Is There ROI for Marketing Automation?
Tuesday, April 26, 2016
Layer One - Vice President of Marketing
A Return on Investment is the most important piece of any business project. The sum of a good project’s parts are built with the end goals in mind. What does that look like for Marketing Automation?
The answer to that question is typical of many marketing projects. It’s directional. Increase your marketing budget, and you’ll see a correlation of an increase in sales. For many Executives and Executive Teams, though, there is a desire to go deeper. Show me the specific activities that increased dollars at specific accounts or created net new accounts - Let’s talk about these two concepts:
I’ll spare you the details on how each dollar spent will generate X amount of brand awareness. This definition is more around “having a particular direction of motion, progression, or orientation.” Think momentum.
I think about well-tuned Marketing Automation programs like a locomotive. Hard to get moving, hard to stop once its moving.
There is a one-time cost associated with setting up a program that will continue to run. The ROI in this sense is 1 to many. Good MA Programs will generate new business for companies and once they start doing so - they will continue to do so and the revenue will quickly add up. Knowing this is half the battle.
Account Based ROI
You get the directional concept (it’s real!) However, an Executive Team has asked you to put together something more concrete, a ratio of dollars spent to dollars earned over 1-3 years. Agree on some assumptions and you can fulfill this request. These assumptions are below. Disclaimer: these will be different per company and are for example only.
- Your MA budget is $250,000
- The Master List contains 100,000 individuals
- The open rate is 15 percent
- The form submit rate is 3 percent
- The number of leads that turn into key accounts is 5 percent
- A Key Account is an account that generates $50,000 in revenue year over year
- Segmentation: (Number of Contacts in your Master List) x (Standard Open Rate) 100,000 x 15 percent = 15,000
- Qualified Leads: (Segmentation) x (Form Submits): 15,000 x 3 percent = 450
- Budget for Marketing Automation: $250,000
- Cost/Qualified Lead: (Budget) / (Qualified Leads): $250,000 / 450 = $500
- Leads That Turn into Key Accounts: (Qualified Leads) x (Key Account Rate):450 x 5 percent = 25
- Total Sales: (Number of Key Accounts) x (Revenue of Key Accounts): 25 x $50,000 = $1,250,000
- Total Revenue (Total Sales) - (Budget for MA): $1,250,000 - $250,000 = $1,000,000
In a nutshell, I'm suggesting that spending $250,000 on Marketing Automation will generate $1,000,000 in total revenue. Now, that will take some time to realize in the first year, but once its achieved, you can plan on it being there year over year. In the end, MA programs will generate qualified leads that make it easier for sales to sell. They still have to sell and close, though - and that’s that.
Again, these numbers can vary widely depending on the metrics achieved in any given MA program along with company budgets and sales structure. I encourage you to plug in your own numbers or message me if you have questions. I have more detailed worksheets and can explain with more depth the reasons for segmentation and the methodology behind Qualified Leads .
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