Are you adopting a revenue-focused approach to planning your marketing activities?
If you usually take a data-driven approach, you will need to rethink your current metrics. These should be more than good ideas that justify marketing spend; they need to be actionable insights that inform your decisions.
Here are four ways you can measure ROI from your B2B marketing campaign:
Think of marketing-impacted revenue as the amount of money received with a clear history of a customer interfacing with one or more aspects of your campaign. These marketing efforts could be anything from social media ads to automated emails.
Reporting and analytics tools will help when measuring this metric. You will need to keep track of every type of conversion related to your B2B marketing campaign. These conversions include clicks on a Pay Per Click (PPC) ad, newsletter signups, web form submissions, etc.
Do not forget to create a detailed funnel for your marketing campaign. It will enable you to know which stages are being well-executed. You will also get to learn the point at which most of your prospects are losing interest.
Average Order Value (AOV)
When it comes to B2B commerce, the size of a deal is quite important. This is partly because there’s a considerable amount of attention paid to a prospect before they buy. AOV becomes even more important for businesses using the account-based marketing (ABM) approach.
Start by finding out the number of buyers who interacted with any part of your B2B marketing campaign. Pull up the figures for the revenue they brought in. Divide the total marketing-induced revenue by the number of buyers who engaged with the marketing campaign.
The result is the average amount spent by each of these customers. However, the average order value isn’t a full-proof indicator. You may have a scenario in which one marketing-impacted customer brings in most of your revenue. Suppose the AOV is still significantly higher than the cost per acquisition.
In that case, you can continue with your approach as you try to understand the behavior of low order value customers. Furthermore, pay attention to other tactics used to generate a purchase. These may include discounts, promotions, loyalty programs, etc. Such offers can skew your AOV.
Things get trickier when the offers are communicated to a particular portion of customers through specific channels. You may be wondering how high or low your AOV should be. The answer is tied to your overall strategy.
Some businesses go for profit maximization, making the highest margin possible from one customer’s purchase. In contrast, others go for sales maximization, getting a little revenue per person, but from many people.
Cost Per Acquired Customer (Customer Acquisition Cost)
Once you’ve run a round of marketing activities, record the total amount spent on your campaign. Revisit your updated customer list. Single out all the new customers you can trace back to one of your marketing activities. Divide your total marketing expenditure by the number of new customers acquired through your marketing efforts.
The result will give you a fair idea of the amount spent to acquire each new customer. Just like with other metrics, the customer acquisition cost (CAC) should be used cautiously. For example, you may be spending a decent sum of money on multiple marketing tactics, yet only one is very effective. It is vital to focus on the channel that brings in the most buyers.
Your calculations may produce a low CAC, which makes you comfortable. However, you might actually be spending a lot of money unnecessarily. Time intervals are also very significant when looking at CAC. In the beginning, your CAC might be low. But as you repeat your marketing activities, the number of new customers acquired from the same marketing expenditure may reduce.
Such revelations usually prompt marketers to respond by increasing the total amount spent on marketing. They hope that this will lead to an increase in new customers acquired. Sadly, this may not come true. Sometimes, the truth is that a specific marketing channel has been exhausted.
It could be that you’re marketing to the same people you’ve already acquired. Or maybe you’re targeting those who are not interested. In such situations, you should consider redirecting some of the funds allocated to that channel. Look for a different one where you haven’t hit the ceiling yet.
Customer Lifetime Value (CLV)
The size of the deal brought in by each marketing-impacted customer may be a key metric here. Never-the-less, it doesn’t paint the complete picture of the ROI for your B2B marketing campaign. It is crucial to get repeat business from buyers. This is because you’re likely to spend less on getting an already buying customer to buy again. New customers usually require more spending.
List down all your marketing-impacted customers. Attach the amount of revenue they’ve brought in for the time that they’ve been your customers. Compare it with your CAC on a case-by-case basis. This will help you determine how much your marketing campaign gets you per buyer throughout their time as a customer.
The CLV should be significantly higher than the CAC. That difference is partly to make up for other non-marketing costs of doing business. If the CLV is roughly the same amount as your CAC, there’s reason to worry. Yes, you may be making back all the money spent on marketing. But clearly not enough to cover the other business costs.
But as you record the amount of revenue from a buyer throughout their time as your customer, keep tabs on any additional marketing efforts targeting that customer. Some customers’ decisions to buy again are influenced by recurring messages about new offers.
These variations can make the initial cost of acquisition a bit misleading. Ensure that you have a journal or log laying out all the instances where a customer engaged with your B2B marketing campaign. Thankfully, Customer Relationship Management (CRM) software and other marketing-related tools have made tracking easier.
Derive the monetary sum spent on marketing towards the customer within their time as a customer. Subtract it from the total revenue they’ve brought in throughout that period. You will then have an idea of the potential of your initial marketing expenditure per customer. Additionally, you will also know the amount you may have to add down the road for more returns.
Resonate is a B2B marketing agency that can help your business achieve a commercial result through marketing campaigns. To learn more about our approach to marketing, please get in touch.