One of our favorite marketing sayings is:

“If you can’t measure it, you can’t improve it”

Below are what we feel are best practices in marketing analytics and measuring and improving marketing ROI.

Marketing reporting is less important than making the marketing DECISIONS that improve ROI. Don’t measure just what you can – measure what you can ACT on.  Ultimately marketing ROI should not be about “who gets credit”, but instead about what decisions the measurements allow to improve overall profitability of the program – and the company.

Measure to find not just what works, but what works better; focus on “improving ROI” not “proving ROI”. Measuring marketing programs should not be a pass / fail exercise. Instead, focus your efforts on learning what you can do that will improve ROI. This isn’t about dropping low-profit programs; it’s about a holistic view of what works and where profit comes from. The best ROI may come from improving targeting or optimizing sales conversion.

It’s possible to measure just about anything in marketing, but impossible to measureeverything in marketing. Just because you can measure something doesn’t mean you should. Marketing measurement costs time and money, so focus your time and energy on the metrics that will support the most profitable decision-making.

Don’t be an “arts and crafts” cost-center; marketing should be a revenue driver worthy of investment. It’s easy to measure marketing activity (inputs such as budget and programs), but hard to measure marketing results. Contrast this to sales, where activity is hard to measure but results are easy to see. Given this dynamic, is it any wonder that Sales tends to get the credit for revenue but marketing is perceived as a cost center? To build credibility, focus your measurements on the metrics your CFO cares about – things like revenue, cash-flow and profit – and position your budget in terms of investment instead of cost.

Avoid “vanity metrics” that sound good, but mean little if anything about real marketing ROI. Many common marketing metrics – such as names gathered at a tradeshow, Twitter followers, and press release impressions – sound good and impress people, but don’t really have any strong correlation to revenue. It’s OK to track these internally if they help you make better marketing decisions, but avoid sharing them with executives outside of the department unless you have previously established why they matter.

Focus on effectiveness (doing the right things) more than efficiency (doing possibly the wrong things well). The best ROI gains come from focusing time and money on doing the right things (such as targeting the right segments) more than on how well or cost-effectively you do them. Metrics that show a CFO that marketing is impacting revenue are more likely to protect the budget than metrics that show how well the marketing department is operating internally.

Program planning includes ROI planning:  1) what to measure 2) when to measure and 3) how to measure. It’s important to quantify the expected outcomes from any marketing investment being planned, and to know exactly how you will measure the program against those goals. You can also take specific steps to make marketing programs more measurable, such as setting up control groups or varying spending levels by geography to measure relative impact.

True marketing ROI requires understanding all the costs involved, not just top-line impact.Sometimes a marketing program that appears profitable won’t be if sales expenses and COGS (cost of goods sold) are taken into account. Even better, incorporate the full lifetime value of a customer into your calculation. The more your metrics can correlate to the net-present value of lifetime profits from incremental closed revenue, including all marketing and sales costs, the better.

Fundamentally, marketing measurement is about sales effectiveness, not marketing. The two most important questions you can answer about marketing’s results are: (1) what effect is marketing investments having on sales effectiveness and productivity and (2) how are marketing activities lowering the combined expense to revenue ratio for sales and marketing combined? By focusing not just on marketing is isolation, but on how marketing impacts sales productivity, you will get a much more comprehensive view of the true ROI of your activities.

The world has changed. We are in the midst of an unprecedented shift of power to the consumer fueled by the virtual megaphone handed to them through social media outlets. When a customer is angry or has a bad experience with a product or service, the old rule of thumb was that they told an average of 10 people about it. In today’s world some could easily be telling 10,000 (or more!). On the flip side, happy customers can be telling many more than the old average of 3 people about their good experience. Marketing executives just need to design initiatives that enable and activate them to do so. That shift can be represented through adapting one of every marketer’s favorite marketing conceptual frameworks, the funnel.

Infusing Engagement into the Marketing Funnel

With the expansion of the marketer’s toolbox to include social media, marketing is no longer about pushing out one way communications. The marketing world is no longer defined solely by impressions; it’s now a world of interactions. Today’s marketing includes the customer’s voice throughout the process, whether it’s intentional or not. Customers will talk online and comment on a brand’s marketing campaigns, products, services, and even how a company treats employees. It’s not enough to think about how companies communicate outwards; it’s just as important to think about how customers can communicate back, with each other, and arguably most importantly, with new prospects.

A few years ago, Forrester Research published a report on “engagement” and suggested that the marketing funnel has become much more complex in today’s environment.  (See image.  While the influencing factors are more complicated, the same simple, visual framework as the traditional marketing funnel can be leveraged to show this complexity. The design needs to account for engagement throughout the process rather than looking at it through a lens of static messages we push out.

For example, traditionally, marketers look to create awareness by placing carefully planned messages across appropriate media outlets. Today, customers can create and spread their own messages about a brand through user-generated content and social networks. Traditionally, marketers would hope to influence customers in the “consideration” phase through strategic promotions and sales tactics. Today, user-generated ratings and reviews are frequently enough to convince a customer to make the purchase. Building loyalty is no longer just about loyalty points programs for repeat purchase or sending regular emails to customers. Building loyalty now means entering into a dialogue with them and letting customers participate in more meaningful ways than static customer feedback surveys or a constant barrage of emails announcing special promotions.

Extending the Marketing Funnel

The old marketing funnel generally followed some version of this pattern:

• Awareness > Research/Consideration > Purchase / Conversion

With the widespread adoption of Customer Relationship Management (CRM) in the 1990’s, marketers began focusing more on loyalty or customer retention and brought the funnel one level deeper. The customer’s voice was considered important, but only in the context of customer service and a closed feedback loop. The old thinking was that sending customers regular emails would keep the brand top of mind and that special offers would keep customers from switching to competitors.

As mentioned before, today’s marketers will need to build a more authentic, deeper relationship with customers by truly engaging them to earn their loyalty—and this is how companies can begin to cultivate advocates.

It’s time to extend the marketing funnel one level deeper to account for advocacy. There are two reasons that cultivating and enabling advocacy is critical in today’s world:

1. People trust other people more than they trust companies. A recommendation from a friend or family member is still the single most important criteria in making a purchase decision and recommendations from strangers online also hold more weight than marketing messages.
2. With the growing voice of the customer online and the “power” (virtual megaphone) handed to them through social media outlets, it’s important to help make sure the voice of happy customers is louder than that of the few unhappy customers.

Cultivating and enabling advocates will generate authentic word-of-mouth, bringing the best new customer prospects into the marketing funnel. The ROI on that? Priceless.