As the growing reliance on data reshapes marketing, many CMOs wonder which metrics to collect and how to use them to boost company profits. There's a secret to that. In fact, there are four.
Heidi Bullock, vice president of demand generation at Marketo, outlined those yesterday in a CMSWire webinar, The Survivalist's Guide to Data-Driven Marketing. The session was sponsored by Marketo and you can watch it by clicking on the frame at the end of this story.
Bullock explained that marketers need to understand the close connection between their budgets and the company's financial success. For example, they could ask themselves what impact would a 10 percent increase in the marketing budget have on their company's profit?
"Forty-four percent of marketers have no idea what a budget increase can do for their company," she said. "If you fit into this 44 percent, you're going to experience difficulty protecting your budget. Likely, you'll find yourself asking the question the other way around: What will happen now that my budget has decreased 10 percent?"
This brings us to the secrets Bullock outlined, often pointing out how using the right metrics the right way can help marketers attain budget increases rather than budget cuts.
Secret No. 1: Agree on definitions
Marketers have access a lot of data. That could include trade show scans, high-quality demos and pipeline metrics. Knowing which data to use is the important part.
"If you run the events team, it may be a high number of quality demos," she said. "But if you're reporting back to your CFO, my guess is it's probably going to be pipeline. It's really important to understand which metrics matter to the person or stakeholder you're speaking with."
Using the wrong metrics can hurt a marketing department, she noted. For example if marketers rely on "vanity" metrics such as press release impressions or Facebook likes, they may have a tough time obtaining more funding.
"Instead of using metrics that measure business outcomes and improve marketing performance and profitability," Bullock said, "marketers opt for metrics that sound good and impress people."
Show Impact, Not Costs
The worst metrics, she said, are "cost metrics" that frame the marketing department as a cost center. "If you only talk about costs and budget, then others are going to associate your budget with costs," she explained.
She gave the example of a marketer who was proud that she cut the cost per lead by 10 percent. She proudly told that to the CEO, but he responded by cutting her budget because she didn't seem to need as much money. He hired a new salesperson instead.
Secret No. 2: Set goals with key stakeholders
Bullock said it's important to establish your goals with the C-suite or other managers when presenting your plans.
"Your first step is to quantify your expected outcomes," she said. "All too often marketers plan programs and commit their budget without establishing a solid set of expectations about what impact they expect the program to have."
Secret No. 3: Design programs to be measurable
"If you don't have a way to measure impact, it will be almost impossible to report back on your goals," she said. "Marketing automation makes something like this easy. That said, if you're not using marketing automation, just think about what it is you want to show your C-suite and think about ways to build those metrics into the program."
Secret No. 4: Focus on decisions that improve marketing
Bullock advised marketers not to measure things just because they're measurable, but to monitor metrics that will help you increase your company's profitability.
"A key part of your planning process is to identify upfront what decisions you need to make to drive company profits," she said. "And then build your measurement to capture the right information."
With marketers facing expanding responsibility for revenue in companies, it's important for them to "put the same rigor to our part of the revenue cycle that sales does for theirs," she said.
At Marketo, she said that's done by watching three sections of the sales funnel: the top of funnel (ToFu), middle (MoFu), and bottom (BoFu). This is illustrated in the table above.
The marketing staff pretty much owns ToFu. But as marketers develop "marketing qualified leads" in MoFu, they begin a dialogue with sales. BoFu is dominated by the sales staff as they close the deals.
Bullock also shared some basic tips on analyzing data, which can get very complicated when each customer may respond to a variety of contacts through email, webinars, trade shows and events. Plus, there are many potential customers within companies.
She showed a Marketo-generated chart that shows all the interactions that a company had during its journey through the funnel. Taken as a whole, there initially appeared to be little interaction with the marketing efforts. However, a second chart tracked the CEO of that company, showing that she had numerous interactions with marketing before sales got involved.
In closing, Bullock offered several suggestions:
- "The reporting is less important than the decisions that improve ROI. Think about measurement, but also think about the decisions that you make.
- Just because you can measure things doesn't necessarily mean you should. Pick a few things that you're really going to act on.
- Think about the words you use in discussion marketing. Focus on investment and return, not cost and spend metrics.
- Create a trusted marketing forecast that will help build credibility with others in the company.
- Aim for progress, not perfection. "The last time I checked, no dataset was perfect," she said. "So don't go crazy over that. With the data you have, do the best that you can."
Title image by Igor Golovniov / Shutterstock.