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Calculate your marketing ROI and figure out how your marketing team is doing
Proving an ROI in marketing separates a six-figure earning marketer from the rest of the pack. Many miss out on performance-based raises because they struggle with measuring ROI.
39% of marketers say they’re somewhat successful at tracking the ROI of their marketing. Most B2B/SaaS organizations also struggle to administer any sort of attribution program. A Content Marketing Institute survey found 80% of B2B organizations use metrics to measure content performance. Still only 43% measure the ROI of content marketing.
So how do you even begin to answer questions like “how is our marketing doing?” First, you need to know what ROI is in the context of marketing.
ROI in marketing measures the performance for marketing campaigns or any activities by calculating how much money you get back on your investment. By measuring your ROI, you can track the measurable success of any marketing initiative from paid campaigns to a blog post on your brand’s website.
Even when you’re dealing with common challenges that inhibit your ability to see which marketing activities encourage conversions, it can feel like you’re pushing a boulder uphill. The key obstacles to measuring marketing include:
Research from TrackMaven found attributing social and content to revenue is the top challenge marketers face with proving ROI. Your leadership team wants to know what kind of ROI they’re getting back from investing in top of the funnel content, but it's not as simple as saying you're ready to make more data-backed decisions.
“SEO is plagued by the difficulty of understanding, predicting, and measuring the impact of specific organic search optimizations,” said Ryan VanValin, SEO Team Lead at Seer.
While it’s far easier to see the results from digital advertising, it’s also difficult to prioritize long-term strategies like SEO working with executives who may not be patient on seeing a return from top of funnel content. If you’re building organic traffic into your marketing strategy, you have to manage expectations.
Yes, content is a long game — but it carries value over time. Content has a fixed cost compared to ads where you pay for every click. Here’s another key study you can use to make the case for more organic strategies: OpenView Partners’ SaaS benchmark report found slower, growing organizations rely on sales-led acquisition strategies. Companies with a product-led, go-to-market approach have higher organic traffic.
34% of B2B marketing teams say sales and marketing misalignment is the biggest obstacle to converting leads. If your marketing and sales are working off different key performance indicators (KPIs) and not communicating enough, this also hinders your team’s ability to show the ROI of campaigns.
You need to form a smarketing organization where you have a shared understanding of target audiences and your sales team knows the value of your campaigns.
“Most companies are using a mix of programs," said Jill Avery, a senior lecturer at Harvard Business School. It can also be challenging to attribute profits to a specific marketing program. This makes it hard to figure out which marketing activities create the largest ROI impact.
Still, there’s a silver living. Measuring ROI gets clearer with more advanced reporting and solutions like Campaign Manager 360 that provide insights into the role that specific channels play in your conversions.
If you’re launching a new initiative like a branded podcast, you have no existing benchmarks to work off. It can feel like you’re walking in the dark. This content requires more upfront work on your end to track its impact on marketing qualified leads and new revenue.
On top of everything else, you have to weigh your team’s business model and average sales cycle length. For B2B companies, you’re dealing with long sales cycles. You may have a subscription service that charges less upfront, but makes more over the lifetime of a customer.
Since the revenue generated is ongoing, you may have no idea how much a customer will be worth. Your client could continue subscribing over the next decade or get bought out tomorrow.
This makes it difficult to calculate ROI and leads to two big questions:
First, let’s look at answering what is a good marketing ROI. Read on to learn more about benchmarks you can work off for different marketing channels.
A good ROI depends on the type of marketing strategy, distribution channel, and your industry. For example, 4:1 return on spend or higher indicates a successful ad campaign in many cases. Here are a few benchmarks to keep in mind based on channel and content type as you focus on micro-goals and conversion rate optimization:
Average CTR for B2B Google Search Ads is 2.41%
Average attendance rates for B2B webinars are 46% and average webinar conversion rates are 2-3%
SaaS businesses who offer a free trial with no credit card required to convert 8-10% of users that sign up
These benchmarks can also vary by your specific industry, but by having any sort of benchmark in place you can create SMART goals. Now let’s look at some of the popular methodologies marketers use to measure ROI.
Before selecting methodologies, you’ll need access to the analytics for anywhere your marketing team spends money. From there, it’s a matter of using the right data.
While selecting methodologies require work up front, your work can pay off in spades. According to Forrester Analyst Tina Moffett, B2B companies see an average 15-18% increase in revenue after taking a more sophisticated approach to analyzing and optimizing their marketing programs. That said, here are five methodologies you can use to track your ROI.
Baseline method is a simple calculation to determine your ROI on specific channels. First, calculate the cost per lead (CPL) on a channel. Take the amount invested on a channel and divide it by the number of leads produced by that channel in your defined time period.
Then you’ll need to get your baseline number. Multiply your lead to sale conversion rate by the average customer value (can be ARR, ICV, or LTV). If your CPL is less than or equal to your baseline, you have a positive ROI. Baseline should be either more than or equal to CPL.
As you can guess, the higher the difference between your CPL and Baseline, the better. With this method, you can compare the ROI of different marketing channels. For example, you may find it costs you $500 to acquire a customer through ads and $1,000 through events.
The baseline method gives you a glimpse into which channels are most effective and where your marketing team might need to reallocate spend.
If your CPL is higher than your baseline, you can see how much you need to decrease your lead acquisition costs or increase your conversion rates.
This method won’t weigh mitigating factors. For example, an enterprise customer that may be more expensive to acquire, but can drive a ton of revenue over time.
With experimental versus control groups, you compare the control and experimental groups against each other in an experiment.
To do so, split a group of prospects in half. Send one half a variant (the experimental group) to a marketing activity; leave the other half (the control group) using the current system as a constant. Identify a variable(s) to measure over time whether it's top of line metrics or MQLs. Plot each group on a graph and track over time.
By completing these experiments, you can measure how effective different marketing activities are over time and see the impact changes have on your KPIs by testing your experiment on a smaller group. Let’s say you want to see the effects of different account-based marketing activities. You may test adding personalization based on the industry of your target persona while keeping the rest of the content the same. So you decide on A/B testing, adding their industry to the headline on a landing page to see the effect on scroll depth and conversions.
Other follow-up experiments you can run:
Update the testimonial to someone more relevant to your target
Adjust the copy so it focuses on the core challenges of a job role
Display companies you have as customers that are more relevant to the industry of your target customer.
You can also run multivariate tests where you compare how effective a drip email campaign is versus another.
Running experiments you can see the value of a new tactic compared to your current marketing.
With the right test design in place, you can measure most things.
If you attempt to run multiple experiments across all your marketing programs, it can get expensive as experiments take time to design and implement. There can also be additional costs associated with software and hiring talent with running tests.
This method focuses on measuring tactics versus channels or your overall program.
An attribution model establishes rules that state how much credit different touchpoints in your funnel receive for sales and conversions. Under this attribution model, the first click matters most and gets all the credit for a purchase.
First touch attribution can help you see what top of the funnel content delivers value. Here are a few scenarios where it makes sense to view your campaigns under this lens:
See which blog posts on your site land a tracking pixel on leads that end up converting
Discover the referral channel with the most traffic that converts
A visitor might bounce around from one marketing campaign to another
This attribution model is easy to set up.
First touch models do not take into account retargeting ad campaigns or other additional interactions that help push conversions.
Hard to determine the first touch in longer sales cycles. In Google Analytics, the longest you can look back on when someone visited your website is 90 days.
Last touch attribution, also known as last click attribution, gives the final touchpoint a lead interacts with before buying all the credit for a conversion. By default, Google Analytics's Acquisition reports attribute completing goals to the last interaction. This attribution model can help you see your most impactful bottom of the funnel marketing activities.
For example, let’s say your lead sees the following before buying (in this order):
Facebook receives 100% credit for the sale.
People often use multiple devices and browsers so it can get difficult to capture their entire journey. Since the last touch attribution only looks at the last touchpoint, it is the easiest to track.
If you only have a few ways in which someone can convert at the bottom of your funnel, this model can be powerful.
Also, if your customers don’t require many touchpoints before converting, last touch attribution can help you focus on optimizing those interactions.
It may not provide as much value when you’re working in a longer sales cycle. LinkedIn research found the average decision-maker reads 10 pieces of content before finalizing a B2B purchase.
Using this model, you have no visibility into what other interactions influenced a purchase beyond the final one.
Multi-touch attribution models distribute credit evenly across each touchpoint. This model is powerful for longer sales cycles with many touches. Running this attribution model for 3-6 months, marketers can optimize every touchpoint and turn off keyword ad groups that aren’t driving sales.
Let’s say a lead is worth $1500 over the next year. First, they discover you on a LinkedIn ad, read a blog post, and then sign up for a webinar before they buy. Each interaction has a $500 value by default under this model. You may find that leads who first find you through LinkedIn ads end up only booking demos, but do not purchase. Then you can reallocate your budget.
If your team has long sales cycles, you can use this model to have a clearer view of all the marketing touches that influenced a conversion.
You can also leverage multi-attribution to find underperforming ad groups.
Multi-touch attribution relies on a fair amount of assumption with distributing revenue between channels. However, you can customize this model in tools like Google Analytics so that specific touchpoints receive more credit.
If you weigh all touches the same value, you can give too much credit to lower impact marketing activities.
Requires more work on your end (such as direct email outreach) to find out if sales and other resources encouraged a sale.
“A lot of times when companies use last touch attribution, they saw their brand’s AdWords campaign was driving all their conversions. So they dump money into that,” said Dan McGaw, founder of McGaw.io in an interview on the Marketing Analytics Show. “Come to find out once you run multi-touch, you find that it is not as valuable as you might think. We see a lot of companies distribute that spend from brand key terms to more middle of the funnel where they can actually make more money.”
Ruben Ugarte, Data Strategist at Practico Analytics, has helped 70+ companies use data to make higher quality decisions. Here's what he's found:
Companies will start with last touch until they reach low millions in annual spending.
At that point, they can look into upgrading into a multi-touch or a logarithmic model.
Channels that are easier to track tend to get more resources. This usually leads to higher spending on Facebook and Google, but less investing in word of mouth even though the latter may be cheaper and more effective.
Some companies build more advanced multi-touch attribution models that assign value to different touchpoints based on:
This factors how close other touchpoints occur in relation to the action that delivered revenue. For example, a prospect clicks through from an email to attend a webinar, attends the event, and then converts. You may weigh those activities higher than an eBook they downloaded three months ago.
More credit goes to marketing activities that reached the key decision-maker(s) on a deal than those engaging other influencers.
Some marketers place more weight on touches they believe had a larger role in a conversion. For example, attending an afternoon summit may have a larger influence than a single website visit. Keep in mind though you shouldn’t conflate more expensive programs with higher value touchpoints just because they cost more to run.
Use multiple methods to evaluate the performance of different channel content and campaigns. Make sure the attribution models you use match your business model and the marketing activities you need to track.
For any attribution model, you’ll need to determine the lookback window. This establishes how far back touchpoints can go that you credit in your attribution model. Your lookback window should factor in your average sales cycle length. Gauge this in your CRM.
After implementing a methodology, you likely won’t see conversion leaps in the first 30-60 days, except if you have big traffic spikes.
Here’s an equation to figure out your marketing ROI.
Number of leads is how many site visitors your campaign captured as a lead.
Lead-to-customer rate measures how many leads end up becoming customers. If for every 100 leads you generate 3 customers, that would be 3% (.03 as you enter it into this formula).
Marketing expenses cover any costs associated with a campaign or piece of content:
Hours spent by your team developing a campaign
Payments to contractors to complete any associated work
Deal size is the average sales amount of closed deals for a given period.
For any sort of subscription-based model, it can be difficult to factor in lifetime value with this equation.
Instead, you’ll need to calculate your customer acquisition costs (CAC). Customer acquisition costs factor how much a company spends in a given time period divided by the total number of new customers acquired during that period.
“Startup investors love customer acquisition costs because this one simple calculation can tell you how a singular campaign is working, how productive a department is, or how the entire business is scaling,” said Aaron Patrick Doherty, Strategy Lead for Technology & Analytics at MarketOne International.
Jason Lemkin of Storm Ventures and SaaStr says successful SaaS companies spend 20–30% of LTV to acquire a customer. In a self-service app with few upsell opportunities, the CAC is 90 days of revenue.
Once you have LTV, you can calculate the ROI:
If you don’t have data at hand to determine the average lifetime value, you may look at the initial contract value (ICV) or annual recurring revenue (ARR).
Looking at benchmark figures like the one below can also be helpful as you work through these ROI calculations. SaaS companies with less than a million in recurring revenue spend 20% of their ARR on average on sales and marketing.
If you’re establishing your first marketing budget, use a mix of long and short-term market plays to help reach your ideal customers. A good rule of thumb: start with a 60/40 split of organic strategies and paid ads.
Now, here’s a recap of what you need to do.
Use a combination of attribution models and testing methods to see which acquisition channels:
where you're generating initial interest
what overall campaigns are most effective
You may end up selecting one primary methodology for analysis and reporting, but different business goals and sales cycles can make each method a better fit.
Preface to others that some strategies may be a longer-term play. For example, if you’re building a brand’s presence on organic search, it can take months of creating content and linkbuilding before you may see big wins from your top and middle of funnel content. 5.75% of the pages studied by Ahrefs went from first seen to top 10 rankings for at least one keyword in 61–182 days.
You won't be able to set and forget your methods for measuring ROI. Like your campaigns and A/B tests, you'll need to tweak them over time.
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