/ Translating marketing metrics into financial ones (that your boss actually cares about)

In the growing digital landscape, technological advances have proliferated the number of methods that marketers can use to reach their audience, from interest targeting to influencer marketing to interactive campaigns.

These new opportunities make it an exciting, but extremely busy, time to be a marketer. But with every new channel utilised comes the corresponding uptick in workload. First, you will need to assess it to understand its potential, then develop a suitable strategy, and subsequently implement it. Last, and probably the most arduous part due to the mountains of data that these campaigns can produce, you have to create reports for your campaigns to showcase the results to the business stakeholders.

As you will well know, this growth in marketing methodologies and the simultaneous explosion of data and reporting metrics has made it difficult to really prove the value of your marketing activities. This isn’t helped by the fact that, as marketers, we speak a different language to every other department, making the value of marketing’s performance even more complicated to understand for some. Social engagement may be sky high, but that doesn’t show non-marketers anything if you can’t connect it to actual revenue generation. You know improved brand awareness is excellent, but many will see it as meaningless compared to the tangible financial results that the sales department generates. As a result, marketing is not always taken seriously.

So, you know that it’s increasingly important to prove to the business’s stakeholders that your department contributes to the overall success of the business but, unfortunately, it can seem to be a herculean task to do. Especially with the reams of information that you need to sift through to find the data that backs you up. But luckily, it might be easier than it seems.

To start with, if you’re only working with your department’s data then you’re going to be missing out on seeing things in the context of the bigger picture. A big key to success is combining your marketing metrics with corresponding financial results in order to show the business stakeholders how your activities are contributing to revenue generation.

To get you started, here are three measures that translate your marketing metrics into the financial ones your boss cares about.

 

Customer Acquisition Cost (CAC)
How much we pay for a single new customer.
 By calculating the Customer Acquisition Cost (CAC) you can show which new channels of your marketing strategy are the most efficient. While it is a good idea to calculate the general CAC, you should also do it for each channel separately. This way you can quickly see where your marketing efforts are being successful and budgets are being spent most efficiently.
CUSTOMER ACQUISITION COST = costs spent on acquiring more customers for channel / # customers acquired in the same period on same channel

 

Time to payback CAC
How much time it takes before a customer gets profitable.

Once you know which channels are the most efficient in acquiring new customers, it is time to discover when these new customers will become profitable. The time to pay back the CAC demonstrates the number of months it takes to earn back the acquisition cost, and therefore tells you the moment you will start profiting from each marketing activity.
TIME TO PAYBACK CAC = CAC / monthly revenue = time to payback CAC

 

Return On Investment
How much revenue we make from our investments.
A key metric your boss will be specifically interested in is the Return On Investment (ROI), this shows marketing’s ability to generate more revenue than it spends on an activity. Marketing is intended to grow sales, but overall marketing campaigns are designed to do more than that. It’s often a long-term process with multiple touchpoints in the customer journey, which makes it challenging to assess and determine ROI. Measuring sales growth, however, does part of the job for you. By comparing the ROI of months before the campaign launch with the ROI of months after the campaign, the return of your marketing efforts in terms of sales can be seen.
ROI = ((Sales growth – average organic sales growth) – marketing cost) / Marketing cost

 

With these essential metrics and accompanying goals, you will be able to transform all your data into valuable knowledge in order to help the business stakeholders get a clearer view of the performance of your marketing department.

Find out even more information on how your data can help you to champion your department within the business and check out our latest whitepaper: Your marketing ROI: Risk of Inaction vs Return on Investment. 

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