October is here and it is time for marketers to start sharpening our pencils as we begin the 2013 budgeting season. The key to bulletproofing a budget is to let metrics drive the conversation, to build a true Return on Marketing Investment model for your organization’s marketing spend. Three critical aspects of building this ROI model should be centered on your pipeline, spend saturation and program attribution.
1. Know your pipeline. The key to demonstrating the return on your marketing investments is to understand how marketing has affected the sales pipeline. Start with what revenue has been generated in the past year, and determine how many of these sales, in dollar value, resulted from marketing’s lead generation activities. Then, look at the current active pipeline and determine how much of what’s in there is due to marketing efforts. Is marketing responsible for 30 percent of active deals? A half? Three-quarters?
2. Saturation – when is enough, enough? A second – and oft-forgotten – key to building marketing ROI is understanding when a specific program has reached its saturation point. This is the point at which additional investment will have no additional impact on revenue. Make sure you know what that point is and build your budget accordingly.
3. Attribution – can a marketing program get some respect? Perhaps the hardest part of demonstrating return on marketing investments is correctly attributing where a lead came from. A prospect may read about you in a trade pub, or see you at a trade show, and later does a Google search to find you. SEO gets the credit, rather than your successful PR and tradeshow programs. Your model must try to attribute these inquiries (and leads) across a number of programs.
With metrics in hand, the conversation can shift from projections created by finance to what investment in marketing will be required to achieve those projections. If the ROI model is strong enough, it will not only protect your marketing budget, but even increase it.
To read more about bulletproofing your marketing budget, download the latest issue of Arketi Insights, available for free at www.arketi.com/2012budgetinginsights.