Measurement, Accountability and ROIB2B Marketing University

December 1, 2009

David M. Raab

Raab Associates Inc.

www.raabassociatesinc.com

www.racombooks.com

Today’s Goals

• understand the measures you need

• build a plan to capture them

(Sad) State of the Art

19% of marketers are confident they could forecast the

impact on sales of a 10% cut in marketing spend– Association of National Advertisers, 2009– good news: up from 10% in 2009

24% of marketers calculate ROI, NPV or other profitability

metric for at least some marketing investments– Lenskold Group / MarketSphere, 2009– bad news: barely changed in past five years

Why It Matters

3.3x higher Marketing ROI vs. average for best-in-class

companies, who more often apply measurement best practices:– 1.7x more set channel performance standards– 1.7x more assign an individual to regularly calculate ROMI – 1.5x more keep history of marketing performance– 1.5x more define campaign success measures in advance– AberdeenResearch, 2008

2.0x higher ratio of faster vs. slower growth among firms that

use ROI metrics vs. those that use traditional metrics– Lenskold Group / MarketSphere, 2009

Measurement Goals:

Count Response• response

capture• campaign

attribution• cost capture• comparisons

vs budget, vs history

• response quality

Measurement Goals:

Show Impact• import sales data and

match to leads• attribute sales to

campaigns• simple ROI (= revenue /

campaign cost)• full ROI:

– estimate differences in future value

– estimate additional marketing & sales costs

• applies to lead generation campaigns only

Marketing / Sales Integration

Marketing

Sales

then…

metrics measures

# new leads

marketing cost / qualified lead

marketing cost

# qualified leads

# accepted leads

# closed sales / # accepted leads

sales cost / $ sales

sales cost

# closed sales

$ sales

Marketing / Sales Integration…now

metrics measures

# new leads

marketing cost / qualified lead

marketing cost

# qualified leads

sales + marketing cost / $ sales

# accepted leads

# closed sales / # accepted leads

sales cost / $ sales

sales cost

# closed sales

$ sales

Marketing

Sales

Marketing / Sales Integration…now

Marketing

Sales

Additional Implications:• unified sales / marketing reports• sales access to individual lead history• greater emphasis on recycling leads

Measurement Goals:

Understand Process• define marketing / sales

funnel• define markers for each

funnel stage• track progress through

stages• measure impact of

treatments on progress– conversion rate and

velocity• tailor treatments to

stages– refine based on results

Understand Process (1)base test 1 change vs base

stage conversion quantity cost/lead total cost conversion quantity cost/lead total cost1 1,000 5 5,000$ 1,000 5 5,000$ -$ 2 0.5 500 10 5,000$ 0.5 500 10 5,000$ -$ 3 0.5 250 20 5,000$ 0.43 215 10 2,150$ (2,850)$ 4 0.5 125 30 3,750$ 0.5 108 30 3,225$ (525)$ 5 0.5 63 40 2,500$ 0.5 54 40 2,150$ (350)$

total 63 21,250$ 54 17,525$ (3,725)$ mktg cost31,250$ revenue @$500 26,875$ revenue @$500 (4,375)$ revenue

47% ROI 53% ROI 6% ROI10,000$ profit 9,350$ profit (650)$ profit

base test 2 change vs basestage conversion quantity cost/lead total cost conversion quantity cost/lead total cost

1 1,000 5 5,000$ 1,000 5 5,000$ -$ 2 0.5 500 10 5,000$ 0.5 500 10 5,000$ -$ 3 0.5 250 20 5,000$ 0.5 250 20 5,000$ -$ 4 0.5 125 30 3,750$ 0.55 138 35 4,813$ 1,063$ 5 0.5 63 40 2,500$ 0.5 69 40 2,750$ 250$

total 63 31,250$ revenue @$500 34,375$ revenue @$500 3,125$ revenue

47% ROI 52% ROI 5% ROI

Understand Process (2)base test 1 change vs base

stage conversion quantity cost/lead total cost conversion quantity cost/lead total cost1 1,000 5 5,000$ 1,000 5 5,000$ -$ 2 0.5 500 10 5,000$ 0.5 500 10 5,000$ -$ 3 0.5 250 20 5,000$ 0.43 215 10 2,150$ (2,850)$ 4 0.5 125 30 3,750$ 0.5 108 30 3,225$ (525)$ 5 0.5 63 40 2,500$ 0.5 54 40 2,150$ (350)$

total 63 21,250$ 54 17,525$ (3,725)$ mktg cost31,250$ revenue @$500 26,875$ revenue @$500 (4,375)$ revenue

47% ROI 53% ROI 6% ROI10,000$ profit 9,350$ profit (650)$ profit

base test 2 change vs basestage conversion quantity cost/lead total cost conversion quantity cost/lead total cost

1 1,000 5 5,000$ 1,000 5 5,000$ -$ 2 0.5 500 10 5,000$ 0.5 500 10 5,000$ -$ 3 0.5 250 20 5,000$ 0.5 250 20 5,000$ -$ 4 0.5 125 30 3,750$ 0.55 138 35 4,813$ 1,063$ 5 0.5 63 40 2,500$ 0.5 69 40 2,750$ 250$

total 63 21,250$ 69 22,563$ 1,313$ mktg cost31,250$ revenue @$500 34,375$ revenue @$500 3,125$ revenue

47% ROI 52% ROI 5% ROI10,000$ profit 11,813$ profit 1,813$ profit

Understand Process (3)base test 1 + 2 change vs base

stage conversion quantity cost/lead total cost conversion quantity cost/lead total cost1 1,000 5 5,000$ 1,000 5 5,000$ -$ 2 0.5 500 10 5,000$ 0.5 500 10 5,000$ -$ 3 0.5 250 20 5,000$ 0.43 215 10 2,150$ (2,850)$ 4 0.5 125 30 3,750$ 0.55 118 35 4,139$ 389$ 5 0.5 63 40 2,500$ 0.5 59 40 2,365$ (135)$

total 63 21,250$ 59 18,654$ (2,596)$ mktg cost31,250$ revenue @$500 29,563$ revenue @$500 (1,688)$ revenue

47% ROI 58% ROI 11% ROI10,000$ profit 10,909$ profit 909$ profit

base test 1 + 2 + more new leads change vs basestage conversion quantity cost/lead total cost conversion quantity cost/lead total cost

1 1,000 5 5,000$ 1,100 5.5 6,050$ 1,050$ 2 0.5 500 10 5,000$ 0.5 550 10 5,500$ 500$ 3 0.5 250 20 5,000$ 0.43 237 10 2,365$ (2,635)$ 4 0.5 125 30 3,750$ 0.55 130 35 4,553$ 803$ 5 0.5 63 40 2,500$ 0.5 65 40 2,602$ 102$

total 63 21,250$ 65 21,069$ (181)$ mktg cost31,250$ revenue @$500 32,519$ revenue @$500 1,269$ revenue

47% ROI 54% ROI 7% ROI10,000$ profit 11,450$ profit 1,450$ profit

Measurement Goals:

Optimize Results• test management

and reporting• downstream impact

of changes• resource allocation• business simulation

model• statistical

optimization• ROI hurdle rate

Measurement Goals:

Strategic Alignment• strategy

definition• spending vs.

targets• market

perceptions• lead profiles• behaviors

Strategic Alignment

Marketing

Sales

Funnel Stage Metrics / Goals Metric Type

(all marketing)

30 % of marketing spend against SMB

leading

reach top 5 Google page rank

leading

interest 20 % of new leads from SMB

coincident

desire 65% of SMB leads are sales qualified

coincident

convert 25% close rate on sales qualified SMB leads

lagging

convert 15% of sales to SMB lagging

Strategic Objective: penetrate SMB marketMarketing Objective: generate SMB leads

Social Media

Capability Levels • monitor • react• initiate • empower

Social Media

Social Media Capability Levels broadcast monitor react initiate empower

Social Network Uses• 60% thought leadership• 49% generate leads• 46% customer feedback• 35% advertising• 29% market research• 15% other

- BtoB Magazine, 2009

Social Media Uses• 25% generate awareness • 18% customer engagement• 16% engage analysts/influencers• 15% market products• 14% monitor and respond• 8% competitive tracking• 4% other - Visible Technologies & SiriusDecisons, 2009

Social MediaSocial Media Measures• activity: mentions, links, downloads, views, shares, members• sentiment: positive/negative comments, evangelists/detractors• content: brand attitudes, messages, insights• impact: attributed sales, customer satisfaction, service costs

Social Media ROI Metrics• 31% Web traffic/response rates• 20% qualified leads• 14% customer loyalty/retention• 13% brand awareness• 12% revenue• 10% other

- Visible Technologies and SiriusDecisions, 2009

Recap: Five Measurement Goals

1. Count Response

2. Show Impact

3. Understand Process

4. Optimize Results

5. Strategic Alignment

Industry Practice

• 35% use traditional metrics – e.g. response rate

• 35% use basic financial metric – e.g. cost/lead

• 24% use profitability metric (at least sometimes)– e.g. NPV, ROI

• (6% don’t know)

– Lenskold Group / MarketSphere, 2009

Systems

CRM/sales automation

Web site

call center

reports & analysisWeb

analytics

email

direct mail

events

searchmarketing

advertising

social media marketing automation• database • campaigns• scoring

Marketing Measurement Maturity Modellevel data needs system needs measures skills / processes

1. Count Response _ campaign tracking codes, universe, budgeted cost and response

_ campaign costs

_ campaign responses

_ response quality

_ campaign management

_ marketing planning

_ capture responses & link to campaigns

_ calculate measures & compare vs. history

_ campaign response [varies by channel]

_ campaign cost

_ cost per response

_ plan vs actual results

_ response quality

_ campaign design

_ tracking discipline

2 Show Impact (acquisition programs)

_ sales results on leads_ sales & costs on existing customers

_ marketing treatments and costs per lead/customer

_ marketing lead database

_ import sales results & link to marketing leads

_ campaign attribution method

_ report marketing costs by lead

_ estimate long-term value

_ new leads per campaign

_ sales per lead

_ simple ROI (sales / acq cost)

_ long-term value per lead

_ long-term costs per lead

_ full ROI (long term value / all sales & marketing costs)

_ long term value forecasting

_ cost allocation

3 Understand Process _ customer attributes

_ customer behavior

_ stage assignment / scoring

_ track funnel status over time

_ calculate summary measures on transitions and time-in-stage

_ correlate stage changes with marketing treatments

_ calculate flow through funnel

_ funnel counts

_ treatment impact on conversion and time-in-stage

_ treatment impact on flow through funnel

_ treatment ROI (net change in value / change in cost)

_ funnel stage definition

_ funnel change analysis

4 Optimize Results _ test setup and reporting

_ business modeling

_ automated optimization

_ budget and revenue projections by period

_ test design, execution & analysis

_ business modeling

5. Strategic Alignment _ strategy tags on campaigns

_ Web visitor behaviors

_ report budget by strategy tag

_ Web surveys & visitor profiles

_ social media monitoring

_ sales analysis (upsell, etc.)

_ trend analysis

_ marketing spend vs. target (by strategy tag)

_ market perceptions vs. target

_ visitor attributes vs. target

_ trends

_ strategy measure definition

_ data interpretation

Next Stepsdoable within data needs system needs measures skills / processes

next week

next month

end of year

mid next year

Consider:• where you’re spending your budget • the biggest information gaps • potential for improvement • management pressure • low hanging fruit • resource gaps • outside resources

Keys to SuccessCompared with all firms, companies with effective marketing measurement:

•2.5 x more have a formal process to apply

measurements to decisions

•2.1 x more make targeted investments in

measurement systems, skills and data

•2.0 x more hold marketers accountable for meeting targeted measurements

- CMG Partners and Chadwick Martin Bailey, 2009

Thank You

David M. Raabemail: draab@raabassociates.com

blog: http://customerexperiencematrix.blogspot.com/Twitter: @draab

phone: 914-241-2117