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Marketing Accountability: Can Sales Afford Not Knowing the ROI on Marketing Spend?

 

COVID-19 the catalyst for profound and sustainable changes in marketing’s way of working.

The results of account-based marketing (ABM), content marketing, in- or outbound marketing, on- and offline marketing, and branding, have to be monitored and presented more than in the past.

Marketing accountability was already getting more attention – not because senior management demanded it, but marketers themselves want to present the actual effect of marketing efforts to the company’s bottom line.

Many claim “Half of my marketing budget is wasted, but I don’t know which half!” It remains distressing if teams continue with this knowledge and run the same marketing activities over and over again.

4 reasons why marketing accountability is on the rise:

  • Offline results must be measurable in addition to online marketing efforts
  • Understand that every marketing dollar spent should meet the required return rate
  • The ICT products for marketing automation are much more mature and developed with the marketing process in mind
  • Marketing doesn’t like the misunderstanding of being a cost center instead of a profit center

The return on marketing is unknown

Research into the design of marketing accountability shows that the majority of companies are not satisfied with the demonstrability of marketing results. Still, most organizations reserve hardly any budget each year for monitoring the marketing results. As a result, management remains unfamiliar with the returns of marketing activities.

While discussing marketing investments, Guy Powell distinguishes four elements:

  • The financial value of the investment
  • The expected return on this investment
  • The risk associated with the investment
  • The risk or return ratio

This is all about what a return on marketing investment should yield and has to be part of the design process for each marketing strategy.

How to pivot effectively toward an accountable way of working

It doesn’t matter if we’re referring to the marketing activities at small local companies or large international players. Both will gain a lot once they’ve deployed accountability in marketing. For marketers themselves, the advantages mainly lie in the increase in prestige and more responsibility.

The better marketers demonstrate the exact results of their marketing efforts, the more difficult it is for management to reduce the marketing budget without adapting goals accordingly. Marketing is then taken seriously by demonstrating the contribution to the organizational objectives. Another effect is that they will be able to share in the praise regarding revenue, which usually falls to sales alone.

Making marketing activities accountable can be achieved in a few simple steps.

Spontaneous (SME)

Most of the time, there’s no staff with a marketing focus and campaigns are driven by events and ideas from brainstorms. Budgets are more or less assigned from a cost-based perspective, and there are hardly any activities to measure results.

When leads are drying up, sales calls for a campaign, like showing up at a trade fair or business event. Often, companies take part in an event just because they have for years. But nobody has any idea about the results, let alone the ROI – and a certain percentage of the leads are not followed up with until they say yes or no to an offer.

Organized (corporations)

As we have learned from the past, a couple of campaigns related to seasonal events are documented in checklists and outlines. The required budgets are based on experiences and a bit of measuring in the past. ICT and finance support marketing whenever they ask for help.

In this situation, there’s much better cooperation between sales and marketing. They have joint forces to get a better picture of the target audience and agree what leads are. It was made a team effort to evaluate campaigns and while running a campaign the conversion ratios in the funnels are monitored together.

Responsible (nationals)

The marketing strategies for the year are very well related to the business plan and the campaigns on general and customer events. The actual ROI and other measurements are very well-monitored against the forecasts. Marketing’s alignment with sales and finance is good and supported by general management.

This results in insightful reports to get a fair understanding of which campaigns are successful. There’s a clear picture of which touchpoints create the highest conversion ratios and satisfied customers. Customer lifetime value (CLV) is a very important KPI, and there is more focus on retention than on acquisition.

Holistic (multi-nationals)

Marketing activities are not just something the marketing department takes care of on their own. Martech is supporting marketing in planning, running, measuring and evaluating campaigns and strategies. It consists of a fluent process of pre- and post-ROI is in place, and the average marketing ROI is meeting or exceeding the hurdle rate.

You’ve probably heard of MQL, SAL and SQL. Let’s discuss finance qualified lead (FQL) and operations qualified lead (OQL) here. This is the superlative of CLV as finance and ops work together with marketing and sales to define the criteria of the most profitable customer profile.

Company size is just an indication. In every stage, you need to evaluate four key components:

  1. Marketing process
  2. Budget process
  3. Accountability
  4. Staff

The outcome will define if and what steps need to be taken to enter the next maturity stage. At the end of the day, this will lead to better insights about what happened with the marketing dollars.

How the relatively new idea of FQL and OQL matures marketing wow

No matter the company size or marketing maturity stage, marketing should work to increase marketing effectiveness and efficiency. Better cooperation with sales is inevitable and already put on the agenda.

But marketing teaming up with finance and operations? Not so obvious – which is where FQL and OQL come in. These two elements will help marketing and sales understand what finance and operations think of lead qualifications, which will support strategies that might create fewer leads, new customers, and direct sales.

What else is required for your campaigns?

There are quite a few similarities in marketing and ICT. While defining your marketing strategies, consider how the funnel will look. Discuss what the next step has to be for each touchpoint, either presented by your company or as an event triggered by your prospects.

Assume you’re hosting an event or taking part in a trade exhibition. You’ve planned an ad in a highly appreciated business magazine for this particular industry with 100,000 subscribers. The publisher has shared stats indicating that about 35% of their readers meet your target audience’s attributes.

Considering earlier campaign results, you assume that about 20% of them will register, and 75% actually attend the event. After qualifying the visitors, your sales team will reach out to two-thirds to plan a meeting with about half of them. Seventy-five percent will receive a spot-on proposal with a closing rate of 80%, leading to 1055 deals. So far, so good as with an average deal size of $1150 and a 25% gross margin; the total investment of $235,000 will be recovered with a ROI of 29%. Your senior management demands for a hurdle rate of 25%, so you’re good to go.

While keeping track of your funnel for this event, you find out that about all estimated % were pretty spot on, leading to 1062 deals. But sales had a hard time getting the deals closed and granted a couple of discounts, leading to an average deal size of $1089 and with an overspend by marketing of about $5000, the ROI dropped down to 14%, making your management team less happy than when you unfolded your campaign plans.

Here is your funnel with all the steps you need to measure:

So this is what the marketer has foreseen in this campaign. When a reader visits the landing page, they’ll receive version A or B (50/50 chance) of the landing page. If the conversion ratio of either version falls short by 20% this version will not be used again.

In case the number of visitors is far fewer than 30,000, the marketer will call upon the publisher to show evidence about the edition and subscriber statistics. The marketer will discuss with sales whether the number of follow-up calls, meetings, and proposals are met and ask whether the quality of the leads is as required. Last thing to analyze with sales is why they felt like giving those discounts leading to an unsatisfactory ROI of 14%.

Extend your funnels by including CLV

This brings us to another point: marketing and sales alignment. We discuss MQLs, SQLs, and SALs instead of just “leads”. Asking clients how many leads their advertising generates is just a starter question as we need to understand the quality of leads: cold, hot, etc.

Marketing has to challenge sales to describe what criteria they’re using to accept a lead. The next step will be that sales acknowledges that the received leads meet the agreed-upon criteria. You might assign a KPI here to intervene when something is wrong. Then sales contacts prospective customers as qualified leads in order to close a sale.

At the holistic marketing maturity level, marketing needs to understand the criteria for MQLs, SALs, SQLs, FQLs, and OQLs. The last two are new and seldom presented in a picture of a funnel, yet important for the profitability of your company. This will enable marketing to attract gold customers while avoiding doing business with untrustworthy customers. Measuring marketing results, investigating, and profiling your target audience will increase marketing effectiveness and prospect nurturing by sales.

What will boost the “new” marketing?

For the design of marketing accountability to be successful, four success factors play a role in an organization: management and organization, processes and implementation, people and culture, and ICT and infrastructure.

  • Management and organization: Management discusses the SMART objectives with marketing and evaluates the results. Marketers align the marketing plans with the business strategy and objectives.
  • Processes and execution: In regular consultation between the CFO and the marketing manager, the marketing budget is discussed and goal relationship is established. The CFO and marketing manager must account for marketing investments in the same way as other investments in the company.
  • ICT and infrastructure: With marketing and ICT, the marketer determines which customer information must be made available better, faster, and more up-to-date in the short term. ICT makes planning tools, which may already be used within the company, suitable for marketing.
  • People and culture: The marketer of the future behaves more like an entrepreneur and feels responsible for the results that they achieve. Proper accountability for good or bad results achieved by particular marketing activities must be rewarded.

What’s next?

Start with the design of pre- and post-ROMI calculations as the first step toward accountability. The organization can then gradually grow into a fully accountable marketing department. It’s important that marketers are given more space to test and are able to examine good and poor results.

This creates a learning organization that critically assesses and presents its own added value. Alignment with sales together in collaboration with finance and ICT are the key factors for the success of accountable marketing.

Purpose of accountable marketing Results
Optimizing marketing expenses by developing a market model that uses valid SMART marketing measurement moments and units for the short- and long-term.
  • More profit
  • Less waste
  • Higher customer satisfaction
  • Control over budget
  • Marketing back in the boardroom improved quality of leads

Marketing stands alone

Another cause of the lack of a clear result report is the solitary behavior of marketing. Marketing success factors don’t always align with business strategy priorities. The relationship with finance is usually weak because marketers often lack the expertise, support, or budget to make marketing accountable. Benchmark studies showing the contribution of marketing to the financial results are lacking. A lot of research in this field shows that companies hardly have an integrated marketing performance framework.

What’s the advantage of accountability?

With a marketing performance management framework in place, a company can create more growth, increase profit and economize marketing budget. Marketing accountability can lead to up to 30% more turnover, because the learning organization knows better and better where the marketing dollars should be invested.

In addition to the four reasons why accountability is gaining more interest, this is also an important motivation for demonstrating the return on marketing investments (ROMI).

Another way to look at it are the consequences of measuring marketing accountability:


Soure: Stephen Diorio, Director of the Revenue Enablement Institute and member of the Forbes CMO practice

 

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