In March we had Kathleen Ritz, CEO of Ritz Marketing, in to talk to our clients about the impact of Social Media on a typical middle market business. As a finance person, it is always tough for me and my team to truly value marketing as it's often unmeasured – you just 'have to trust.'
Try googling 'marketing metrics' and see what you find. A few books; an advertisement or two. I would have thought that this topic would have been overwhelmingly saturated with blogs and different thought leadership. No wonder we're often so leery of investing in marketing programs.
What a business owner typically can prove statistically is that marketing ultimately translates into sales. That is a given – but what to measure?
I came across a great whitepaper that discusses a new way to consider marketing metrics. Its premise is marketing metrics need to be translated into future sales, revenue, and profitability. In the whitepaper, the authors advocate tying marketing metrics closely with sales metrics – which makes sense.
If you have an effective sales process and associated measurements, taking the leap to include marketing metrics should not be difficult. Effectively if you can track the number of new names that marketing efforts generate from things like:
- Association memberships
- Tradeshows
- Events attended
- Blog subscribers
- E-mail solicitations
You can translate these into actual sales results by backing into the prospects generated from these activities. For example, if you know that 1 out of 5 prospects (prospect, meaning you don't know anything about them but they do meet your sales criteria) become leads in your pipeline, and that once someone becomes further qualified 1 in 10 will become customers, a $50,000 per customer sales rate, a $5,000 profit, and a 5 year average retention rate, a tradeshow might look like this:
So, if you know your conversion rate from people that enter your process and associated lag times, you know how to measure the total associated revenue that you can expect to generate from this tradeshow. You also know the cost per prospect - $100, so you can evaluate this program relative to other marketing opportunities.
You can also measure the total effectiveness of your marketing program over time – assuming effectiveness is measured as the cost per prospect – the lower the cost the better.
Again, all this is predicated by having good sales metrics. I think while measuring marketing programs is important, it is necessary to have solid sales metrics as a foundation. This leads to a better translation of marketing programs into sales.
However, all your marketing types out there, if you can measure in a way that translates to revenue the opportunities to boost budgets and do what you really want to do may be limitless!
