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June 12, 2020   |   5 min read

Marketing Prevails: How to Keep Your Budgets Intact

Alison Trickett   |   Chief Growth Officer

Marketing budgets are often one of the first places companies look to cut during setbacks in the economy. In fact, 65% of CMOs and marketing leaders report they are already bracing for moderate to significant budget cuts due to coronavirus-related disruption.

Kim TowneWhile the COVID-19 pandemic was clearly unanticipated, it got me thinking as a marketing leader about what might have made our lives easier when justifying our efforts. I recently spoke to Kim Towne, Director of Analytics at Mindstream, about how those at the industry forefront can adapt amid future economic challenges and the fundamental role analytics will play.

Why do you think marketing is one of the first places companies look to cut during setbacks in the economy?

I think the general view is that marketing budgets are not essential. And I also think there was such a rapid change with consumer and business behavior that it was just the easiest budget to cut immediately. In the past few months, we’ve seen a lot of companies pause and recalibrate [their marketing efforts] and that’s probably true across most industries.

While it’s the easiest place to cut, do you think it’s the best place to cut?

No. There's still a place for marketing, even if it's scaled back. For example, a lot of restaurants went to curbside delivery – while this industry has been hit hard, it is vital to let your customers know the changes in your business to keep the lights on.

We’re seeing more and more marketers needing to rapidly justify a Return on Investment (ROI) on their marketing programs (sometimes within days). Where would you start?

I think the first place to start is understanding the difference between marketing ROI and Return on Ad Spend (ROAS). ROAS is really a direct correlation on your media spend – it is revenue divided by media spend:

Revenue divided by media cost equals ROAS

ROI is slightly different, because it's subtracting your total investment in marketing from your total revenue gained from those efforts, then dividing that number by the total investment.

Revenue minus marketing cost divided by  marketing cost equals Marketing ROI

Many people look at marketing ROI in a percentage, so you can multiply the resulting number by 100 to get your ROI percentage.

For marketing ROI, do you subtract the cost of time and tools (i.e., staff salaries, technology investments, etc.) it takes to put the entire program together?

I’ve seen this calculated a lot of different ways. Ultimately, it’s a business decision and it’s going to vary by organization. For example, I work with a company that adds the costs of creative, landing page development, and media commissions to use in their marketing ROI calculation. We’re looking at total cost to get that campaign up and running and ongoing optimizations to that campaign plus media spend, and then using that total to calculate their Cost Per Conversion. Their rationale is they are engaging an outside source (Mindstream in this example) to get their campaigns up and running is just as important as what they spend in media.

Another thing to consider is profit margin on the services or products sold. It's not just being able to calculate the marketing ROI. It's understanding if the ROI is enough.

For example, let’s say I’m selling widget A with a profit margin of $5 per widget and I’m selling widget B with a profit margin of $10 per widget, I need to be more effective and have a higher ROI for widget A than for widget B because of that profit margin. So, this is a step beyond just marketing ROI by understanding if it’s enough of an ROI to justify the program.

What baby steps can marketers put into place now to more easily justify ROI when asked in the future?

The first baby step is to make sure you have the basics in place – tracking. You never want to have somebody ask how your marketing efforts are performing and your response be, “I don't know because my tracking broke.”

Having the basics in place sounds so simple but it’s not as easy as it seems and will vary by channel (website, email, social, ad platform, etc.). Conducting a tracking and analytics audit for each channel is a great way to start.

It’s also important to know the value of your marketing efforts. For example, if you are responsible for driving new business leads to your website, what is the value of a lead for your company? If you don't know the value of your goal what information do you as the marketer have access to and what information do you need to be able to assign that value?

What else should marketers sharpen to further their ability to measure ROI and understand the numbers?

We spoke about calculating marketing ROI a variety of ways, so having an overall understanding and an aligned point of view across your organization on how this is calculated is important. It will help you better defend the numbers when people ask.

Another issue I tend to see organizations challenged with is not always knowing their “source of truth” for performance. Facebook, Google Ads, Google Analytics, CRM systems, and other channels report conversions in different ways and it leads to people questioning the data.

Google Analytics uses a last click attribution when tracking conversions so if I clicked on an ad from Facebook, visited the site, and then achieved the goal setup in your website analytics, it’s attributed to Facebook. If you use Facebook’s attribution method when you track conversions, they have an attribution window that’s between one and 28 days when someone viewed or clicked the ad. In Facebook, if you viewed the ad then later went to the website through an organic search, Facebook will still get the credit … so your conversion numbers are different.

A screenshot of Google's Attribution Tool.

Really understanding how you want to count your conversions and how you want to give your ad platforms credit for the work they're doing is important. You have to make sure all of your data is accurate (baby step one) and you’re measuring everything by the same measuring stick.

Have more analytics questions without answers? Contact us and we’ll get back to you as soon as possible.

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