How to Make the Business Case for Marketing Analytics
- AUTHOR Bonnie Crater
- September 12, 2014
- No Comments
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:
Web Ads 50K
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.