Measuring MROI in a B2B World (3 of 4): Attribution is Required

This is part three of a four-part post that will explore the challenges of measuring marketing return on investment (MROI) in a high-ASP B2B business. 

As I stated on the first post of this series, MROI is a straightforward concept: measuring what the return is on your marketing investment. I have also identified six problems that make that concept much less than straightforward in real-life implementation. "Devilishly complex" was the phrase I used. However, it is not impossible to get reasonable MROI measurement to guide decision-making, if you have certain baseline capabilities in place. 

There are two key capabilities that enable MROI measurement: multitouch attribution (MTA) and pipeline attribution. Why? Because that attribution is the bridge that associates all of the touchpoints in a complex customer journey to resulting pipeline.

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[To get one thing out of the way, I'm only going to talk about pipeline attribution, rather than revenue attribution, because of the Delayed Return Problem. Focusing on pipeline, which is the estimated value of the sale when the opportunity is created, reduces the time gap between investment and return by the length of the opportunity-to-close cycle, commonly a couple of months in this type of business. This makes the resulting learnings more actionable.]

Multitouch Attribution

MTA has been a well-known concept in marketing for many years. However, it's frequently associated with attribution marketing touchpoints to the generation of a marketing qualified lead. (For example, here's a HubSpot article talking about it.) While that may be adequate for some businesses with simple sales engagement models, in the case of high ASP B2B, it doesn't solve for the Buying Team and Lead Irrelevance problems. (I guess I called the latter a sub-problem, didn't I?) What this more complex sales engagement model requires is a way to associate multiple marketing touchpoints to multiple leads.

One way to do so is to associate all marketing touchpoints with an opportunity, rather than a lead. In doing so, you retain all of the benefits of traditional multitouch attribution, like being able to compare performance of very different marketing channels, like email and in-person events, but in a way that acknowledges that you're engaging multiple individuals at an account.

Pipeline Attribution

Maybe this goes without saying, but if you have implemented the ability to associate touchpoints with opportunities, then you are now associating touchpoints with pipeline. It is then a straightforward exercise to attach costs to the marketing investments that generated those touchpoints. After that, you know what you have? MROI! 

Well, sort of. In my next post, I'll break down different views of MROI into a framework that can be applied for various forms of marketing decision-making.

Also, I don't want to gloss over the complexity and hard work that I just described in a few short paragraphs. At our company, it took us two years to build out this capability completely, and we're still fine-tuning it. The point is, if you do that hard work and solve the hundreds of small problems you'll encounter, you'll have an analytics foundation that can serve many purposes, not just MROI evaluation. Our attribution model is at the center of almost all marketing performance analysis that we do.

Measuring Marketing ROI in a B2B World (2 of 4): More Challenges

This is part two of a four-part post that will explore the challenges of measuring marketing return on investment (MROI) in a high-ASP B2B business. 

Why is Measuring MROI Difficult?

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The first post in this series identified several challenges facing the marketing analyst when trying to evaluate marketing ROI. This post will discuss the following additional challenges:

• The Delayed Return Problem: purchase cycles can easily exceed six months after initial marketing engagement
• The Relevant Investment Problem: some marketing is 'the cost of doing business' and other marketing is incremental, optional investment
• The Campaign Definition Problem: campaign definition is inconsistent, making it difficult to evaluate campaign MROI

The Delayed Return Problem

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The buying process for a $1M piece of technology is typically months long, frequently well over a year. Let's say you want to base the return of your MROI calculation on sales revenue. That sale likely takes place two to four months after the opportunity was identified. That opportunity is identified months after the prospect account interacted with your marketing campaign. And that campaign interaction took place months after your campaign was planned.

This long delay between campaign planning (i.e. investment) and campaign return (pipeline or revenue) severely limits how MROI calculations can be used to guide marketing decision making. For instance, it makes no sense to use MROI to optimize an existing campaign to maximize ROI because of the delay between optimization changes and subsequent effects.

The Relevant Investment Problem

Frequently in marketing performance measurement, the focus of the computation is just the incremental program spend, like the cost of a media buy. Or maybe you include the costs of an external agency to develop creative for that ad run. But you typically don't include the cost of your internal staff that manages paid media.

But in the high-ASP B2B multitouch world, which investments are considered part of the 'campaign' under evaluation, and which touches are baseline execution to even be in a market? For instance, you're not really a business if you don't have a website, and websites aren't free. But some components of your website are specific to a campaign, not just the baseline web presence to show you're in business, and the cost of those components are an incremental cost associated with the campaign.

Deciding which costs to include and exclude from a given MROI calculation, and uniquely identifying those costs, are some of the most difficult steps in MROI measurement.

The Campaign Definition Problem

What is a marketing campaign? To many folks not involved in marketing, they probably think they have a good idea of what one is because they have been subjected to advertising campaigns their entire lives. Why does the definition of a campaign matter? It matters if you intend to use MROI to evaluate campaigns as compared to each other. You need a consistent basis for campaign definition to ensure you're fairly evaluating campaigns by this metric.

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Mateusz Makosiewicz' recent blog post gives an excellent list of many different types of marketing campaigns. A former CMO of mine asserted that a marketing campaign is a large-scale, multiyear program. Her definition didn't match any of the eight examples in the article, although it comes closest to the eighth, the 360° campaign. 

Two of Mateusz' examples are an SEO and an email campaign. Those typically don't have incremental associated costs because your SEO and email infrastructures (staff, agencies, martech) are part of your baseline marketing function. Contrast that to the brand campaign he also mentions. Brand campaigns are typically executed with large media buys, and frequently leverage creative developed by marketing agencies that specialize in brand programs. 

Applying MROI to 'free' campaigns, like SEO and email, would yield infinite ROI, as compared to the finite returns of the brand campaign (ignoring, for the moment, how you would even measure the return of a brand campaign). This extreme example highlights the need to have a consistent definition of 'campaign' if you want to apply MROI to the evaluation of those activities.

Lots of Challenges; Where to From Here?

I have identified many challenges associated with measuring and using MROI in your marketing performance evaluation. But they are just challenges, not complete roadblocks. In the next post, I'll discuss the importance of multitouch and pipeline attribution in this effort, and the final post will provide a framework for evaluating MROI in high-ASP B2B businesses.

Measuring Marketing ROI in a B2B World (1 of 4): Challenges

This is a four-part post that will explore the challenges of measuring marketing return on investment (MROI) in a high-ASP B2B business. The posts will break down this subject into three topic areas:

1. Why is it difficult to measure? (2 posts)
2. Multitouch and pipeline attribution are both required
3. An MROI measurement framework

(Make sure you subscribe to the blog to be notified when subsequent posts are published!)

Why is Measuring MROI Difficult?

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Marketing return on investment (MROI) is a straightforward concept: how much return is the company receiving on its marketing investment? Company leadership simply wants to evaluate their marketing investment just like they would investment in other functions, like product development and sales. MROI is typically thought of as comparing the incremental sales generated by marketing campaigns with the cost of those campaigns. If marketing campaigns achieve less ROI compared to other investment types, like developing another new product, then leadership can shift those investment budgets accordingly.

While the concept of MROI is straightforward, the actual measurement of it is devilishly complex, particularly in business-to-business (B2B) markets with high average selling price (ASP). There are several reasons for this complexity, and this post will describe each.

Fundamentally, the high-ASP B2B sale is different from a low-priced, transactional consumer sale: there are long customer research cycles prior to sales engagement; selling cycles are many months, or even years long; and the 'buyer' is not an individual but a team that involves multiple customer departments. There are also some factors shared with consumer sales, such as the impact of online research on purchasing decisions.

If you examine the problem more deeply, you'll find seven overlapping and interrelated factors that make measuring MROI particularly challenging. In no particular order, they are: 

• The Multitouch Problem: contacts engage with multiple marketing channels
• The Cookie Problem: contacts engage on multiple platforms, privately
• The Work From Home Sub-Problem: contacts are no longer working from their office
• The Buying Team Problem: prospective accounts have a buying team, rather than a buying individual
• The Lead Irrelevance Sub-Problem: those that control budget actively avoid becoming a lead
• The Delayed Return Problem: purchase cycles can exceed six months or more after initial marketing engagement
• The Relevant Investment Problem: some marketing is 'the cost of doing business' and other marketing is incremental, optional investment
• The Campaign Definition Problem: campaign definition is inconsistent, making it difficult to evaluate campaign MROI

The Multitouch Problem

This may be the most well-documented challenge in evaluating marketing execution performance, but it presents a new level of complexity for MROI measurement, especially in B2B.

The multitouch problem arises because in any long marketing and sales prospect engagement timeframe, the prospect engages with many different marketing activities. The common solution to this problem is a technique called multitouch attribution (MTA). Rather than describe MTA here, you can find a couple of excellent tutorials here and here. (Interestingly, the second article quotes market data indicating that only about ⅓ of companies have even implemented MTA. Wow.)

One thing to consider when learning about multitouch MTA is that the majority of the relevant literature, including the two linked articles above, is from the perspective of an all-digital customer engagement. In high-ASP B2B markets, marketing also invests in important offline engagements, like trade shows, in-person lunch-and-learns, sports hospitality, and similar. These investments are frequently a large part of the marketing budgets at these companies, so a proper MTA solution must also account for these interactions.

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Using MTA, you can now assign 'value' to each marketing execution. In other words, each marketing execution now has a measurable contribution to the desired outcome, like leads or pipeline. To then use MTA as a foundation to compute MROI, another layer of complexity is introduced: the need to assign investment costs to the marketing execution. This is where it gets really tricky, because the costs need to be tracked at the same granularity, and using the same hierarchy, as the performance measurement. 

For example, participation in a large third-party trade show may have a single budget number, but that budget number is likely broken down into component pieces, like hospitality events during the show, or paid media buys for pre-show promotion. Engagement touchpoints may be captured in multiple ways, like clicks on paid media, in-booth badge scans, hospitality attendees, VIP meetings in a suite, or post-show email responses. There may be several questions about this trade show, or trade shows in general, that you want to answer with MROI, like 'are hospitality events worthwhile?' or 'is paid media an efficient channel to promote trade shows?' or just the more global 'was Trade Show X a good investment?' To answer each of these questions, you need to ensure that you're including only the correct marketing touchpoint contributions to the multitouch model AND isolating the correct associated investments. For even medium-sized marketing organizations, this quickly becomes big challenge.

The Cookie Problem

Most of the technical problems marketers face when trying to measure performance tend to get easier over time as more advanced technologies are made available. The opposite seems to be happening with what I call the cookie problem; it's getting worse. We do see technological advancement, but any improvement is facing increasing headwinds from increased privacy protections, both legal (e.g. GDPR) and commercial (e.g. DuckDuckGo), in addition to evolving user behaviors, like an individual prospect using multiple platforms to access company digital assets.

Simply put, the cookie problem is this: whereas we used to be able to track a prospect's interactions with our digital marketing via a simple cookie on their machine, and use that cookie to associate and aggregate lots of that individual's interactions, we can no longer do so. 

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The WFH Sub-Problem. Adding an additional later of complexity to the cookie problem is what I'll call a sub-problem: the work from home sub-problem. One standard method of associating an anonymous visit with at least an account, if not an individual, was by using a reverse IP address lookup tool. This worked because prospect companies have a limited set of IP addresses that became known over time. Now, with so many prospects working from home, if they're not on their company's VPN, then their IP address just looks like their local broadband provider. This presents a significant new challenge for the IP lookup tools to identify accounts.

The Buying Team Problem

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Purchases of high-ASP B2B technology are rarely performed by an individual in a simple transaction like consumer purchases are. Rather, they are executed by a multi-departmental buying team, potentially including people from operations, finance, purchasing, and IT. The serve in a range of purchase roles, like technical approver, budget owner, product evaluator, supplier evaluator, and so on, and all of those roles will interact with marketing campaign activity at some point. 

ALL of those touchpoints, across ALL of those roles and team members, are relevant to the evaluation of marketing return. In other words, marketing return must be evaluated on an account basis, not a contact basis. That means that your martech stack must have the capability of associating contacts into accounts, at scale.

The Lead Irrelevance Sub-Problem. I only call this a sub-problem to the buying team problem because the individual lead is a subset of the buying team. However, it may be the more impactful problem. Simply put, the contact that typically becomes your first lead at an account is likely NOT a particularly important contact in the account's purchasing process. 

Why is this? Modern B2B marketing techniques have been deployed and refined for about 20 years, and the targets of those techniques have come to recognize and assertively avoid them. The 'big fish' is not going to fill out your lead form. She's not going to be scanned in your trade show booth. He's not going to answer his phone when your SDR calls. Anyone sufficiently advanced in their career to have a meaningful influence on a high-ASP purchase has seen all these techniques and is immune to them. The ones filling out your lead form and being scanned at your booth are low-level players at the account. The lead is dead.

That doesn't mean that you don't want to capture leads or stop executing at least some of these techniques. (I might argue that your lead forms are doing more harm than good, but that's a topic for another post.) But leads should be treated as what they are: a simple indicator of possible account-level interest that should be targeted with a broader account engagement strategy.

(Please see the next post for the remainder of the problem statements. Reminder ... subscribe if you want to be notified when subsequent posts are published.)