Today’s chief marketing officers are experiencing something of an identity crisis. In a fast-paced business environment that’s being revolutionized by a flood of digital technology, what I’ve seen as a CMO recruiter is that the lines dividing internal silos are blurring and a lot of confusion remains about what the CMO should be delivering and the value he or she can add.
CMOs oversee and manage marketing efforts, of course. But they are also responsible for driving innovation and leading an organization’s growth through areas outside of the traditional marketing purview, such as product development, customer service, and sales, according to last year’s CMO Survey.
It’s no wonder there’s confusion around the role of CMOs: they are being pulled in a thousand directions every day. With increasingly robust analytics and ROI measurement capabilities, the heat is on for them to demonstrate their value. Such a wide array of responsibility leads to 62% of CMOs feeling pressure from their CEO or board to prove the value of marketing, and 65 % of those CMOs saying that the pressure is increasing.
It’s clear that modern CMOs must be able to prove their value in the C-suite. But how do they do it? The answer starts and ends with their ability to demonstrate a significant, positive return on investment (ROI) in the marketing department and across the organization that results in sustained business growth.
To truly cement their position at the top of the the C-suite, today’s CMOs need to understand marketing ROI. But they must also know how to prove it– as well as communicate their ability to optimize it–to the rest of the C-suite and the company as a whole.
Nailing Down the Elusive Marketing ROI
For marketers, determining the ROI for any given activity can be tricky.
Though many marketing activities certainly produce direct ROI (a message is delivered, a prospect responds, clicks over to your website, and makes a purchase), the line between the first touchpoint with a prospect and eventual conversion into a prospect or a customer isn’t always straight and clear. A problem I’ve seen time and again as a CMO recruiter is that it isn’t always possible to connect the dots or to determine which touchpoint had the most meaningful impact.
Furthermore, some marketing activities, such as branding and publicity, aren’t intended to produce direct sales but are, instead, intended to build awareness and brand affinity that translate into long-term revenue.
So how how can a marketing leader translate their department’s work into financial terms that will resonate with the rest of the company and prove their worth?
1. Get a Hold of Your Spending
Accurately tracking ROI begins with an understanding of where every marketing dollar is being spent across your entire company, and then aligning that spend with the company’s strategic priorities.
That spend should include direct monetary investments, such as advertising buys, and time costs, which can be figured based on the gross cost of your team and the time it takes the team to see a specific marketing activity through to completion. Don’t forget other costs like staff training and technology acquisitions.
2. Chart out the Customer Experience and Understand How Marketing Tactics Affect It
Map the buyer’s journey and understand how various marketing tactics drive it
Next, ask yourself a few important questions: How does your ideal buyer make the journey from stranger to lifelong customer? Which marketing strategies and tactics have the most impact on that journey?
Only after you’ve developed an in-depth understanding of the buyer’s journey and the factors that affect it can you accurately track and report on ROI.
3. Establish a Set Marketing Formula and Assign Value to the Ingredients
There are countless ways to reach your ideal customers throughout their buying journey. Choose your marketing mix strategically, basing it on data and analytics whenever possible, and commit to sticking with that mix long enough to track trends over time.
Next, combine direct costs and time costs for each activity to determine your marketing inputs. Finally, determine an intended outcome for each activity, whether a rebranding effort or an online lead generation program, and assign a value to that marketing output based on its impact on sales.
4. Acquire and Develop Attribution and Reporting Models Appropriate for Your Business
When calculating marketing ROI, should you credit a sale to the first touchpoint between your brand and the consumer or the last touch before the prospect becomes a marketing qualified lead (direct attribution), or distribute that credit across all touchpoints (indirect attribution)?
In most cases, the correct answer is a bit of both.
Develop a customized attribution and reporting model based on the unique nature of your buyer’s journey that puts weighted value on various touchpoints throughout the path to sale. Then, work with Sales and other customer-facing departments to set up tools and measurement processes that allow you to track activity against that model in real time.
5. Measure, Test, Optimize, Improve
As more results and data pour in, you’ll begin to see opportunities to optimize your marketing spend, decreasing costs and increasing impact. Take those opportunities and report positive outcomes to your executive teams and the company as a whole regularly.
Finally, as best-practices come to light, instill them in the culture your organization. Over time, doing so will make your marketing outcomes more predictable and improve the sustainability and success of your company as a whole.
It is both a difficult and an exciting time to be a CMO, and the best have unprecedented opportunity to rise to the top. Making your department accountable for every dollar it spends and showing the returns to the rest of the company is your real challenge.
Luckily, thanks to the advent of new tools and technologies, as well as a strengthened commitment to data and analytics among marketers, ROI is becoming a more measurable and meaningful metric than it has ever been.
Make achieving positive ROI and properly reporting it to your company your #1 priority. That’s how you truly earn your spot at the table.
Article source: MarketingProfs
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