20% of B2B companies don’t measure their ROI. Why not? Surely knowing whether or not you’re gaining a return on the investment you’ve made is key to planning future investments with confidence? In many cases, companies are not 100% on methods of measuring ROI, as it’s not a definitively tangible value. But a lack of measurement can lead to badly spent budget and missed opportunities.
We’ve just launched our latest resource- an ROI calculator, so you can pop your figures in and see what return you’ve had on your investment! This is a great way to get you started, before delving deeper into ROI measuring tactics enabling you to promote positive change and advancement in your marketing.
Measuring ROI in B2B marketing is a challenge; there are so many factors that can affect the final number and the readings you draw from it. These 5 methods will help make it all a bit easier:
1) The “magic” method
This method is incredibly simple, and can adapt easily to any marketing channel and a vast amount of companies varying in size and industry. If you’re looking for a speedy ROI figure that’s still insightful, this is the method for you; all you need to work out if your cost per lead (CPL) and the “magic number”.
CPL is easy (you probably already know it!). You take the channel cost, and divide it by the amount of leads produced by that channel over the given time frame chosen, to find how much each individual lead cost your channel. You’ll need to do this for each channel you’d like to measure.
The “magic number” is a little different- it comprises of your sales conversion rate (from lead to sale), and the “average client value” (average yearly revenue produced by a single client) – you may need to ask another department for this! Multiply these values together and you have the magic number! You only need to do this once, no matter how many channels you’re investigating.
Here’s where we see the ROI- in the comparison of these two numbers. If the CPL is equal to, or below the magic number then you’ve got a positive ROI- the greater the difference- the better! If the CPL is higher than the magic number, you may be losing money.
Benefits of this method include the ease at which you can do the math, and in comparing the numbers, you can use the differences between them to assess how much change is needed. This method however lacks in providing finite details. Though some leads may cost a lot more, they may also be responsible for bringing in a high amount of revenue-so you’re actually not losing money at all! This is a great starting method in finding areas you can relax on and areas that need more attention.
2) Single attribution method
This the most popular method, with 45% of B2B companies using it to measure their marketing ROI. A key challenge when measuring marketing ROI is attributing a lead to its original source, so you know where to apply the revenue; for many companies, this is a priority that prevents them from measuring ROI properly. This method attributes each lead to a single channel by choosing the first touch (first channel that touched the lead) or the last touch (the last channel to touch the lead before the inquiry was officially made). Use your CRM to ensure leads are always attributed to the touch point you chose.
Now you have each lead appropriately attributed, you can total up the sales conversions and revenue brought in by each channel from the attributions. This gives you all the numbers needed to see the overall ROI for a campaign, or work out the CPL and average revenue made from each lead- allowing you to get deeper detail about what works and what doesn’t from an ROI perspective.
This method benefits from being simple and cheap to implement, whilst additionally allowing you an advanced insight into the early stages of your sales funnel and lead generation. The figures and values are simple to understand, especially when presenting and planning future investments.
The drawback with single attribution in ROI measurement lies in its inability to measure nurtured leads in the same way. The influence of subsequent touches are not factored in, and channels such as content run long into the nurture process for some leads, your numbers won’t reflect the success of those investments, as the focus hinges on the final lead generation.
3) Multi-touch attribution method
As you may have guessed- this is similar to the single attribution method, but takes account of each contributing factor before the official inquiry is made. A businesses may need to encounter your brand as many as 35 times before they are ready to approach you! There’s a lot of positive analysis to be taken in accounting for all touch points made before the official inquiry.
The easiest way to explain this method is with an example. In a sale for £50,000, 3 members of the business were targeted before the inquiry. Businessman 1 liked a social media post and attended a webinar, Businessman 2 attended the same webinar and received an email campaign message, and Businessman 3 downloaded a whitepaper asset from your company.
From the £50,000 made on the sale, you could attribute the return from revenue to channel like this-
- £20,000 to the webinar
- £10,000 to the social media account
- £10,000 to the email campaign
- £10,000 to the whitepaper asset
By accounting for each touchpoint, and weighting them appropriately based on involvement (2 businessmen attended the webinar- so it gets a higher revenue return attributed), you can see in incredible detail what channels were involved in making that revenue, and assess the return you’ve made across all areas.
This method is brilliant for a detailed perspective, covering all leads from those that were only touched once to those that were nurtured across time. This is an especially useful method if your company has longer sales cycles, leading up to larger deals with high revenue generation. It also gives you some details insights on where channels are boosted by supporting each other, helping to make multi-channel strategy plans (read more on those here!).
A drawback of this method lies in the data needed to fuel the results- if you’re not one for spreadsheets, this may be a challenge! You’ll need to ensure there are clear records of prospects targeted and nurtured across every channel, so when the sale is made, the company can be traced by every channel, enabling you to source the multiple touches made. This method also relies on a fair amount of assumption in the distributions of revenue between channels- so isn’t 100% factual.
4) Test vs control groups method
This method is great at measuring the impact of change as well as the return you’ve gained or lost from the venture. When looking to use ROI to implement improvements and make decisions, this is a fantastic method to employ. It’s simple in theory- you test a new investment or process change against a control group. Split your group of prospects in half, apply the changed variant to the marketing activity sent to one half, and leave the other using the current system as a constant. Chose a variable to measure over time, plot the two groups together on a graph and you’ll be able to draw a direct comparison.
You can measure anything you like, revenue made, leads converted, leads generated; and you’ll see how the change you implemented affected that variable over time compared to a group with no change. Then test something else- the amount you’re investing, try a new copy, a new look- anything! Just ensure the control group remains a constant.
This method is incredibly sophisticated in the detail it provides you and has the additional value of proving impact against your current systems, which the other methods don’t provide. Its freedom also allows you to test and discover the precise detail you need before making a big financial investment.
However this can be costly, applying this method to every aspect of marketing would be costly in both money and time. The method also hinges entirely on statistics and numbers, aiming to only take the tested variant into account; one small factor can throw the test off and provide unreliable results.
5) Market Mix Modelling (MMM) method
Only 3% of companies use this method in measuring ROI, as the equations and detail can get very deep. The aim of this method is to show how independent marketing touches (and other non-marketing factors) relate to the outcomes in sales volume using the Regression technique.
Put very simply, you create a marketing mix of dependant variables that feed into your marketing directly and indirectly, such as digital spend, website visitors, print distribution etc. These variables are weighted into an equation and put against the overall revenue generated by sales.
In the end, you arrive at an ROI telling you how much of the overall revenue can be attributed to each variable. For a 101 on the MMM method and how to implement it- there’s buckets of information here. This method is very accurate, and covers every angle you could investigate giving you deep insight into your marketing department that other methods might miss out on.
However it requires a huge amount of data, along with deep analytical skill to draw out the correct numbers, and when using ROI with a wider team to improve your systems, these values can become incredibly difficult to communicate.
Hopefully we’ve opened your eyes to some new methods in ROI measurement. There is no right one to choose, each have their benefits and hindrances, meaning some will fit your businesses better than others. With the financial year ending, there’s never seen a better time to get a grip on your ROI, and use it to improve your marketing like never before. Download the ROI Calculator today to get started!
Free guide – Effective multi-channel models for marketing and sales has plenty more information in about marketing ROI. If you found this interesting, you should definitely give it a read!