According to our 2021 State of Martech report, 39.5% of Marketers found that their budget going into 2021 was dependent on business demand and success, and yet, 73.5% of organisations still planned to maintain or increase their marketing spend in 2021.
The past 18 months have been a difficult period for the vast majority of organisations, but what these statistics indicate is that marketing and marketing technology are still valued highly within most organisations, even when those businesses are under duress. Often in the past, Marketing was the first department to have budgets cut, so perhaps marketers are beginning to change external perception of the department into a profit centre, rather than a cost-centre.
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Why are Campaign Metrics not enough?
Marketing departments are under pressure as they are driven by business need for marketing to consistently deliver bigger and better results, and campaign metrics aren’t enough to prove to key stakeholders that Marketing is providing tangible business value.
Campaign Metrics are essential to the marketing department in working out the specific success rates of their individual marketing initiatives. These metrics, such as click through metrics and open rates, though considered vanity metrics, still allow marketers to work out how best to tailor their content on a case by case level, testing different methods to discover what’s best.
It is not their value to the marketing department that’s the problem, but rather that campaign metrics don't provide the rest of the business with any holistic understanding of the marketing contribution to revenue. In fact, According to Fournaise, “73% of CEO’s think Marketers lack business credibility and are not the business growth generators they should be.”
Too many marketers measure MROI by looking at campaign metrics and performance only. This is important, but it is rather tactical. Campaign reporting can tell you how a campaign is performing, but it isn’t really MROI in the business sense. That is, unless all campaigns are rolled up into one, collated, and then tracked for performance improvement using common KPIs.
Essentially, the measurement of campaign metrics is not an effective measurement of MROI. Click here to read more about the kinds of reporting and dashboards you should create to best represent campaign success.
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The importance of proving Marketing Return on Investment
Marketing Return on Investment can be divided into three dimensions:
- Justify Marketing spend
According to our latest MROI Report, only 21% of the C-Suite understand how MA/MC can enhance customer experience and demonstrate the ROI of Marketing activities. Marketing is a significant expense for many organisations, and the C Suite want to know that there is a return on that investment.
Effective MROI reporting therefore exists to ensure that marketing are impacting on the profitability of the organisation.
- Decide what’s profitable
MROI is often calculated at the campaign/program level, analysing information that gives marketers insight into which efforts have a higher return, and therefore warrant further investment. However, by raising this higher than just these tactical levels, the Marketing department can gain a holistic view of marketing success, as well as inform on where further budget should be allocated.
- Hold Marketing accountable
Good marketing is not about awards, stories or design, it’s about delivering customers and sales. Measuring how efficiently Marketing spend their budget allows everyone to be accountable for using that investment wisely. This is essential because it makes concrete what used to traditionally be intangible.
Before, Marketing ROI was spurious at best, measured by awards and ‘brand reach’; but now, by holding marketing accountable for their spend, ROI is clearly demonstrated back to the rest of the business. All expenditure is then justified before it is spent.
Working out MROI
It’s not hard to work out the cost of marketing investment accurately. Sure, there are issues such as working out whether the marketing budget should include marketers’ salaries, or whether the office party comes out of the marketing budget and so on, but this pales into comparison against attempting to quantify marketing return on investment. To achieve this, a Sales baseline is required, and since marketing has most likely been around just as long as Sales in most organisations, this can become difficult.
Jill Avery, Senior Lecturer at Harvard Business School, states that “the incremental financial value attributable to marketing derives from its ability to increase customer loyalty and reduce customer churn. In this case, managers need to measure how much profit was retained that would have been lost without the marketing program”.
Marketing Return on Investment is, on the face of it, a very simple measurement, that of marketing spend, subtracted from that of Marketing profit. The difficulty lies in the measurement of marketing profit.
- What Sales successes can effectively be attributed to Marketing?
- And how has brand reach and customer experience improved upon the profit margins?
Both of these questions are not easy to quantify, however, the simple fact that the vast majority of marketing budgets were not slashed at the beginning of 2021 indicates that businesses believe marketing is providing some value into the wider organisation. It is now down to marketers to prove this in a tangible way, engaging key stakeholders with the unequivocal proof that marketing has real business value, a fact we marketers already know.
Download our ‘Marketing Return on Investment Report 2021’ here to gain further insight into market trends surrounding marketing value, and the journey towards proving it.