Continuing a series of blogs on Measuring Marketing Return on Investment (ROI):
Developing ROMI metrics
Calculating ROMI is not a perfect science. In developing ROMI metrics, don’t let a quest for perfection be the enemy of good. Knowing something about your marketing ROI is better than knowing nothing.
By setting realistic performance targets and integrating the performance targets directly into your marketing objectives you will be able to stay on track. Establishing the right metrics combined with tracking progress will help you assess where improvements and adjustments are needed.
- Establish ROMI goals in line with marketing and company business objectives
- Design marketing program and marketing data metrics in tandem to reflect shared marketing program and ROMI measurement objectives
- Design MROI metrics that speak directly to the bottom line; avoid soft metrics
- Focus on metrics that provide evidence change and growth in revenue and profitability and, if successful, will improve future marketing effort
ROMI Metric Examples
Measurement of marketing ROI is driven by metrics. Part of the challenge of developing these yardsticks is that there are so many aspects of that effort that can be measured.
There’s no one-size-fits-all guide to determining which metrics are right for your marketing. The right metrics provide insight into performance, and help focus your efforts and refine your strategies.
“Not everything that can be counted counts.”
(I’ll get to the rest of the quote later)
Some of these potential metrics are soft, nice-to-know measurements – often referred to as vanity metrics – such as increases in Facebook “likes” or your number of Twitter “followers.” Unless a Facebook “like” converts to a completed contact form on your website, this metric otherwise has no impact on sales.
Others are good-to-know measurements of marketing department activity, response rates, website visits and PR editorial coverage.
The most important are essential- to-know metrics that gauge the actual ROI impact of marketing programs on revenue.
The good news is that you don’t have to measure every possible data point to build a successful strategy. In fact, the best course is to focus on a relatively small set of clear metrics that capture the most relevant and meaningful data.
Focus on two categories of metrics: revenue metrics and activity metrics:
▪ Revenue metrics are what marketing will report to executive management on a
monthly or quarterly basis to document marketing’s contribution to revenue and
▪ Activity metrics are what marketing will internally need to gauge the impact of
its programs, database management and sales-marketing alignment.
In this blog, we will look at Revenue metric examples.
Revenue Metrics: The Big Picture
What kinds of metrics tell a story that management will understand and embrace—especially when the time comes to justify your budget?
The answer to this question begins with your marketing and sales funnel. It’s important to quantify your marketing team’s impact in terms of converting leads to closed deals and generating revenue.
Here are some key revenue-related metrics that allow you to accomplish this:
Marketing Lead Metrics
Inquiries or raw leads are typically the first metric that matters to executive management, since this is the point where your marketing team actually begins its qualification process and separates the “suspects” from the “prospects.”
A related metric involves net new leads added to a marketing contact database. This number—for example, XX new names added to the database per quarter—allows marketers to demonstrate that they can generate the raw material required to feed a company’s funnel.
Marketing Qualified Leads (MQLs) represent the next step into the marketing funnel, where individual prospects show the right level of buying intent and engagement to pass them along to sales.
Defining the “Marketing Qualified” Lead
Whatever the criteria, sales and marketing must align and work together to develop the definition of a qualified lead. Without shared and mutually agreed upon parameters of what constitutes a Marketing Qualified Lead, the two teams are working from different playbooks.
Keep in mind, if you construct qualification parameters that are too narrow, marketing may not be able to supply sales with enough leads to feed the marketing and sales funnel. So there may need to be some negotiation in order to keep the funnel full with enough leads.
Sales Lead Metrics
Opportunities, also known as Sales Qualified Leads (SQLs), have been moved into the sales pipeline and get actively worked by sales reps. This is a critical metric for both the sales and marketing team. This is also the point where a lead may be associated with a potential revenue value— a key number for anyone concerned with revenue-focused metrics.
Conversions from one marketing and sales funnel segment to the next are actually a function of the other metrics we’ve previously talked about. Higher conversion rates, especially as leads turn into opportunities and then customers, indicate a more efficient marketing effort that delivers what the sales team needs to hit its numbers.
The same applies to time-to-conversion metrics that measure how long it takes for leads and opportunities to move through each stage of the marketing and sales funnel. Rapid time-to-conversion, again, usually indicates more efficient marketing activities that generate faster, higher ROI.
Nuturing can take the form of white papers, e-newsletters, webinar invitations—ongoing communications that really talk about your company’s value and expertise.
Re-engagement metrics cover situations such as leads that don’t score high enough to convert to MQLs, or SALs. The better you are at placing these leads in a nurturing campaign, and ultimately moving them back into the sales pipeline, the more you’ll contribute to revenue growth.
Check back next week when I cover Activity metrics, including what and how to measure.
Rick Verbanas has brought his passion for marketing to Fortune 500 companies, small businesses and not-for-profits. He strives to stay current in the latest marketing best practices, and provides a weekly roundup for your news and enjoyment. To subscribe to future blogs, please enter your email address on the left hand side of the page.