The Marketing Strategist:

So You Want to Deliver Marketing ROI?

April 21, 2015

Nicole FranceAt ITSMA, we’re big fans of account based marketing (ABM). It’s not just that we think it is a challenging and fulfilling role for marketers, but also because it consistently delivers some of the highest return on investment (ROI) in B2B marketing. In our latest research on the subject, we talk about why that is. We also provide guidance on how to develop meaningful metrics to demonstrate the performance of ABM from initial implementation through maturity.

This challenge of identifying meaningful metrics—whether in ABM or other marketing programs—raises the bigger issue of exactly what ROI means in the context of marketing. Let’s consider why marketers should treat the term with care.

ROI Defined

First, ROI is a finance calculation that measures the real or expected gains from a capital investment. In finance terms, however, just about everything marketing does is an expense.

Does that mean we shouldn’t consider the work we do in marketing as an investment? On the contrary. Companies that get it do consider marketing an investment. But it is important to remember the risks and limitations that emerge when we try to apply ROI calculations outside of their natural habitat. We can take the spirit of ROI calculations, but as marketers, we have to set clear boundaries as to what constitutes the investment in question. What spending over what time frame will you include?

Second, ROI is calculated for a defined period. Any ROI calculation will vary depending on the period over which it is measured. So if you are a widget company investing in a fancy new widget press, the return that you might expect on that investment will be different if you calculate it after six months, two years, or five years. ROI does not stand on its own: it must be tied to a specific interval.

Third, the point of ROI calculations is to evaluate multiple investments of the same size over a specific period to decide on the best option to take. In a world where there is no such thing as limitless resources, this is an important way to make trade-off decisions. It’s sensible, then, that ROI measures are also used to evaluate the performance of an investment over a given period, presumably the one that was used to justify it in the first place.

The challenge we often have in assessing marketing programs is that we fail to specify the period over which we are evaluating the performance of a specific investment. To make matters worse, we often try to compare the ROI of different scales of spending over different periods—talk about apples to oranges! This sets the scene for the all-too-common, typically fruitless debates on long-term ABM programs versus short-term lead-generation campaigns. Sound familiar?

That doesn’t mean we should abandon use of ROI in marketing. It got your attention, didn’t it? Rather, we must shape ROI discussions to focus on measures and timeframes that make sense for the marketing objectives defined.

For account based marketing, this means balancing metrics that cover relationships, reputation, and revenue and adapting the set of metrics depending on the maturity of the ABM account or program. For further detail, read ROI in Account Based Marketing: Delivering Consistent Results.

We’re also now working on the broader issue of communicating marketing performance and ROI. If you’d like to be part of the discussion, answer our online survey or contact us directly.

 

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