article | December 18, 2018
How Top CMOs Determine Where to Spend
As a leading CMO, you’ve integrated digital channels into your marketing channel spend to align with how your personas or buyers want to get information. You’ve started measuring the effectiveness of these now institutionalized channels through ROI (Return on Investment) to understand short-term investment impact. But ROI is best for changing campaign tactics or understanding initiative success as it relates to revenue impact. This limits what’s incorporated in the perceived “return” as its purely dollar-driven.
Following ROI, you started introducing ROMI (Return on Marketing Investment) into your organization to determine if you’re spending too much, too little or just enough. ROMI provides transparency to Sales and Corporate for how marketing efforts are performing, combining marketing sourced revenue (e.g. resulting sales) with marketing touchpoint revenue (e.g. social media mentioned, etc.). ROMI, like ROI, is about having a resulting number greater than 0 to better justify marketing spend.
Use a ROMI tool to see how your measurement efforts compare. A ROMI tool breaks out marketing impact by both sourced and touchpoint contributions in addition to costs. Giving you visibility by vertical or marketing segment for further insights into how you’re performing beyond the top-level marketing organization.
But get ready for the next gen investment measurement tool: ROMTPI (Return on Marketing Touchpoint Investment).
What Exactly is It?
Touchpoints refer to customer interactions across the length of the customer lifecycle. Many of the touchpoints marketing often focus on are prior to a sale. It’s important to apply touchpoints throughout the entire lifecycle for both prospect and existing customer opportunities. Investing in the right touchpoints has been proven to improve revenues, reduce costs, and reduce churn.
ROMPTI can be further enhanced by overlaying it with an investment heat map. The tool below visually portrays the potential of each touchpoint along the customer lifecycle to help marketing invest accordingly. These insights can be leveraged in campaign planning across lead gen, demand gen, ABM, etc. to align investment pattern with funnel stage touchpoints. See Figure 1. Warmer coloring (such as orange and red) aligns to where customer or prospects see and/or interact most with your offerings. Cooler heat coloring (such as yellow) are auxiliary touchpoints that only serve to complement the warmer elements.
As you can see in Figure 1, customer touchpoint engagement – or where customers and prospects engage – appear to align in “Not in Market”, “Options Evaluated” and aspects of “Usage” stages. In some instances, particular investment channels and activity tactics will be more expensive than others, slightly swaying the investment percentages higher in these areas.
How are Leading CMOs Using It?
Most companies don’t fully understand the needs of their customers. A recent study shows over 45% of marketing budgets are spent on touchpoints or channels that don’t align with buyer preferences. This generally leads to lower ROMI or ROI with marketing trying to persuade sales of their value contribution to long-term revenue success. CMOs are leveraging ROMPTI to achieve their revenue contribution goals. Applying a more targeted touchpoint strategy has shown revenue can increase by 20% while reducing costs on less resonating activities by ~15%. Customer satisfaction rates also improved in the study by 35%.
Targeted touchpoints are possible by focusing on customers with an outward-in view. In addition to knowing touchpoints, CMOs are measuring them on a regular basis in a systemic way to drive decisions. These decisions inform campaign tactics in addition to other functions such as Sales, Corporate Communications, Brand, Event, etc.
What’s in It for Me?
Marketing budgets are getting tighter requiring organizations to do more with less and prove their value. As you plan budgets for the next fiscal year and make the case for what you want to spend, ROMI and ROMTPI are powerful tools or extra ammunition in proving your value and obtaining more budget as you compete against other function. Fight the perception of marketing as an internal cost-center with as much clarity and transparency as possible in your results by leveraging these tools. Budget constraints are real and require you to do more than just build a plan that supports the revenue results you’re aiming for. You must be savvy and quantitatively driven, leveraging the interlock with sales and historical returns.
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