B2B Marketer: Challenges in Calculating Marketing ROI
Anurag Khemka
President and CEO-RightWave
Tuesday, October 20, 2015
Ever since John Wannamaker's century-old famous quote "Half of the money I spend on advertisement is wasted, the trouble is I do not know which half." marketing has relentlessly tried to find a reliable way to determine ROI of its initiatives, but remained unsuccessful due to the lack of reliable tracking and credible attribution models. However, in last two decades both technical capabilities and systems have evolved that can accurately track and record activities with proper source attributions enabling advanced analytics and reporting. When attributed correctly with reliable marketing funnel model, accurate returns from marketing campaigns can be calculated to not only help marketing determine which half must be improved, but also justify marketing spend by demonstrating impact of marketing on business growth and sales productivity. This development in the "Marketing Science" is phenomenal as this can change Marketing's status from a cost center to a profit center.

The biggest impact of maturing of both Sales Force Automation (SFA) and marketing automation (MA) systems is on how the B2B marketer must improve the ways to conduct business. Both SFA and MA platforms provide the core infrastructure to track and measure almost all prospect and customer touch point. However, according to Sirius Decision fewer that 20percent of the B2B organizations are comfortable with their ability to quantify the return on Marketing spend. The challenges now lie in setting, configuring, and operating these platforms to reliably track and extract information that can be meaningfully interpreted, analyzed and reported on consistently.

Most modern systems can provide easy metrics for direct ROI, like clicks and registrations from emails, visits from social media or PPC, attendees in a webinar, cost per lead or per MQL from an event etc. But true ROI requires connecting the dots from each campaign interaction to creation of opportunity and closedwon revenue. B2B Marketers face following challenges in calculating end-to-end ROI:-

1. Tracking and measurement: While the ability to track each marketing touch point is getting better, campaign setup and channel integrations must be carefully configured to consistently measure accurate attribution. Automated tracking must be supplemented with manual tracking for offline channels.

2. Distributed systems of record: With lots of technologies, SaaS systems, and marketing channels in use, the data today is highly distributed.This data must be brought together for appropriate attribution and analysis.

3. Many to many attributions: In B2B, revenue is the result of multiple nurture cycles where many campaigns involving many individuals, over a significant time-span result in a qualified opportunity. Most systems lack in their ability to link multiple campaigns to a single opportunity. E.g. in SFDC, you can only convert one lead to an opportunity or carry only one campaign as influencer for that opportunity. Even leading MA systems like Marketo and SFDC only track one lead source by default, either tracking the first or the latest source.

4. Temporal attribution through funnel stages: In systems where many activities can be attributed to an opportunity, it is not easy to separate the activities that impacted each stage vs. all activities. The time when an activity happens during the sales cycle matters in attributing its impact. If a prospect attends a webinar after the opportunity was created;the webinar should not be credited for opportunity generation, but may be credited for revenue acceleration.

5. Data Quality Management: The biggest hurdle to reliable analysis and reporting is not having a clean database. An effective data-stewardship is essential. Record duplications, inconsistent information, maintaining unique company association are just a few of the issues that must be handled.

6. Definition and agreement on funnel and ROI model: Its often seen that sales and marketing departments have a tough time agreeing on a consistent funnel and ROI attribution model. Arguments over sales generated vs. marketing generated abound. Aligning marketing's main goal with increasing sales productivity allows these departments to work as partners.

7. Tracking and reporting marketing spend: To calculate the ROI of any campaign or initiative, we must know its actual cost. Most marketers only report direct cost, while the cost of internal resources and travel often contribute the larger portion of true campaign cost.

8. Multi-dimensional Analysis: Most SFA and MA systems are capable of doing excellent reports as long as one or two objects are involved.For true B2B ROI calculations, complete lifecycle of leads, campaigns, accounts, and opportunities must be analyzed. To determine a campaign's ROI, one must analyze member lead's involvement in other campaigns as well as multiple leads from same account through complete lead and opportunity cycles. SFA and MA systems currently fall short in their ability to offer such multi-dimensional analysis.

Though these challenges look daunting, overcoming them is now possible with a disciplined data-driven approach to marketing. We (my Company RightWave) have successfully built and provided accurate reporting to not only understand end-to-end ROI from each campaign and channel but also reliably calculate marketing's contribution to the sales pipeline and revenue. We have demonstrated marketing's impact on sales productivity like length of sales cycle, win percentage, and deal size. When sliced against each campaign and campaign type this analysis can identify the campaigns that are meaningfully accelerating revenue velocity. These reports have repeatedly shown that marketing- influenced opportunities result in win more often with on average half sales cycle duration (in comparison to the opportunities without marketing engagement). With such numbers,the CEO's perspective on marketing investment and measurability has to become strategic.

It is no coincidence that the last decade has seen not only the birth of the Marketing Operations department but also seen significant rise in marketing technology spend by the leading organizations. While the platforms today are providing adequate core infrastructure needed for tracking and measurements, they still lack the smarts for automation of setup, configuration, multi-channel integration, and operational insight. Leading organizations are carefully investing in systems, infrastructure, manpower, and know how while adopting a disciplined approach to data-driven marketing strategy to address these challenges and to maximize the return on their marketing investments.
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