How does a company measure if its marketing output is driving revenues?
An organization’s marketing can be so great yet it still does not bring in any extra revenue to the company. That’s because marketing tends to focus too much on vanity metrics (e.g. awareness, engagement), a result of the discipline being too rooted in brand and customer relationship building. This often makes it difficult to show a direct connection on how marketing activities result in driving sales or revenue growth since the typical marketing KPIs aren’t often rooted in how they create business impact.
By default, many organizations believe that they need great PR, a marketing campaign, and even a branding strategy. Obviously, these serve a purpose to create influence and build up awareness, but the KPIs that these activities focus on do not directly impact revenue and sales growth even though over time, a great brand does contribute to the company’s bottom line.
This is why sales and marketing teams don’t often see eye to eye. The sales team depends on the marketing team for leads. The marketing team believes that its demand generation campaigns are driving good leads. The sales team goes through the routine sales process with a very low conversion rate on the leads. (Let’s face it, most leads do not close.) And the sales team doesn’t see marketing as valuable enough to their process.
There’s also friction because marketing teams don’t have the responsibility of generating revenue while the sales teams by default take on too much responsibility for driving revenue. In actuality, the responsibility should be shared across more functions at the company instead of charged strictly to sales.
So if marketing should take on more responsibility in becoming a valued driver of growth, shouldn’t there also be a system for measuring and contributing marketing output to pipeline attribution for the accounts that the sales team cares about? Otherwise, marketing just becomes a cost center. Read that again!
Our approach for accomplishing this value-driven growth is to prioritize marketing outputs and budgets based on whether it drives business, brand, or communications impact. These three categories of impact allow us to determine the contribution that the particular activity can have on sales and revenues OR if the activity is just a necessary cost center. If the latter, then we consider it to only create communications impact, and therefore, has lesser priority in the marketing food chain. Essentially, you would allocate a greater budget to activities that drive business impact vs activities that only focus on communications impact.
Here’s an illustration to bring clarity to this profit-centered approach.
When PR is contemplating an earned media campaign, the typical KPI for measuring campaign success are media impressions. But does this PR campaign directly result in more sales or revenue for the company? If not, then it’s just communications impact, and the budgeting for this activity should be of a lesser priority than the budgeting for an activity that would bring in sales and therefore, drive business impact.
Once we’ve determined a marketing function or activity to drive business or brand impact, we evaluate where there’s an opportunity to inject a metric that can tie the results back to its ability to add to the sales pipeline. For example, a particular marketing effort with a call to action (CTA) response can be trackable by measuring the number of CTA responses that eventually become sales qualified leads (SQL). Thus, making it easier to measure if this campaign impacted profits.
Once marketing separates its functions based on how it supports sales, we’re better able to implement Account-Based Marketing (ABM) strategies so that sales focuses more on closing deals instead of performing all of the other activities in the pipeline from generating and qualifying leads to engaging with prospects. Ultimately, the goal is for marketing to join the ranks as a partner to the sales team in becoming a valued driver of growth.
There’s more in our knowledge bank about Account-Based Marketing (ABM) as the real driver of B2B business growth.