Have you calculated your B2B marketing costs and ROI?

Do you know how much marketing activity you can actually afford? Even if best practice marketing is employed it is not safe to assume that an increase in B2B marketing costs will be more than covered by the resulting sales?

As an example if a manufacturing company intends to increase sales it is reasonable to expect that some extra marketing activity will be required to generate those sales. Of course a proportion of the increase will be generated by existing customers and projects but what about the rest? Marketing activity will be required to generate the required sales leads.

The ideal marketing process may include Content, Website (&SEO), Email, Social media and possibly some Pay per Click. Is it really possible to justify investing in everything or are there choices to be made? The first step is to determine how many sales leads (on average) are required to generate a sale, what is the average value of a sale and therefore how many leads are required. Read more on calculating lead quantity in this post  from Christopher Ryan.

With the number of leads in place it is then possible to develop a process. For a manufacturing business social media should be a low priority leaving Email and website both of which require content. If an Email list of existing customers and prospects is in place then to reach out to these contacts with engaging and valuable content and nurture those prospects going forward is by far the cheapest route.

Simple measurement processes may be put in place to quantify exactly how many leads are generated from an ongoing Email campaign but what if the business suffers from the all too common small list syndrome , what then. Ultimately, a small Email list results in a small number of leads, regardless of how strong your content and nurturing process may be.

Of course you could take the inbound route but that demands both a substantial investment in content, in its many forms, and SEO to ensure your content hub (website) is actually found. Don’t fall for the ‘build it and they will come myth’ as it just won’t happen.

Good quality SEO takes time and effort and that involves cost. Justifying the expense of a full time SEO person can be difficult and it is not something you can expect an existing marketing person to learn overnight. It is important to make a careful analysis at this point of exactly how many sales leads you can expect from inbound marketing (and website) and therefore what you can reasonably invest.

The alternative option is to invest in pay per click but it is important to first check it fits with your type of business. It is well established the majority of prospects look to the organic results on Google before they look to the ad results. PPC has many advantages including the ease of defining cost per lead but it only tends to fit with a relatively small proportion of manufacturing type businesses. It is however easier to equip an internal marketing person with PPC skills than SEO skills in a relatively short period of time.

Cost per lead is generally higher for PPC than inbound marketing or Email. On the flip side PPC and Email are much faster to generate results. However, as mentioned above, Email only works well if you have a good quality Email list. If it is necessary to build a list that can take a significant amount of time and effort. The task is not to blindly invest in marketing but to think through a process that will deliver the required number of leads for an appropriate cost. Crucially, the same analysis will show what is, and is not, a realistic number of leads and therefore a reasonable turnover growth forecast.


The Problem With Measuring Marketing Results

In principle measuring marketing results is relatively easy but how do you really prove the positive impact of your B2B marketing activity? Yes you can measure clicks, opens, shares, impressions and a host of other signals but how does that relate to sales? While owners of the business may be interested in activity all they ultimately care about is sales.

In an old (but still gold) post Annuitas state ‘The rest of the organization tracks and marches to the beat of the revenue drum. Marketing must follow suit.  Clicks, opens and responses do not mean anything if they cannot be tied back to a revenue stream’

Although it can be difficult, measuring sales leads is one possible answer. However, as there is always a time lag between the lead and the sale it is not a perfect measure. Lead measurement also leaves the marketing department wide open to attack by those who may be looking for somewhere to hide. It is too easy for others to claim the leads are of poor quality, or for the wrong products or from the wrong customers.

Measuring Inbound vs Outbound

The trend towards inbound marketing further exacerbates the problem. A major element of inbound marketing revolves around content but producing and distributing that content comes at a considerable cost. It may be easy to construct an argument that shows inbound marketing is far more effective in B2B markets than outbound but without being able to tie the costs back to a recognizable output (sales) that argument is likely to fall on deaf ears.

Directors and financial officers have often become conditioned to measuring marketing results v budgets based on outbound techniques like traditional advertising, direct mail and exhibitions, it is what they expect and, to a point understand. It may be frustrating that the such activities get approval ahead of an inbound approach but the standard of proof on something that is new is always much higher.

One Possible Solution

When relating marketing activity to results, and specifically to sales there is no perfect answer. One, relatively simplistic, but useful technique is to set a baseline based on past activity. How many leads are generated at present per month and what is the average conversion (leads to sales).

A variance factor may be added to this number (perhaps +5%) then it is relatively safe to assume that if leads increase beyond this level it must be due to marketing activity. This is a particularly useful measure if adding in new marketing processes including inbound marketing.

Leads can then be converted to a rough sales number and compared directly with the marketing costs of generating that sales number to give a ROI. The measure is not perfect as sales numbers can be impacted by a wide range of factors beyond marketing control but it does give an indication that higher management and financial people understand.

Sales may wish to claim that the increase in sales numbers is due primarily to their activity and increased conversions. However, marketing may argue (with some justification) that a major part of that success is due to increased lead quality.





Marketing Campaign Analysis And ROI

Without marketing campaign analysis any marketing department will find it hard to justify itsProve marketing campaign effectiveness to sales existence. At the corporate level higher management need to know resources employed are delivering the required return. At a human (more selfish) level the corporate environment is competitive and everyone is keen to claim success and disassociate themselves from failure. In the mass of touch points that ultimately lead to a sale marketing needs to prove its contribution.

The problem is how to decide what to measure, how to measure it and how to provide clarity out of the mass of data collected. In our experience the best measurement processes follow a pattern:

  • Set required outcomes
  • Decide what marketing tools will be used
  • Define measurement tools and frequency of measurement
  • Measure
  • Adapt and improve based on firm data

Set Marketing Outcomes

For most businesses the desired outcome is a sale but in B2B markets many customer touch points are required to generate that sale. A lead is required for sales to follow up and a sales process initiated to take the opportunity forward to close.

Sales cannot operate in a vacuum and support from various business departments (technical, production, quality, management) will be required in any sales process. Marketing will also have inputs a various points but most are soft and may be minimalized by those who may wish to do so. Often the only hard statistic that may be measured is lead generation

The problem for marketing is accurately pointing to the specific lead that initiated a sales process and ultimately led to the sale. Historic company data should give an indication of the best type of lead and the number of those leads required to generate a sale. It is then for marketing to decide the number, the source and the relative quality of each touch type that will generate that lead.

Marketing Tools

With marketing outcomes in place an analysis of touch points, marketing tools to generate those touches, the quantity of touches required, the cost per touch and (crucially) measurement of those touch points may be undertaken. Using a single marketing technique to deliver the required number of touches is a high risk strategy. A better approach is to use a range of marketing tools working together to deliver the required result. The actual mix developed will generally be specific to each business and their market.

Marketing Campaign Performance Measurement and Analysis

marketing analysis and roiAlthough most B2B Marketing commentators suggest inbound marketing campaigns generates the best return on investment elements of outbound marketing remain effective. The problem is (telemarketing aside) it is difficult to measure the lead generation effectiveness of outbound techniques such as advertising, direct mail and exhibitions.

In contrast the effectiveness of most online marketing techniques can be measured in great detail. Marketing campaign analysis combining Google analytics and webmaster tools can precisely define the number of website touches. Google analytics and Adwords tools can record the detail of every touch generated by PPC and there are many low cost CRM systems available that can record the outcome of an Email campaign.

Social media activity recording tools are also available for little to no cost that can record detail of social media touches and interactions. The challenge is not how to record online marketing data, it is more how to make conclusions based on the mass of data available. The key data required is at least the number of touches secured as from touches it should be possible to extrapolate the number of leads (and sales). Where it is possible to identify (without doubt) a lead then this should be recorded as evidence to be produced when required.

Measure Results Adapt And Improve

It is only possible to really make decisions on how to improve based on accurate data. Without it there is a major risk of wasting time and effort on unproductive activities based on either on the principle of they seemed to work in the past or pure guesswork. With a baseline established showing the number of touches generated by each activity it is possible to drop poor performing activities and continue to fine tune and improve those that are delivering results. A limited number of new marketing activities may be added to replace those dropped on a trial basis to be continued only if analysis shows they deliver results

So for any marketing department intent on proving its value and the ROI on a marketing campaign building a process to maximise customer touches and converting those to sales leads is key. There may be many more valid marketing tasks to be undertaken but ultimately it is the generation of sales leads that is key. Measurement and analysis of results provides the opportunity to refine and adapt a process to deliver increased value (more sales leads) over time.

The Short Term Impact Of Reduced Marketing Spending

What is the real impact of reduced marketing spending? Many suggest it is false economy but the truth is, at least in the short term, it can have negligible impact on a business.

With the professional marketing team gone many of the day to day marketing functions may continue. For example general administration staff may allocate some of their time to database update, sending out the latest newsletter or other relatively simple pre defined, routine marketing tasks.

The impact of removing a marketing team very much depends on the specific business and market. The actions of the marketing team can continue to have an impact several months after they have left. The noticeable impact on a business may therefore be insignificant in the short term. How long a business can continue without marketing is the key issue.

For some businesses it may be many months for others a few weeks, it very much depends on what tasks the business needs to perform. If the business must re-position itself in the market then professional marketing strategy and planning skills are required.

If product line rationalization or new product introductions requires marketing skills. Staying front of mind with customers base is not something that may be switched back on overnight. As described above there is a legacy effect when marketing is switched. There is a delay before results start to flow when it is switched back on.

It is important to also consider the impact of reduced marketing spending on other departments. With no marketing support how will sales perform? Sales resource is expensive and if it is not performing to its maximum can be a significant drain on business resources.

In a desperate situation marketing may be cust and there may be minimal short term impact. However, the chances of medium to long term recovery will be compromised if no marketing is in place.