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Marketing ROI in an Age of Budget Cuts

There are many paths to marketing ROI. Finding yours is more important than ever.

In 2014, I was working at IDC as an analyst covering the CMO and marketing operations functions. We worked with some of the largest B2B marketing organizations in the world. Some of the most frequent questions I was asked were, “what should we measure” and, “how do we get to ROI measurements”

That same year, a study found that 93% of CMOs said they were under more pressure to deliver measurable ROI and under the gun to tie marketing efforts to financial results.

Four years later, I’ve moved on from IDC to Allocadia, where I field that same question about measurements, and help marketers find their unique paths to the answer.

The pressure on CMOs hasn’t been alleviated. In fact, it’s only growing stronger. But at Allocadia, we’re dedicated to helping marketers solve that ROI problem. This is a major reason that I joined the company.

Since day one at Allocadia, founders Kristine and Katherine believed that making ROI measurement accessible to every marketer is critical to their ability to make effective decisions.

But the ROI problem goes beyond just decision-making. Many marketers are losing budget because of their inability to rise to the challenges related to articulating their impact. Gartner’s 2017-2018 CMO Spend Survey found that marketing budgets are starting to recede, dropping 10% from their peak in 2016 when marketing budgets were 12.1% of company revenue.

There’s a number of reasons behind this trend. Gartner found that CMOs are:

  • over-investing in areas that don’t produce returns
  • failing to plan proactively and communicate the value of marketing up front
  • harming the relationship with stakeholders such as the CFO

Today, in an age of marketing budget cuts, it’s more important than ever to understand and articulate the return on marketing investment to reverse this trend.

ROI Misunderstood

Many marketers tend to search for the perfect equation or perfect way to measure ROI, but this is unrealistic. The reality is that marketing ROI measurement can be as simple or as complex as you want to make it — it’s just that each ROI measurement answers a different question.

Reversing the trend of budget cuts and finding what’s most effective in marketing requires us to get rid of the notion that there is a single, perfect ROI measurement.

Some marketers are finding success by simplifying ROI. They measure top line returns divided by top line investments, whether across the entire marketing organization or specific to one area of the business. Others export their marketing investment, results, and other data to a data warehouse or BI tool to let their analytics team spin up custom ROI measurements.

Each organization should be measuring ROI according to their current capabilities and using the information to make better decisions. To me, marketing ROI is like the ocean: there are many streams to get there.

We at Allocadia have found that there are a few distinct ways to measure ROI. Choosing the most appropriate one for you depends on variables such as your marketing technology stack, your organizational maturity, and the questions you are trying to answer.

Here they are:

  1. Aggregate ROI: Are we generating results that support our corporate strategies

Rather than getting “into the weeds” of the effectiveness of specific tactics, Aggregate ROI looks at the broader, strategic picture. For example, you might measure the ROI of your marketing efforts by product line, region, strategic objective, or other higher-order dimensions.

Aggregate ROI is a holistic approach to understanding what marketing has invested in and what financial results have been delivered at the global, product or regional levels. The most fiscally-mature organizations are able to sort and roll up a view of ROI depending on what decisions need to be made – e.g. ROI by business unit, product line, region, or program family (if you’re a fan of the SiriusDecisions Campaign Framework.)

Often this is an executive view for large enterprise organizations with big data. These organizations can identify trends and best practices from this perspective as they have the breadth of information to make these comparisons.

Helena Lewis, Chief – Marketing Operations and Technology at NI (formerly National Instruments), sees this type of ROI as “a shared view of the world — customers, activities, performance management. We have global initiatives, and we have revenue objectives for each one of them.” She calls this “Return on Objective.”

At Allocadia, we allow companies to measure aggregate ROI by simply combining CRM, Point of Sale, or other aggregate results data with the investment data housed in Allocadia.

  1. Attribution-based ROI: Which specific tactics were most cost-effective at generating pipeline and revenue

Attribution-based ROI is an important part of determining the results of individual tactics and multi-channel results, as attribution capabilities provide clarity across all marketing channels. This is often used by field or demand generation marketers to make specific program or tactic decisions.

This form of ROI can be done in one of two ways with Allocadia.

For those just getting started with attribution and attribution ROI, Allocadia provides starter attribution models (first touch, last touch, multi-touch) by bringing Salesforce data into Allocadia and leveraging our attribution engine. Then, of course, tying those results to the investments that already live in Allocadia.

For those marketers who already use separate attribution solutions (like Bizible) or are looking for more advanced models, Allocadia can combine data from these technologies with investment data for Attribution ROI measurements.

This brings me to some exciting news!

Yesterday, Allocadia announced a new partnership with Bizible. This is an exciting milestone in delivering on our vision to help marketers make better decisions and to make these various paths to ROI a reality. This partnership allows marketers to capitalize on key capabilities of Allocadia and Bizible to maintain tighter control over spend and deliver powerful return on investment insights. We’re excited to get started!

The team at DemandBase relies on both solutions to understand the impact of their marketing efforts. Here’s how Nani Jensen, Director of Product Marketing at DemandBase describes the joint solution:

“Bizible provides a deep view into our results from sales and marketing activities, including digital data, while Allocadia gives us complete control and transparency into our investments, how they align with our strategy and objectives, and reveals the ROI we’re getting from our marketing plans. This will reveal the true impact we’re having on the business and allow us to make smarter, faster, and more impactful decisions.”

  1. Custom ROI (Data Modeling): How can we answer multiple ROI questions across business units and geographies and at different viewpoints from top-down to bottom-up?

Many complex global marketing organizations require advanced data science tools, custom data models, and integrations, taking a highly-customized approach to marketing ROI. These measurements should serve all marketers, and are often delivered by a central team.

This approach works well for organizations who are furthest along on the maturity scale and often use an in-house data analysis team and a suite of business intelligence (BI) tools. Often these companies want complete control of their algorithms and how their data is utilized.

For them, nothing off-the-shelf works quite well enough to give them the insight needed to understand marketing’s impact in the way they need. But, the key to their success is that their approach to ROI is still built on a foundation of investment data. Allocadia helps these firms by providing a consistent, standardized set of dimensions and master taxonomy within their investment data that is marketing-friendly, not only finance-defined.

Start with I

Regardless of the road you pursue to marketing ROI, the first order of business is to get strong control over the “I” (marketing investment data).

Gartner’s study found that only 53% of marketers are using mature budgeting methods and demonstrating fiscal maturity.

It’s no wonder budgets are being slashed.

But, for those organizations who do excel at Marketing Performance Management, the study found their budgets actually increasing year over year.

This issue is a critical one for the whole team at Allocadia. We exist to help marketers change the conversation from “what did this activity do for me?” to “what are marketing’s overarching goals, and are we meeting/beating expectations?” and “what is the right formula for success?”

Most importantly, we want you to be able to answer, with confidence, “where should I spend my next dollar to drive the greatest impact?”

Learn more about the three paths to Marketing ROI.