Measuring MROI in a B2B World (4 of 4): A Framework

This is the final installment of a four-part post that explores the challenges of measuring marketing return on investment (MROI) in a high-ASP B2B business. This is the money post. I will describe a framework for evaluating MROI.

Part of why it took me a long time (a year!) to write this fourth and final installment of the series is that my thinking on this topic continues to evolve. Because of this, this post really represents my latest thinking which, with apologies to Regis Philbin, is definitely NOT my final answer. I wrote a draft of this post back then and I just threw out most of it. 

There are many levels at which you could try to evaluate marketing ROI, each potentially providing an answer to a different question. The two most important are these:

• Campaign-level ROI: Did this campaign 'make money?' Was it worth the investment, especially as compared to other things we might have done with the money invested?
• Top-level marketing ROI: Is our overall marketing program budget a good investment? Should we increase or decrease the investment level?

Campaign-Level ROI

One of the better articles I have read on the challenges of measuring MROI is a few years old, but still valid: Amy Gallo's A Refresher on Marketing ROI. It highlights some of same the challenges I have in this series. The article focuses on trying to measure incremental return delivered by an incremental marketing program, or what I'm calling campaign-level ROI. The article highlights the primary challenge with this analysis: How do you define incremental? How can you accurately estimate what the baseline revenue would have been if you didn't do the marketing program? And how much of the marketing is truly incremental, because it relies on all of the baseline marketing investments you're already making (what I referred to in my first post as 'the cost of doing business')?

Photo by Jackson Simmer on Unsplash

You can't. Seriously. Give up. Stop trying.

Then what you can do? Two things:

1. Don't try to measure absolute incremental ROI; focus instead on relative incremental ROI. Answer a different question. Instead of 'did this campaign make money,' answer 'did this campaign have a better return than that campaign?' Why is the latter question an easier one to answer? 
2. Because you can make a large simplifying assumption: the foundational marketing investment, the 'cost of doing business,' is the same for both campaigns being evaluated. 

If the underlying foundational marketing investment is the same for multiple marketing programs, then just measuring the incremental program spend and program outcomes and comparing those across multiple programs allows you to pick program winners and losers, based on an ROI computation. 

Top-Level Marketing Program ROI

So how can you use marketing ROI analysis to evaluate the level of overall marketing investment? Measure marketing's impact on pipeline. (Note: In post 3 of this series, I said I focus on pipeline instead of revenue because of the time gap from one to the other, enabling quicker decision-making. Another reason is that generating pipeline is marketing's job, closing those deals is sales' job. Evaluating marketing investment based on the latter does not make sense.) This is the highest reasonable level of MROI analysis. 

This analysis should not capture all of marketing investment, like brand programs and website investments -- again, the cost of doing business -- because those would be required if executive management decided to shift resources from marketing to engineering or sales or something else. It should only include demand gen oriented campaign activities.

How can you measure marketing's total impact on pipeline, then? To say it differently, how much of company pipeline is sourced by marketing, and how much does that cost? I break it down to three components:

1. MQL-Sourced Pipeline: marketing qualified leads that are handed to sales, who then uncovers an opportunity.
2. MQA-Sourced Pipeline: marketing qualified accounts that are handed to sales, who then uncovers an opportunity.
3. MDF-Sourced Pipeline: company-funded marketing activities by channel partners, who then uncover opportunities.

In the past, I have argued against the very concept of marketing sourced pipeline, primarily because it is generally associated only with leads, and tends to ignore the multitouch engagement of buying teams and accounts. While the concept behind MQL-sourced pipeline should be familiar, the problem is that past analysis has shown me that leads are a limited and poor indicator of a customer buying team's activity in high-value B2B sales, so only associating leads to opportunities to define marketing's pipeline impact is a very limited view. 

However, with multitouch and attribution modeling, analysts are able to paint a much broader picture of marketing's account engagement and, more importantly, to monitor account-level or buying-team-level activity. This allows you to monitor engagement thresholds to identify marketing qualified accounts (MQAs) and notify sales when an account appears to be in an active buying motion. Any opportunity sales creates at that account within a finite timeframe following that notification is considered marketing sourced. That's the concept behind MQA-sourced pipeline.

The final component of marketing sourced pipeline for B2B enterprise sales comes via MDF-funded channel partner marketing execution. Obviously, that's only relevant if your company funds marketing campaign execution by your reseller partners. 

Perfect MROI Analysis is Impossible, but Usable MROI is Achievable

I recognize the framework described above, with relative ROI analysis for campaign evaluation and top-level marketing program ROI for overall marketing investment evaluation, is not perfect, nor is it complete. Marketing just doesn't exist in a silo, particularly as it relates to sales, so isolating either the investments or the outcomes is impossible. If that weren't the case, there are so many other questions that a more clean and complete MROI measurement capability might be able to answer.  

But it is adequate for answering some important and relevant questions. And if you have built the required underlying capabilities, like multitouch and attribution modeling, to evaluate MROI in this framework, then you also have given yourself access to so many more capabilities, like marketing mix optimization or even predictive modeling.