficiency and the trend tells the CMO how the overall strategy and tactics are driving revenue. Net Contribution (%) = [(sales revenue - COGS) - (cost of sales+marketing)] / [sales revenue]
- Marketing Contribution to New Opportunities. Again, not an absolute measure, but useful as a month-to-month benchmark. Also good for talking points with the Executive Team.
- Marketing Contribution to Closed-Won Opportunities. A great benchmark. Look for trends. Could also be correlated with other specific marketing metrics like impressions, emails sent, etc. to indicate general effectiveness of the marketing activities.
- Revenue per Marketing Qualified Lead (MQL). Always couch your stakeholder facing metrics as revenue as compared to cost. Think about how your CEO or CFO perceives the Marketing function based on reporting revenue per lead or cost per lead.
- Number of MQLs. The net number of leads passed to Sales is, of course, an important measure of success for the marketing strategy and tactics.
For the marketing team:
- Cost per Click (CPC). This is the best measure to compare any of the myriad marketing digital activities to each other. After a while, you'll be able to reject activities that don't meet your benchmark and do more of those that exceed your benchmark.
- Cost per Thousand Exposures (CPM). This is a good measure to determine reach. Cost per click and cost per thousand exposures should be considered together when evaluating the results of activities.
Eventually, as you become more sophisticated with tracking these best marketing KPIs you will use technology to support your discussions. Set a goal for yourself and your team that the next time you get an audience with the CEO, you will be ready to share at least one statistic about how marketing contributed to revenue.
- Click through Rate (CTR). Another good benchmark for comparing the effectiveness of materials and venues. The CPC, CPM and CRT together help the marketer make decisions about effectiveness.
- Funnel conversion metrics. MQL to SAL to SQO to Closed/Won and other relevant conversions.
- Revenue/Cost per attendee. These are good specifics for evaluating the effectiveness of events like trade shows, conferences or seminars. Be cautious of making binding decisions based only on these metrics. There are likely to be intangibles that should be considered such as the sales person's opportunity to see multiple customers and prospects in a short span of time.
Naturally, your particular business or organization may require different metrics depending on what you are selling. For example, those firms that are selling subscription services may track annual contract value and churn rate.
Final advice; avoid vanity metrics or metrics where the only purpose is to help you and your marketing team feel better about yourselves. An example of a vanity metric could be Facebook 'Likes'.