C-Suite’s Top 5 Marketing ROI Metrics
- At July 7, 2010
- By Ewald Jozefzoon
- In Blog
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Earlier this year, I conducted a research study on Boardroom views regarding effective marketing ROI reporting. In order to find out which metrics are most effective in linking marketing performance to company profit, 108 Board members answered the following question:
How much do the following KPI’s tell you about marketing’s profitability or ROI?
Note: Marketing’s profitability means profits that are DIRECTLY and EXCLUSIVELY attributable to marketing!
To answer this question, the respondents had to consider 13 metrics that are (commonly) used by marketers to report on their performance. The table below shows how the Board members evaluate these 13 marketing metrics.
The responses are grouped by the Board member’s reporting requirements – i.e. whether they require their marketing ROI reporting to be value-based or performance-based. Value-based reporting presents marketing ROI in tems of monetary value. Performance-based reporting tracks and presents non-monetary marketing outputs.
In the above table, we also make a distinction between B2B and other (B2C / Both) respondents to see whether there are significant differences in how these groups evaluate the surveyed marketing metrics. Based on these results, we can rank these metrics by relevance in their ability to link marketing performance to company profits:
From the table above, we can also conclude in general that board members, that require value-based marketing reporting, tend to focus on less metrics than those that require performance-based reporting. The value-based group seems to say: “Less (KPIs) is more!”
Of the metrics highlighted in green, the measured profitability can be more easily and directly attributed to marketing contributions. As a result, when applied correctly, they are great marketing profit indicators. Although the metrics highlighted in yellow are great profit indicators, they are next to impossible to be exclusively or directly attributed to marketing. Customer satisfaction, for instance, is as much – if not more – the result of Operations (product / service delivery) than it is of Marketing (product / service management & development). To a large extent, the same applies to Loyalty.
Although the ROI metric evaluation differs among the four response groups, there are five metrics that all groups consider to be valuable:
- Increased Sales/Profit
- Customer Lifetime Value
- Faster Time-to-Sell
- Customer Satisfaction
- Loyalty
Consequently, it is safe to say that any report that includes these five metrics has a high chance of meeting the C-Suite’s requirements for marketing ROI reporting.
In one of my following blogs, I will elaborate more on what the C-Suite considers to be reliable sources of marketing income in terms of increased sales and profit.
Request the FULL survey report (Free).
CALCULATED MARKETING SUCCESS!
Paul Hassels Monning
Thanks for sharing these insights – very valuable for any business marketeer. Paradoxically, the factors customer sat & loyalty are both seen as not directly attributable to marketing yet at the same time deemed as ‘valuable’ in the top 5 metrics. Please elaborate in one your next blogs or in reply to this comment what causes CXOs to say this.
Steven Groves
Ewald, a nicely done survey asking pertinent questions at the highest level of the organization – the C-Suite and the board. I’ll make it a point to request the complete survey and may have a few questions of my own for you! Thanks again!
Socially Yours,
Steven Groves
Ewald Jozefzoon
Paul, thanks for your comment. You raise a good point. The easy answer to this, though, is that the results represent the perceptions of the respondents. In order to meet the Board member’s reporting requirements, it is important to find a way to accommodate these perceptions. In one of my next blogs, I’ll elaborate more on this.
Kind regards,
Ewald
Ewald Jozefzoon
Steven, thanks for your feedback. I’d be happy to forward you the full report once I receive your details. Also, should you have any additional questions, don’t hesitate to contact me (ewald@calibrero.com / +31 653 924 806).
Kind regards,
Ewald
Adam Gelles
One consistent metric that marketers fail to use to show value is “pricing premium” which is a directly attributable to branding efforts. Same applies to publically traded companies and shareholder pricing premiums.
Ewald Jozefzoon
Adam, You’re absolutely right for saying that. Although not mentioned specifically, “pricing premium” is a metric that would fall under the “increased sales/profit” category. In one of my next blogs, I’ll elaborate a bit more on the marketing value drivers that enable marketers to increase both sales and profit.
I would love to hear from you any insights you may have on how well “pricing premium”, as a marketing ROI metric, is being received by C-Level managers.
Kind regards,
Ewald
Simon Johnstone
Ewald
Thanks for pulling this together. From my perspective, again it shows the journey we have in terms of educating the C level suite the impact Marketing can have in an organisation.
Few take aways :
1. Metrics are all over the place – Is it clear what i need from marketing ?
2. Lack of delineation between Sales and Mktg accountability ?
3. Is our Product (Marketing) not important ?
Many of the metrics are scattered across all elements of marketing. IMHO the accountability of the marketing department is not clear in the eyes of many. and this seems to confirm this. A clear understanding of Marketing (and deliniation of the different components ( ie Field, Corporate (Brand) and Product) needs to happen.
Likewise i have never seen a marketing manager in the B2B drive an increase in revenue …. saying that I have seen significant increases in Volume, Quality and Velocity of Qualified leads being handed off to sales to capitalize which has resulted in significant increases in $$.
Lastly – How about Product Marketing ? Don’t we have to have a product or service to sell ? Do we know how we compare – or is this not important. Potentially Pdt Marketing metrics may tie into Customer Satisfaction somehow – Which is a metric that we all know is near on useless (NPS is much much Better) but again .. shouldn’t the board look at this in more detail. (I bet you Apple (A Product mktg organization) look much more at these type of metrics than anything that those organizations from your survey..
Thanks again . Great Article
Ewald Jozefzoon
Simon,
Thanks for your comments. In general, I wholeheartedly agree with you that marketers still have work to do in order to convince the C-Suite of their commercial value.
For me, one of the key take aways of this survey is that Board members want to know what – or how much – they get in return for their marketing dollars/euros in terms of increased sales or increased profits. I agree with you that Marketing does not increase sales/profits by selling directly – that’s a sales job. However, marketing absolutely does increase sales/profits by:
1. accelerating time-to-sell
2. reducing cost-to-sell
3. generating new profit streams (eg. through product management/development)
Each of these three components represent a monetary value -profit – that can be directly attributed to marketing. I believe that, by quantifying these values, marketers enable the Board and other stakeholders to get a better understanding of and appreciation for marketing’s commercial worth.
This will be explained more in one of my next blogs, where I will share more results of the survey. In that blog, I will elaborate more on how marketing can convincingly prove that they increase company profit.
Kind regards,
Ewald