We’ve seen marketing move up the agenda in B2B organisations and go from a peripheral support function to becoming instrumental in building a business and feeding into the bottom line. Following the lead of B2C organisations, many B2Bs now have in place, or are hiring into, board-level marketing roles. However, there are teething problems with this position. Senior marketers, especially in the B2B sphere, are finding the role challenging and this can be down to a range of issues, perhaps they are presented with a reticence to change business practices or they do not have the autonomy needed to be effective in their role.
Recent research in the US shows that CMOs have the shortest tenure amongst the c-suite of around 2.5 years, compared to 4.5 years for CIOs and CFOs, and 7 years for CEOs. Especially with current economic pressures, budgets are being pinched and marketing is often the first to go. CMO Magazine recently suggested that this short tenure was mostly down to demonstrating value: “a big stumbling block is that CMOs still struggle to prove value and effectiveness”. In this article from our B2B team, David Zaranka looks at ways in which marketing teams are measuring their output and therefore demonstrating their value within the business.
David spoke to a leading CMO in the B2B sphere who had the following feedback: “Overall, successful businesses will agree that marketing does add value and plays a critical function, however it is often unfairly viewed as a huge cost centre, first and foremost. As such, there is incredible pressure on the marketing leaders or teams to prove their value and consequently their impact to company bottom-line performance.
On a positive note, companies have embraced true innovations, improving their technology stack- with martech tools and systems that allow leadership teams greater transparency, analysis and measurement of the key drivers of performance. These are interventions, linking revenue to differing parts of the business, that should also include the role that Marketing plays as a critical player.
Essentially, Marketing should not act as the Lone Ranger, but a formidable team player that allows a company to create a roadmap for success. There are ways to track ROI, through KPIs set internally by each team and by the board. There may be other strategies that involve performance-linked KPIs based on key milestones achieved where Sales and Marketing have worked together as a team (take for example, a new business pitch as an example).
Ultimately, revenue generation, client retention and strong customer service are all pillars of success to which all business stakeholders are held accountable for, and Marketing plays but one critical role to help deliver that value, and drive business performance – always.”
Setting meaningful and accurate measurement criteria for marketing activities is a constant challenge, especially in the B2B world where there are no physical products or easily trackable pipelines. Connecting marketing activities to revenue is far harder for B2B marketers. There are multiple touch points, so it might not be instantly clear where a lead has come from. There is also the sophisticated and complex consumer to consider: buying habits change over time, and especially in the current business world, things are hugely unpredictable. Measurement criteria therefore may well have to change over time as well. Another challenge is understanding which metrics are meaningful to your business stakeholders. In the absence of being able to measure activities in direct relation to the bottom line, are there other areas that might be good to report on, but that are perhaps less tangible, such as brand equity.
How are businesses overcoming these challenges and measuring their marketing activities? Firstly, what’s clear from the clients we’ve spoken to is that it’s by no means a one size fits all issue. What works for one business may have little impact for another. There are, however, three models that we’ve seen implemented with success. Firstly, the Single Attribution model – by far the most simple of the models for measuring ROI and therefore for many the preferred method. This is where value is assigned to the first or last touchpoint in the process of closing a deal. The benefits here are in its simplicity. It’s easy to understand and therefore gives a good level of transparency to the board on how activities are performing. On the flipside, given the complexity of B2B sales and the multiple steps involved in closing a deal, it could miss vital detail towards which marketing activities have inevitably contributed.
Another approach is Simple Calculation – this is a much more involved process and is similar to how ROI is measured in B2C businesses. Businesses need to have a relatively sophisticated CRM system in place to use this model as it involves tracking leads based on what channel they were brought to you. The calculation is based on the marketing spend on each channel and the number of converted leads from that channel. You can then work out the cost per client. You can also work out the cost per lead by using the numbers from the other end of the funnel, before conversion, and the channel cost. This method gives easily reportable figures for the board and trackable metrics to understand the effectiveness of different channels. The challenges here come in being able to get all the figures that are needed. Are things recorded effectively across the business and will your sales team readily provide this information?
The final method is the Sales Funnel approach. This is about knowing where every lead is in the sales funnel and understanding which marketing techniques work best. What’s being tracked can include the number of prospects and how often they engage with your marketing channels, how many prospects turn into leads, how many leads end up in the sales pipeline, how many leads turn into clients and how much revenue is generated. Marketing automation is key here and businesses that use this method tend to be using systems like Pardot, Eloqua, Marketo or Hubspot as they allow tracking and measuring at every step of the sales funnel.
The final stumbling block is how to turn these measurements into meaningful ROI and present a business case for your marketing budget. Simple, top level stats are the most impactful and these should then be supported by the finer detail from your measurement method. While as a marketing team you know that brand equity and website visitors, for example, are incredibly important for the business, having P&L responsibility means demonstrating how your business unit is feeding into the bottom line, so this is ultimately what all your measurement needs to boil down to. Closer collaboration with the board, business leaders and stakeholders is also key, as well as working effectively with sales teams. In this way marketing teams can form a solid understanding of business needs and adapt strategy in order to help drive revenue.
Measuring ROI in the B2B world is no easy feat, but with a seat on the board, CMOs need to step up their reporting and demonstrate their effectiveness within the business. Done well, reporting on ROI will inevitably lead to greater engagement from the board and therefore more flexibility when it comes to setting budgets. Choosing the right reporting method is key. A thorough analysis of the information that is available and the systems that are in place should be the starting point. In the most forward-thinking B2Bs we’re seeing an increase in demand for data analysts to help enhance the marketing information that is available. This has the dual benefit of assisting with reporting on (and increasing) ROI but also in understanding the customer and therefore ultimately being able to better meet their needs.
For more information please contact David Zaranka, our consultant specialising in marketing opportunities across Technology and B2B markets.
