How to Make the Business Case for Marketing Analytics

Measuring marketing and its impact on revenue is a hot topic these days but sometimes convincing management to invest in new tools can be a challenge. Here’s a way to think about the ROI for marketing analytics investments. This example shows how CFOs and CEOs think about the marketing spend.

Say you had a company whose annual profit and loss statement looked like this. We’ll use a small company example to make the numbers easier:

Revenue                                          2,000K (that’s 2 million)
Research and Development       300K
General and Administrative       300K
Sales and Marketing                    1,000K
Cost of Goods Sold (COGS)         200K
Net Profit                                       200K

Let’s say also the sales and marketing spend was split 60% to sales and 40% to marketing. So that’s 600K for sales and 400K for marketing.

And the marketing spend looks like this:

Events         100K
Webinars    100K
Emails         150K
Web Ads     50K
Total           400K

And you know from your new marketing analytics tool that you get the following campaign influence and return on investment:

Category       Budget       Influence     ROI
Events           100K            1,200K        12x
Webinars      100K            800K           8x
Emails           150K            0K                0x
WebAds        50K              0K                0x

The analysis shows that you’re getting no return on Emails and WebAds but excellent return on Events and Webinars. So what if you ran an experiment and allocated the 200K spent on Emails and WebAds to Events and Webinars? What would the projected result be?

Category    Budget        ROI    Projected $
Events         250K          12x      3,000K
Webinars    150K          8x        1,200K
Emails         0K              0x         0
WebAds      0K              0x         0
Total        $400K          10.5x    4,200K

So the now the influenced revenue is 4.2M which is more than double the 2M in revenue with the old marketing budget. That’s amazing! This result is material, very material actually, meaning it is meaningful for the company results. Anything that moves the needle even 10% is material.

So having the right tools to get these kinds of metrics is really important. And doubling sales is an excellent way to justify your spend on marketing analytics. Matt Heinz, CEO of Heinz Marketing, and I did a 30 minute Webinar on this topic if you want to learn more about Making the Business Case for Marketing Metrics.

Bonnie Crater

About Bonnie Crater

Bonnie is a 5-time VP of Marketing at Genesys, Netscape, Oracle (Network Computer Inc.), Stratify, and VoiceObjects. While valuing the creative side of marketing, Bonnie's real love is marketing operations -- measuring marketing investments and determining investment optimization. Now as CEO of Full Circle Insights, Bonnie is working to help fellow marketers get the data needed to succeed. In 2000, Bonnie was named one of the “Top 20 Female Executives in Silicon Valley” by San Jose Magazine. Bonnie holds a B.A. in biology from Princeton University.