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As a marketing analytics firm focused on helping brands and agencies for the past 15 years, we've challenged our clients to be able to measure the value of marketing. But what does that actually mean?
If you ask various people within agencies and brands, you get varying answers. When I am out on the speaking circuit, I often open with that question, and the range of responses I get is fascinating.
The answers include...
- Brand awareness
- New customers
Although the range of answers is wide, most align with business value metrics. However, when I look across the marketing landscape and talk to clients and prospects daily, the reporting and analytics we use to demonstrate marketing effectiveness do not convey that level of value.
Three Ways to Measure Marketing Value
1. Measuring Media Activity
Almost every agency uses this approach and phrasing to show clients the value its media strategy is delivering. Media reports revolve around the following types of KPIs:
- Cost per click
- Cost per impression
- Media conversions
- Cost-per-media conversion
Let me be clear: All those metrics are related to the media optimization process, but none offers any business value.
I can hear the agencies saying, "But that is what media conversions are for!" To that, I say media conversions were never meant to demonstrate business value; instead, they are a metric used to optimize the media itself.
2. Measuring Marketing Impact
As an industry, we are stuck in the paradigm of using media activity to communicate value, but there aren't any metrics in that approach that can be equated to real value.
Unfortunately for the entire marketing industry, the idea has created distrust in the marketplace about the value that marketing is delivering to an organization.
Today, organizations have no choice but to start measuring value using a first-party data strategy. What does that mean? It means organizations must combine the activity data with actual conversion activity in a first-party environment, such as the organization's website.
Measuring marketing value begins with combining media activity with website conversions in your reporting.
Let's say you are a marketer tasked with generating demand for your product or service and delivering leads for the sales organization. You need a report that demonstrates the following:
- Website performance
- Website conversions
- Cost per conversion
- Campaign ROI
- Attributed marketing value
As you can see, the metrics used align to real business value.
In your report, you should be able to answer the following questions:
- How well is my website engaging and converting users from all marketing channels?
- How many website leads does it take to generate a lead or online order?
- Which campaigns delivered the greatest value to the organization?
- What marketing channels are delivering the most leads?
- What marketing channels are creating the lowest cost per lead?
Now, pause for a second. Compare the types of reporting you are getting from the media platforms or your agency with the reporting I just described. Do you see the difference?
That is the level of analytics marketers must have to demonstrate value and drive results. But you can't stop there.
3. Aligning Marketing to Business Outcomes
Now that we have established the baseline for how marketers should be demonstrating value with a combined view of media activity data and first-party website conversion data, it's time to finish the story.
In the example of a lead generation marketer, we know the number of leads coming from marketing. How many of those leads become customers?
Aligning marketing performance and value builds on the foundational metrics already mentioned and goes even deeper by demonstrating the following:
- Lead conversion rate
- Cost per lead
- Cost per opportunity
- Cost per order
- Cost per customer
- Marketing ROI
That level of insight makes the best of a first-party data strategy by integrating all media activity, website conversion activity, and CRM data, allowing marketers to answer real, revenue-driving questions such as...
- How many marketing leads does it take to create a customer?
- What is the conversion rate of a marketing lead to a sales opportunity?
- What is the marketing acquisition cost of a new customer?
- What type of customer is generating the most significant marketing ROI?
- For every dollar I spend on marketing, how much revenue is generated?
Those are the questions marketers need to be answering to understand the value of marketing.
'Y' Do You Do Marketing?
To get started on your journey to measuring your marketing value, start with this marketing ROI formula:
Challenge yourself with these two essential questions:
- How do I demonstrate that we are good stewards of marketing dollars?
- How do I quantify the impact marketing has on the business in the form of revenue?
Based on your answers, look at what your analytics are telling you and find out where you need to go using the three levels of insight outlined in this article.
Article written by Matt Hertig, ChannelMix co-founder and CEO.
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