Measuring ROI for B2B Marketing Campaigns
A massive challenge B2B marketers face is understanding how to measure the ROI for a B2B marketing campaign. The problems start when you try to prove results based on a single marketing channel.
Measuring The ROI For A Single Marketing Channel Only Tells Part Of The Story
For example, you may have a great blog post that ranks well in Google. As a potential customer, I find your blog post while searching online. That might be my first touchpoint with your brand. I read it, and it makes sense. Your blog has helped me understand my problem and has me thinking about possible solutions.
At this point, I might leave your website because I’m not ready to take action. I’m still gathering information at this stage.
So as a buyer, I’m in the early awareness stage here. I’m starting to become aware of my situation. I’ve managed to define it with the help of your blog.
The good news is now I know your business exists, and I’m familiar with your brand and what you do.
Next, I might go back to Google and search more about how to solve this problem. I need to know what solutions are available before I commit to anything. I might do this over days, weeks or even months.
Maybe I’m Googling my problem again a week later, and your Google Ad pops up with an ebook. It takes me to your website again.
I’m like, “I’ve been here before!” I put my email address in and download your ebook, which provides excellent insights into the solutions on offer.
Because I downloaded your ebook, you’ve got my email address now. So, I read your guide, thinking, “This is great information”.
Two days later, you follow up with an email with a great offer of a free strategy call or a free demo.
When I see that email in my inbox, I think, “you know what, let’s do this”.
So I’ve now moved into the decision stage. I’m evaluating vendors to make a purchase decision.
So What Part Of The Process Should You Attribute The Lead?
Was it the blog, the ebook or the email that moved the customer to a decision stage?
All of these touch points played a crucial part in the process.
This is where tracking ROI on multi-channel marketing gets complex.
Do you attribute the lead to first-click attribution (content marketing and SEO), or do you attribute it to the last click (email follow up)?
Which part of the campaign has been most effective?
It’s All One Big Orchestra
Every aspect of this campaign was compelling and moved the buyer closer to their destination!
Determining the real ROI from an individual channel is problematic because each element has assisted the buyer along their journey.
What’s the thing that actually got the person to convert? The blog? The email? Google ads?
It’s everything – because they all helped your buyer along the journey to becoming a lead.
The Winning Formula To Measure ROI Of Your Marketing Campaigns
You need to look at three core metrics….
- How much did you invest in the marketing campaign as a whole?
- How much did it return in closed sales?
- What was the gross profit on that?
We look at the entire thing because segmenting our individual channels is complicated. Every aspect is interlinked.
You want one number that you can report back to the business.
Calculating The Magical Number
The first thing you want to look at is your time frame. Over what time frame do you want to measure the ROI?
Align your ROI and sales cycle. If it’s a quick sales cycle, say 30 days, you can measure the ROI for the quarter.
If it’s a longer sales cycle, for instance, 180 days, you can measure the ROI over six months or a year.
For example, let’s assume you invest $100k in marketing over the year, spread across all your marketing channels.
And this has generated $1 million in closed business revenue directly attributed to that marketing activity.
Next, apply the gross profit margin of your business to the sales generated; let’s assume a 40% gross profit margin. 40% x $1 million = $400,000.
So, if you spent $100,000 to generate $400,000 in gross profit, your return on investment is four times.
Every dollar spent on marketing equals $4 of gross profit. Now you might ask, “Well, why do you use gross profit? Why wouldn’t you just use the net profit?”
Why Use Gross Profit?
Most businesses can take on more customers without substantially increasing their current infrastructure.
You probably don’t need to upgrade your office, pay more rent, or spend more on your internet bill or day-to-day expenses to serve more customers.
That infrastructure is already set up, so your business expenses shouldn’t increase materially as you acquire more customers.
“It’s the incremental gross profit that matters. If your marketing produces additional gross profit without increasing operating expenses, that gross profit should flow straight through to the bottom line.”
You might say, “Okay, 4:1 – so after investing $100k, I have $400k in gross profit. Is that a good deal?”
Absolutely it’s a good deal.
It’s a cash-making machine, and you want to put as much money as possible into it to continue getting those dollars out.
Now, if you invested that same $100,000 but only generated $50,000 in gross profit, that isn’t a good deal. It’s a net loss of $50,000.
So, that’s why we use gross profit to measure the success of B2B marketing campaigns.
It’s the easiest way to get a clear picture of incremental profit added from all marketing activities.
How Do You Measure The Effectiveness Of Individual Marketing Channels?
You want to know if a marketing channel isn’t performing.
You may have sent all these blog posts live, and you’re getting a lot of good rankings, but are they producing traffic to the website and helping to drive awareness and leads?
First-Click Or Last-Click Attribution?
You can run a first-click attribution report from, say, Google Analytics and look at all the leads coming in and the first interaction these customers had with your website.
If you see that the first interaction many leads had was via organic search, that’s a good indication that your blog posts are performing.
However, last-click attribution is usually the metric reported on because it’s the last interaction that happens prior to a prospect converting into a lead.
It’s worth remembering there may have been many touch points during this buyer’s journey that can’t be measured when looking at last-click attribution.
There are a lot of performance metrics you can look at for each channel, and you want to keep your finger on the pulse there.
The Bottom Line…
You should consider the financial return on your B2B marketing investment across all marketing channels.
Reporting with one number means you know whether your marketing efforts are producing a great return or falling flat.
If you need to tweak something, you can drill down into the individual channel metrics, working out how these respective channels have contributed to the buyer’s journey.
This will allow you to make the proper adjustments to increase leads and sales and improve your ROI.
