Marketers today need to become more and more results-oriented. Many managers still see the marketing department as a necessary expense rather than a source of revenue. This is a major challenge for marketers, as the risk of not being able to meet their budget or even having to cut back is greater if marketing is not seen as a revenue-generating unit. Therefore, it is important for marketers, and especially marketing managers, to be able to demonstrate the value that marketing delivers.
In this article, we will go through which metrics are important to be able to show and present to the management team or board to clearly demonstrate the value you create. We will also go through the common pitfalls you risk falling into when collecting data and what you should do to avoid them.
What marketing data should you present to a management team and board?
When presenting marketing data and reporting on the achievements of your marketing department, it is important to think about who your target audience is. As with any marketing activity, it's important to know your audience and find out what makes them tick. A management team and board of directors are most interested in how marketing has helped create tangible value for the company. A CEO or management team has the ultimate responsibility to carry out directives set by a board of directors. A board has a responsibility to oversee shareholder value in the company and is therefore tasked with maximizing the value of the company. Marketers therefore need to demonstrate what the marketing team has done to increase the value of the company. The primary metric that marketers can develop to demonstrate value creation is the number of leads or customers that have come from marketing activities.
For e-retailers, this is often an easy exercise where it is easy to deduce from an analytics tool how many e-commerce purchases can be derived from different types of traffic sources or campaigns and the value of those purchases. But for B2B companies, it can be more difficult to measure incoming leads from marketing activities and the value of those leads. Ideally, as a marketer, you want to show the ROI (return on investment) of your marketing activities. Then you need to be able to produce an estimated value per lead and then the number of leads linked to the marketing activity and the total cost of each activity.
What do you need to do to produce the marketing data to be presented?
In order to show ROI on marketing activities, you need the following information:
- Value resulting from the activity
- Cost of carrying out the activity
It sounds simple but can be difficult to obtain this data easily.
Value from the activity
We start with the revenue part. For e-retailers, this is pretty concrete and you can probably get this data in a good way just through Google Analytics or similar tools. But for B2B companies, a little more work is usually required. First, you need to work out the number of leads that came from a particular type of marketing activity. You can get this data from a web analytics tool if you have conversion tracking set up. Then the challenge is to value these leads. In the ideal case, you have follow-up in your CRM for all incoming leads and can follow these leads through a sales funnel. If you have this set up, you can easily measure how many of these leads become SQLs (sales qualified leads) and then how many of these become actual customers. You can also find out the size of the average deal and what it is worth. What I mean here is to find the "lifetime value" of an average deal. Then you calculate the total profit over a lifetime that an average customer contributes.
Here is an example of how to calculate the LTV (lifetime value); an average customer buys a subscription for 50,000 per month and stays on average for 24 months. The margin on the sold subscription is 50%. Then you calculate the LTV by multiplying SEK 50,000 by 24 months multiplied by 50% and get that the LTV is SEK 600,000.
To then bring this down to average revenue per lead, you multiply the LTV by the conversion rate for lead to SQL and then again by the conversion rate for SQL to customer. In a hypothetical case, the conversion rate for lead to SQL is 5% and SQL to customer is 25%.
The average value per lead is then 5% multiplied by 25% multiplied by 600,000 which is 7,500 SEK.
Then you can easily multiply the number of leads by this value to get the total revenue per activity.
Total cost per activity
The total cost per activity is often easier to calculate than the value from the activity. The important thing here is to actually get the total cost and not just the part that is easiest to calculate. Say you run a Google Search Ads campaign. It is easy to calculate the ad spend for that specific campaign, but not all costs are linked to the campaign. In addition to ad spend, you probably have someone who set up the campaign in Google Ads, it may be an agency or someone internally, but regardless, there has been a cost associated with the set-up. In addition, someone has probably produced copy for the ad, a landing page and perhaps some kind of white paper. All these elements also have a cost associated with them and should therefore be included in the total cost of the campaign. An example could look like this:
Total cost of campaign X.
ROI of the activity
In the last step, you only need to divide the total value by the total cost, minus 1, and then convert to a percentage.
(total value from campaign / total cost of campaign)- 1 = ROI
If we follow the above example, it could look as follows:
Common pitfalls when it comes to reporting marketing data.
The most common mistake when presenting marketing data is to present data that is easy to obtain, instead of the data that really matters.
Examples of data that are easy to obtain, but do not provide much value to the recipients are:
- Number of visitors to the website
- Number of exposures
- Open rate in emails
The reason why these metrics are not particularly interesting to include is that they do not say much about the actual value of the company. The number of visitors to the website does not create value if you do not sell ads yourself and therefore want many visitors. A much better metric here is conversion rate or number of conversions. Just like the number of visitors, the number of exposures is a measure that is easy to produce but does not provide any value in itself. Instead, try to focus on conversions or conversion rate and if that data is hard to get hold of, CTR (clickthrough rate) is a much better metric to use as you can see the percentage of people who interacted with your ad.
Open rate is a metric that marketers have used frequently over time but is also a weak metric not only because it gives a poor indication of value but also because open rate is an unreliable metric as it is difficult to determine if the email has actually been opened and read, or if it has just been deleted. A better measure here is CTR or conversions from an email.
Things to consider to minimize the number of pitfalls.
Thereare a few things to keep in mind to minimize the risk of presenting non-valuable data. First of all, you should always ask yourself: what insights does this information provide? Data can be presented and produced for different purposes and there are two main tracks. One is performance data and the other is optimization data.
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Results data
Whatwe mean by performance data is data that clearly shows results and the type of data that the management team and board of directors primarily want to see. Here it is important to always try to measure what is as close to a concrete value for the company as possible.
Optimization data
Thistype of data is primarily useful for optimizing marketing efforts and is analyzed and reviewed by the marketing team but has little or no value for the management team and board. Examples of metrics include CTR from ads, SEO ranking, technical SEO, CTR from newsletters, etc. that help you evaluate which ads are performing best or if you are moving closer to an internal marketing goal.
Think about what kind of data to use at what time and always ask yourself what to do with the data. If the data does not provide you with information on how to improve marketing activities or give an indication of whether marketing is creating value for the company, it is likely that the data is not important and can be excluded altogether. Furthermore, it is of utmost importance to continue using the metrics you started using. Otherwise, you risk using data points that are good for the specific period but do not reflect reality. This will eventually become visible and noticeable, and confidence in the data you produce will quickly disappear.
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