How much budget should you allot for marketing tools? There isn’t one right answer for this question. At the end of the day, though (rather, at the end of the year) the budget allocated for these tools weighs against the new customers and revenue your marketing efforts attract.
The cost of acquisition struggle is real for director-level marketers; the expectation is to justify overhead expenditures for each line item.
Justifying expenses on marketing tools—the ‘tech stack’ as it’s called in the digital trenches—means drawing a straight line from each tool to the bottom of the budget report showing costs and revenue. Two sentences and a few numbers on a PowerPoint slide per item is the standard method for presenting ROI metrics to company stakeholders.
For most, the ROI received from a tech-stack tends to be thought of as qualitative in nature. The tools make you more efficient, save you time with admin-like tasks, keep your teams organized, and provide a level of reporting that would be impossible to maintain by hand. This is all well and good, but for companies that aim to cut costs and only pay for the “essentials”, qualitative reasons may not be enough to justify the spend of thousands of dollars-worth in technology. So how can you demonstrate ROI in a dollar amount? Ironically, with the very tools you are being asked to justify.
Establish value metrics that justify budget items
The first step to calculating true ROI is getting a handle on your value metrics. Think big picture first and work downhill. Items in your tech stack need to fulfill one or more objectives:
- Save personnel hours (bottom line savings)
- Contribute to lead generation (top line revenue)
- Proving KPIs result in revenue (analytics)
Each objective above easily ties into the portion of the budget where the cost of acquisition gets sorted out. Saving personnel hours translates into reducing labor costs; lead gen translates directly to new customers and revenue; analytics tools provide a yardstick for maintaining creedance and accountability in how you track success.
We’ll take these one at a time.
Time is money
Your labor costs are listed plain as day in the ‘liabilities’ portion of the budget report. Figuring the gross number of personnel hours over a budget term is simple multiplication. In many cases you can simplify it further by dividing total labor costs by total number of personnel hours to generate the worth of one departmental hour.
Total labor costs / (number of personnel x hours worked) = value of a marketing hour
What types of tools save time for your operations? Most do to a certain extent; automation tools in a CRM or CMS are the big ones. Consider what might happen if a certain tool was removed from your arsenal? How long would it take your team to deliver similar utility?
For example, you might say a tool like Hubspot CMS saves a total of 600 hours of marketing per year on publishing and distributing content to targeted prospects. It helps to provide a brief qualitative explanation about what Hubspot does, and what your team would have to do for similar end results to paint a picture for the non-marketers involved. You should have a decent idea of how long marketing tasks take to execute; just be realistic and transparent in your estimation.
Does 600 marketing hours exceed the cost of Hubspot? Maybe it does, and that’s great—but this is just part of the true ROI of Hubspot or any other automation tool you’re justifying.
Next you have to show the gains from using the tool as it relates to lead generation, or better, attach it to the revenue it created.
Revisit KPIs as they relate to driving revenue
Remember back when you put your budget together and you outlined metrics that decidedly lead to generating leads and revenue? Here is where that pays off. Think in a linear fashion by tracing your budget items back to their respective KPIs, and follow the path of conversions to the revenues they drive.
Example time. Say you spend $10,000 on a subscription to Moz Pro so your creatives and web team can produce online content that ranks higher for Google search terms. First you’d calculate the marketing hours relative to the individuals using the toolset, laying out the marketing hours Moz Pro saves your staff.
Then examine how this relates to the KPIs set up around the tool. Here we will consider KPIs that deal with driving organic traffic to the company page since that is the purpose of a tool like Moz, or Ahrefs, Majestic, SearchMetrics—whatever you’re using for SEO.
Say organic traffic increased 15 percent year-over-year—great news, but what does that mean in a “money in, money out” sense to which marketing is held accountable?
Use analytics to prove KPIs turn into revenue
It’s your responsibility to show how improving organic traffic to the website resulted in leads and revenue with your analytics suite. Google Analytics and Adobe Analytics lead the market for monitoring website user behavior; other platforms may be used in conjunction as well. Just make sure that stakeholders have a clear understanding of which tool tracks your key performance indicators (KPIs). Not sure which KPIs you should be tracking? Discover the must have marketing KPIs here.
Marketers use analytics tools to set up tracking for conversion behaviors—like filling out a form, creating an account online, or making a purchase during a site visit—or ‘session’ as it’s called back in the digital trenches. Conversion behaviors result in either direct revenue (easiest ROI to prove) or build site visitors into a marketing qualified lead (MQL).
So for your SEO tool, use your analytics to quantify the percentage of organic site traffic that performs a conversion behavior—this is your organic conversion rate. Organic traffic that results in a sale is money in the bank in true ROI terms; conversions that contribute to an MQL need a touch more refinement before they may be attached to revenue.
Here is why an explicit understanding for identifying an MQL is critical. When everyone accepts what comprises an MQL, organic conversions that result in MQLs and eventually generate revenue may be figured into ROI for any tool used to drive organic traffic to the website.
Go back to justifying your Moz expense. Without the necessary understanding and analysis that ties organic traffic to eventual revenue, your SEO efforts will be shortchanged at the end of the budget cycle. Analytics platforms are really good at charting behavior session-by-session; however, a typical sale takes six to seven touches before the deal closes. Having those mid-funnel conversions set up gives your engagement efforts creedence—the path from awareness to purchase is indeed linear despite all the twists and turns!
MAP out the sales funnel
Your marketing automation platform (MAP) traces leads through the sales funnel—from the first conversion through the entirety of the relationship. The MAP will tell you how many MQLs that closed business with the company had an organic conversion somewhere in the customer journey. These customers can be used to justify spending on SEO.
Likewise, all the other budget spending may be tracked in the same fashion. How many MQLs came from a PPC referral? How many MQLs liked the Facebook page? How many MQLs signed up for the newsletter? What does the conversion path look like for your top accounts? Are there any takeaways you might glean from the comparison?
Data in your MAP will answer all these questions so you can keep fine-tuning your marketing operations. This allows you to assign your budgetary line items their fair due of ROI. More importantly, this makes it easy to get better year after year with your marketing.
Using a sales intelligence for more and better leads
All you need to do is create great content that your target audience will love and all your marketing dreams will come true. How many times is that inferred in marketing how-to content?
We’ll spare you and admit that making great content that converts is tough. Content has been done successfully, which is why content is king, but for a lot of marketers, content is a thorn in their side.
What is the number one consideration when undertaking the creative process? Audience. How do you understand your target audience? You take a guess at it. No, really.
The best in the business are really good at calculating their guesses. You probably have several tools that help ideate a buyer persona to help you build out content that you’re justifying paying for already.
Sales intelligence tools side step the guesswork and just tell you who buys your stuff—name, title, contact info, how much budget they hold, pain points, spending initiatives, and more. Think about if cutting to the chase would save your marketing team time. Chances are it would save significant personnel hours.
Essentially with a tool like DiscoverOrg you flip the sales funnel by starting with your leads already identified. This gives your creatives the luxury of designing materials for actual people instead of imaginary or generalized purchasing managers. It takes pressure off your form-fills so customers need not provide their life story during that initial conversion process.
To justify spend on sales intelligence, tracing the revenue back through the sales funnel is simplified. It’s a one-step process in many cases—you’re counting customers targeted, customers engaged, customers closed in one fell swoop. Obtaining this data can push your strongest leads over the MQL threshold–thus putting more leads in play for your sales team, resulting in more closed deals.
Track ROI within your CRM
Use your CRM as a way to track and justify the rest of your tech-stack spending. Consider creating a field that tracks a “secondary lead source” or “most recent lead source” within your CRM. While it’s important to track from where the lead originated, it is equally important to identify the systems/products/people that made subsequent edits to the lead to help get it over the goal line. A sophisticated ROI tracking mechanism would track both the lead source and lead generators/augmenters like DiscoverOrg, or your MAP system, that surfaced the lead or pushed the lead forward–once again creating a clear tie between your tools and net new business.
Most CRMs will provide some way in which to track campaign success and demonstrate ROI, however you may still need to supplement these reports with monthly tracking that you manage on your own. Consider other metrics you can use to demonstrate ROI from your tools, like website visits, social traffic, form fills, etc. While these efforts may not clearly tie back to net new dollars, you can make the argument that increases in traffic, likes, submissions, etc. across these channels are reflected in a healthier pipeline and more deals closed. Check back next week as we dive deeper into how you can track your campaigns in the top three MAP and CRM systems.
Ultimately, tracking your ROI is a little art and a little science. A little qualitative and a little quantitative. There’s definitely no magic equation to track your true ROI. It all comes down to aligning your time spent, tools, and KPIs with your revenue as seamlessly as possible. Discover more to tips and tricks improve your budgeting habits in our interactive guide.
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