By: Scott Wright and Jack Bowen
In a marketplace that's more competitive than ever, optimizing your marketing spend isn't just a best practice—it's a necessity for survival and accelerated growth. With shrinking resources and an ever-more diverse array of marketing platforms upon which to reach the customer, shooting arrows in the dark is no longer a viable marketing strategy.
In fact, though nearly three-quarters of B2B marketers entered 2023 with a defined set of marketing goals, only 3 percent reported that they achieved those goals. The likely culprit? A mismatch between the messages, channels, and consumers.
Knowing where and how to allocate your marketing budget can mean the difference between a good year and a great one. In this deep dive, we will explore proven strategies to maximize your marketing spend, ensuring every dollar contributes to your company's growth trajectory.
1. Visibility into Performance: The Starting Point
First, you must have visibility into your marketing performance. Without this, you have no chance of optimizing your spend and your ROI. Despite this reality, only 37 percent of CMOs indicated they used marketing analytics to shape their strategic approach to marketing spending.
We see accurate data as the beacon that should guide your decision-making process. Tools like Google Analytics, Google Looker, Power BI, and Tableau offer insights into the effectiveness of your marketing efforts, enabling you to understand customer behaviors and track conversions with precision.
“Tactics without strategy is the noise before defeat.” – Sun Tzu
2. Focus on Your Marketing Channels
Beyond the surface allure of metrics lies a maze of interconnected insights waiting to be unveiled. The true story of marketing effectiveness is told through the interplay of these metrics across platforms. It’s not just about singular channel performance, but rather about the interplay of these channels in harmony.
Different marketing channels serve distinct purposes and reach diverse audience segments. It’s essential to analyze each channel separately, such as Facebook, Instagram, LinkedIn, TikTok, Organic Search, Paid Search, email campaigns, and trackable phone numbers. These insights help us understand how each contributes to marketing goals. However, remember that there’s combined value across all channels, particularly through awareness-driven platforms like social media, which might not be easily measurable but is significant in overall performance evaluation.
3. Track the Traffic from Your Marketing Spend in Each Channel
The journey from initial contact to final conversion is filled with valuable data points. By tracking the quantity of traffic in each channel, and correlating it with your spending, you can begin to discern patterns and pinpoint opportunities for optimization.
Understanding the flow from the top of the marketing funnel—where potential customers first engage with your ads or content—to the bottom is essential. For B2B businesses, this bottom point is where a Marketing Qualified Lead (MQL) is generated, like when a contact form is completed. For a B2C business like an e-commerce website, the bottom of the funnel is the sale.
4. Continue Tracking Channel Performance Through Your Sales Funnel
The sales funnel begins where the marketing funnel ends, and the journey doesn't stop at generating MQLs. For B2B businesses, data can play a pivotal role in understanding whether the MQL is likely to result in a sale. Leveraging data analytics, marketing teams can delve deeper into the MQL's interactions with content, campaigns, and touchpoints. By tracking their engagement levels, such as the frequency of visits, time spent on particular pages, response to emails, and interactions on social media platforms, marketers gain insights into the lead's interest and intent.
Analyzing this data helps tailor further communication and content to match the lead's needs, providing relevant and targeted information that aligns with their journey. Additionally, integrating data between marketing and sales systems ensures a seamless handoff, arming the sales team with valuable information to continue nurturing and converting the lead into a customer.
Finally, the conversion rate to sales is a critical metric, highlighting the quality of leads from each channel. Remember, some channels will generate leads with a higher level of purchase intent, meaning they will convert at a higher rate. If you have different sales resources working to convert MQLs to a sale, you can also track the conversion rate between these resources, which will indicate the potential need for training or coaching for those with a lower conversion rate.
"Make a customer, not a sale." - Katherine Barchetti
5. Using Data to Optimize Channel Performance
Understanding the cost involved in acquiring a MQL and converting it to a sale for each marketing channel is vital. These figures clearly show where your marketing dollars are going and their direct impact on revenue.
Analyzing these metrics against the lifetime value (LTV) of customers provides a comprehensive perspective on the cost-effectiveness of various channels. LTV measures a customer's anticipated revenue over their relationship with the business. By juxtaposing this against the cost of acquiring customers through different channels, marketers gain insights into the channels' viability in the long run. Channels with higher LTV-to-acquisition cost ratios indicate more efficient and valuable customer acquisition sources.
Once you understand the lifetime value (LTV) of each new customer in revenue, you can calculate both the Return on Advertising Spend (ROAS) and Return on Investment (ROI). These are the fundamental metrics leveraged to evaluate marketing spend effectiveness. ROAS specifically focuses on the revenue generated from advertising efforts compared to the total advertising spend. In contrast, ROI offers a broader view, considering the overall investment in marketing initiatives against the resulting profits. These benchmarks are crucial in deciphering the profitability and sustained value each marketing channel contributes to the business.
With this performance data, marketers can make data-driven decisions about budget allocation. The insights obtained enable a strategic distribution of resources, emphasizing channels that exhibit superior ROAS and ROI. These channels merit increased investment due to their ability to yield higher returns and contribute more significantly to the company's profitability.
6. Foundation of Marketing Spend Optimization
You can also use performance data to focus optimization efforts to improve those channels that are not performing as well. Start at the top of the funnel and look at the conversion of each step. For instance, your clickthrough rate for a digital ad versus the number of impressions or the number of MQLs converted on our website versus the total traffic to the website from a particular digital ad. In these examples, you would focus on the ad content and the website content to increase conversion.
Remember, optimization is not a one-time event; it's an ongoing refinement process. It involves constant testing, measuring, and adjusting. For instance, A/B testing ad creatives, experimenting with different call-to-action phrases, or modifying landing page designs can lead to incremental improvements that, over time, result in substantial gains.
Visibility into Performance
Using tools like Google Analytics to gain insights into marketing effectiveness and customer behaviors.
Enables precise optimization of marketing spend and improves ROI by guiding decisions with accurate data.
Focus on Marketing Channels
Analyzing each marketing channel separately to understand their contribution to marketing goals.
Helps in allocating resources efficiently to the most effective channels and understanding the interplay of different platforms.
Tracking Traffic and Spend in Each Channel
|Tracking the flow of traffic in each channel and correlating it with spending to identify optimization opportunities.
Assists in identifying effective marketing strategies and areas for improvement, leading to better allocation of marketing budget.
Tracking Channel Performance Through Sales Funnel
Understanding the journey of MQLs through the sales funnel and leveraging data to enhance lead nurturing and conversion.
Enhances the quality of leads and sales conversions by tailoring communication and content to match lead's needs.
Optimizing Marketing Spend with Key Metrics
Focusing on critical metrics like ROAS and ROI to evaluate the effectiveness of marketing spend.
Provides a clear understanding of the financial impact of marketing activities, helping in budget allocation and strategy formulation.
Continuous Optimization and Refinement
Engaging in an ongoing process of testing, measuring, and adjusting marketing strategies for incremental improvements.
Ensures the marketing strategy remains dynamic and responsive to market changes, leading to sustained growth and efficiency.
In the intricate dance of marketing spend, the steps you take today echo into the future of your business's growth. This guide has walked you through the essential processes of allocating your marketing budget effectively, from the granular tracking at the channel level to the high-level strategic decision-making informed by ROI and ROAS. The key takeaway is clear: diligent analysis, strategic reallocation, and continuous marketing spend optimization are not just best practices—they are imperatives for businesses poised for accelerated growth.
As we look ahead to the next installment – the final one in our series, we delve into the synergy between marketing and sales funnels. “Preparing for 2024? Is Your Marketing Funnel Integrated with Your Sales Funnel?" will explore the critical alignment of these two funnels, ensuring that your marketing efforts seamlessly transition into sales success. Stay tuned to learn how an integrated approach can streamline your processes and bolster your bottom line as we prepare for a thriving 2024.
About Chief Outsiders:
Jack Bowen and Scott Wright are Fractional Chief Marketing Officers with Chief Outsiders, a national fractional CMO and CSO consulting firm. Bowen is an engaging, roll-up your sleeves leader who draws on 20+ years of C-level marketing leadership and growth experience with significant expertise in data-based, direct-to-customer (B or C) performance-marketing, driving both topline and profitability throughout – acquisition, conversion and sales operations. Wright has decades of executive leadership experience leading B2B and B2C businesses to accelerated growth across numerous industries. He works with CEOs and leadership teams to develop customer-centric strategies for brand differentiation and awareness, effective targeting, lead generation, customer experience, and the repeatable processes and core capabilities that create a foundation for sustainable growth.
Together, they are part of a team of more than 120 seasoned and battle-tested Chief Marketing Officers and Chief Sales Officers who have guided over 1,850 B2B and B2C companies across more than 70 industry verticals.
Chief Outsiders executives have the experience to help businesses quickly figure out how to accelerate growth. They work alongside CEOs as members of the leadership team to develop strategies, build organizational and technical capabilities, and execute marketing and sales initiatives that create growth engines. Contact us today to accelerate your growth. Learn more about Scott Wright here and Jack Bowen here.
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