Regardless of whether December is the end of a quarter or the fiscal year, it’s a good idea to Review Marketing’s Performance in 2012.
After all, Marketing does not own making, selling or fixing anything so why do some companies invest up to 10% of the corporate budget (dollars and people) in Marketing? In short, Marketing is responsible for developing and executing go-to-market plans that build the brand, help develop products and assist the sales organization in generating revenue.
With that backdrop, how did your Marketing function perform in 2012? Here’s one approach to objectively and quantifiable address that specific question.
The Value of Marketing – The Direct Correlation to Revenue
First and foremost, it’s all about revenue so it’s imperative to answer a couple basic questions: 1) what did the organization spend on Marketing; 2) what did the organization receive from Marketing; 3) and, is Marketing a managed, repeatable process that can be counted on for next year?
Review Marketing’s Performance in 2012: What Did Marketing Spend
It’s imperative to start the discussion with the corporate plan that drove the Marketing plan that dictated the Marketing budget. There were priorities and assumptions made in the planning process that guided the development of the Corporate and Marketing plans and corresponding Marketing budget. Also, there may have been course corrections throughout the year that may need to be surfaced in order for all to recalibrate.
It’s best to compile a detailed budget spreadsheet that includes total spend by month, quarter and fiscal year (include percent changes for Q/Q and Y/Y and percent of total) with a breakout for:
- People (FTE, contractors and consultants)
- Programs (campaigns, agencies, automation, infrastructure)
Resist the temptation to stop here because there is no information that correlates back to brand or products and little information correlating to sales. Specifically, add the categories below as columns and enter actuals or estimates for percentages to provide insight on what funding levels were for each category:
- Channels of Distribution
- Branding (customer satisfaction, awareness, net promoter score)
It’s best to keep a table with assumptions around the allocations of people and programs to each of the categories above as it facilitates making changes. If it is not clear how to calculate a percentage, look to dollars spent, time spent, qualified leads, etc. to develop an estimate. In terms of people, ask each team member to create a pie chart that allocates their time for the last month, quarter or year across the major activities they perform—the categories in the budget spreadsheet should be categories in the pie chart. It may not be 100% accurate to extrapolate these percentages but it is 100 times better than nothing and provides a flavor for where time and dollars are spent.
Meaningful metrics to report and discuss will include:
- Performance against budget: quarterly and yearly
- Contract terms: list price presented form vendors vs. price negotiated
- Decreasing costs for repetitive functionality from prior year
- Decreasing costs for recruiting
- Projects, people and programs that were reduced or eliminated from the budget
- Alignment of funding and key corporate initiatives
Review Marketing’s Performance in 2012: What Did Marketing Contribute
The next question is how much revenue ties back to Marketing. Marketing’s contribution to revenue is formed through demand creation and management, global programs, field marketing and or market development, depending on your organizations nomenclature. The point is that these groups within Marketing should have an established relationship with Sales where roles, responsibilities, definitions, processes, systems, metrics and an SLA are in place, to establish an effective long-term and successful relationship. In addition, the contribution to the sales pipeline that Marketing is to generate should be documented. Marketing must organize and execute at a level to confidently answer the questions, “if a dollar is invested in Marketing, how many dollars in revenue will be returned and when”?
Of course, there are always a few issues to work out when presenting numbers to the CEO, CFO, VP Sales and the management team. One that is sometimes glossed over but really critical to frame the discussion is whether to evaluate the impact of 2012 Marketing spend or the 2012 Sales pipeline and Marketing’s impact. This is not a semantics issue and it is imperative to understand the nuances to accurate quantify Marketing’s impact on revenue.
If the question is what did 2012 Marketing spend contribute to revenue this will require a time horizon that spans 2012 and beyond as campaigns and gestation periods can cover months or quarters.
On the other hand, if the focus is on 2012 revenue (really the term should be bookings) then the timeframe for Marketing campaigns will have to precede 2012—a good rule of thumb is 2 years for the same reasons mentioned earlier. Some of this will have to do with the methodology Marketing employs to correlate programs to revenue (first touch vs. last touch or contact vs. company).
And, it is a best practice to follow the sales forecast methodology when calculating the pipeline value at each stage in the sales process—is it weighted or actual dollars?
Meaningful metrics to report and discuss will include:
- What closed: won, lost and dead
- The value (number and dollar value) at each stage of the sales process
- The pipeline multiple at the start of the quarter and year
- The number of days in each sales stage
- Conversion percentages between each sales stage
- The flow rate by month
- The number of hot, warm or cold leads
- The cost per lead and closed won deal
- ROI for each program and category of programs
What in Marketing is a Managed and Repeatable Process
In short, the CEO and CFO will become huge fans of Marketing spend when there is an if/then statement that illustrates the impact on revenue for each dollar spent in Marketing. Granted, Marketing is part art and part science so it is not possible to eliminate every expenditure that can’t be quantified to present a positive ROI. And, it is important to note that it is the sum of many Marketing touches that results in a sale and that there is no one magical silver bullet. However, each function in a company requires funding and there is a finite set of budget dollars so it is imperative that Marketing presents a strong business case for funding and that requires quantifiable justification.
Ideally, for each Marketing investment made in 2012, a business case with projections was required and each was monitored and managed throughout the year. Rolling these up to meaningful categories and a total will be germane to a predictability discussion.
The waterfall and the process to reverse engineer lead targets from sales targets will also be another area to cover in detail to reveal assumptions, actuals and any corrective actions that may be necessary to improve accuracy. Specifically, note the specific integration points of the Marketing plan to the Corporate plan
Reviewing the assumptions and execution around the demand creation and management plan will be important to highlight tight process and operational excellence. Automation should be of particular importance as it usually drives down costs and improves productivity so spend time reviewing system and process improvements. The inclusion of industry benchmarks is always pertinent as a competitive streak should be present within the organization.
There are definitely Marketing accomplishments that contribute significant value to the organization but may be difficult to quantify. For example:
- A key competitor may have been weakened with a new product announcement, competitive intelligence or a competitive swap program.
- Industry Recognition (Magic Quadrant, or Forrester Wave placement, most admired company or technology award, etc.).
- Unaided awareness increases
- Customer satisfaction scores improving
- Net promoter scores increasing
- Thought leadership acknowledgements in PR, social media, speaking opportunities, etc.
- The retention of employees that reduces recruiting costs, training and downtime.
- The implementation of automation.
All of these are significant contributions to the company but make this argument after the hard number argument or sandwich in between the quantitative argument for maximum impact as most decision have an emotional component to them.
At the end of the day, there is a finite set of resources within any company and the CEO makes the final call on who gets what so it is important to objectively and quantitatively review Marketing’s performance in 2012. The metrics that matter most to the CEO (and his//her trusted advisor—the CFO) will be expense management, revenue generation, profitability, productivity and customer satisfaction. As a result, this is the messaging that Marketing must use with this audience to deliver a compelling story that will resonate.
Going into the New Year it is a best practice to conduct a marketing assessment to establish a snapshot of current state, desired state and the associated plan to improve the organization. Visit www.vpmarketingondemand.com to download a free market assessment template.