Prioritizing Marketing Tactics & Measuring Effectiveness

No conversation about execution is complete without a discussion on budgeting, prioritization, and outcomes.

Extending the philosophy of structuring your execution with the end in mind, you must identify the tactics that will have the biggest impact on your business now and that you can build on to create sustainable success in the future.

No one has unlimited resources, so you must get bang for your business-development buck. Budgeting and ROI are two sides of the same coin.

You must make informed decisions about where to put your money, time, and attention, and then you must measure the effectiveness of those tactics to find areas of improvement or redirection.

Both budgeting and measuring the return on your marketing investment are challenging conversations at best, and at worst, they are hotbeds for internal misalignment, shortsighted planning, and a lot of frustration.

I’m neither an analyst nor a math whiz, so this is not going to be a deep dive into algorithms, weighted averages, marketing analytics, or investment calculations. Instead, we’re going to take a holistic and practical look at how to understand ROI, how to allocate budget, and how to create agreement within your organization about how ROI is measured so you can then maximize your results.

The language of business can be boiled down to a few critical numbers: revenue, expenses, profit, cash flow, and equity. In business, we pull different levers to impact these numbers. To improve cash flow, the finance department pulls levers such as adjusting terms, managing credit, and getting aggressive on collections.

To impact profit, companies will cut costs or increase pricing. If they want revenue growth, companies generally must pull a marketing or sales lever, so it’s not healthy to refer to marketing as a cost center when it is the lifeblood of the organization.

In the same vein, it is not acceptable for marketing to rely solely on metrics that do not clearly communicate correlation to financial impact. Thus, it’s critical to create an aligned understanding and language for marketing ROI.

To start, let’s go ahead and look at some examples of marketing ROI calculations and why these haven’t helped most organizations resolve this problem.

(Your Sales Growth ? Your Marketing Costs) ÷ Marketing Cost

This simple approach sounds great, but what impact do market trends have on growth?

Even if there are no positive market trends assisting with your revenue increase, this calculation assumes that your marketing costs are solely responsible for growth.

(Your Sales Growth ? Organic Sales Growth ? Your Marketing Costs) ÷ Marketing Cost

Neither of the preceding formulas acknowledges that many marketing campaigns are not designed to impact today’s sales. A healthy marketing mix accounts for immediate revenue impact but also your pipeline for tomorrow’s sales, as well as your long-term visibility and positioning with future decision-makers.

Here’s another option:

(Customer Lifetime Value ? Marketing Investment) ÷ Marketing Investment

I really like this one and think it’s incredibly important. However, there is no separation between the impact of the sales team and the impact of your marketing spend.

As you know by now, I advocate for sales and marketing to function as a unified team, so their figures shouldn’t be broken out separately.

However, the sales team is almost always given the credit for sales growth, which negates the role of marketing in the sales team’s ability to close more deals.

There are numerous other calculations, especially for campaign effectiveness. Here’s an example:

[((Number of Leads × Lead-to-Customer Rate × Average Sales Price) ? Cost of Ad Spend) ÷ Cost or Ad Spend] × 100

But how about the impact of the marketers themselves and their salaries? You see, each calculation comes with its own complexities and imperfections.

Because it’s a complicated environment both emotionally and financially, we need a new way to look at ROI that gives leadership decision-making insight into the effectiveness of their marketing and unifies the business-development approach to maximize revenue growth.

Marketers and leadership teams have a responsibility to build a bridge between the two languages of marketing metrics and financial performance.

What I want to give you is a down and dirty way to understand marketing analytics and, more important, how to translate them into financial terms. It is time for marketing teams to learn how to speak the language of business: financial metrics.

And it is time for the C-suite to stop being legalistic—and at times argumentative—in trying to drive a direct correlation between, say, a single social media post and its direct impact on revenue.

It’s time to view business development as a system you can optimize, much like how you optimize operational processes. Thus, you can then prioritize optimization efforts by finding and minimizing areas of waste, slowdowns, and lost opportunities within the total pipeline.

So how do you do this?

Let’s begin with a visualization of the different types of customer outcomes that marketing can drive to move a prospect closer to a deal. We’ll take a look at how marketing works using a funnel graphic.

You’ll remember that the buyer’s journey goes from awareness to consideration to decision—and possibly to referral and more purchases. What can we measure in the buyer’s journey?

Generate Interest: Awareness

First, your market must know you exist and what problem you solve. This is visibility. You cannot get leads if you are invisible. Visibility is the most financially expensive outcome to achieve and the hardest to measure.

Examples of visibility metrics include impressions, audience size (if you speak from a stage), search engine optimization, and share of voice.

Next, you want your visibility to drive curiosity, and you want your prospects to act on that curiosity. This is measured by traffic. It means that people have heard of you and are spending a few seconds or minutes to intentionally check you out and, hopefully, cement your existence into their mental library of resources.

Traffic can be measured on the trade show floor or by visitors to your websites, visitors to your landing pages, video views, and so forth. This measurement reflects how many people are researching you.

You can also consider the quality of the traffic, chiefly by paying attention to how much time they are spending with you—for example, the amount of time they spend browsing your website or watching your videos.

Build Trust: Consideration

From the traffic you created, how many prospects took an action and began to invest time into better understanding your expertise or your offering? We call these conversions because these movements show that you converted interest into action.

People are now beginning to invest time in you. There are different types of conversions, and they generally fall into one of two camps.

One action involves prospects researching a need, resulting in their signing up for webinars, downloading pieces of content, or taking any actions where they spend time with you and possibly give you their email addresses.

These are called marketing-qualified leads, or MQLs, because all you know about them is that they found your content or offer valuable or interesting. You haven’t confirmed whether they are in your target market, or, if they are, whether they have the authority, real need, or budget to make a purchase.

They are simply in your database now. Conversions can begin early in the buyer’s journey and build on one another to nurture your prospect’s understanding of their problem and interest in your ability to solve that problem.

The two primary metrics for MQLs are (1) how large your email list is growing from your content marketing efforts and (2) how your lead scoring reflects the nurturing efforts (if you are using automation software).

It’s up to you to nurture these MQLs and validate their viability as potential customers through the additional actions they take.

When the MQLs trigger a conversation with a salesperson, who then validates that they are able and interested in a purchase, they become sales- qualified leads, or SQLs.

SQLs are the next level of measurement. Out of the MQLs generated from your marketing efforts designed to request time and build trust with prospects, how many of them did turn into qualified opportunities?

Close the Deal: Decision

And, of course, we want as many SQLs as possible to become customers.

Many companies prioritize closing ratios, but remember that your closing ratio and thus your revenue are lagging indicators. There is nothing you can do to impact this directly, because the activities leading up to it are in the past.

Viewing your total business-development pipeline, not just your sales-qualified pipeline, is the key to understanding marketing ROI. Once you set a baseline for where you stand in each of these action areas and with each of your buyer personas, then your goal becomes keeping as many people inside the funnel as possible.

It also gives you a broad look at the impact your marketing may have in the future. If you invest heavily in visibility and traffic, it takes time for the investment to funnel through the rest of the buyer’s journey, but it will help your sales in the future.

Alternatively, if you’re underinvesting in visibility, you could be creating future harm to your lead generation in the coming years and with future decision makers.

There is an attrition ratio from each level, with the goal being to maximize the ratios and cut waste and lost prospects.

With this paradigm, you can numerically identify where your biggest business-development problems lie and prioritize your time, attention, and money to fixing these critical areas first and creating a continuous-improvement approach.