The quote “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” is attributed to John Wanamaker. The irony is he considered by some to be the father of modern advertising.
Tony Lennon, a colleague of mine from my stint at The MathWorks rejected this and took an aggressive, opposite position, namely, “It’s not marketing if it’s not measured.” Right on, Tony. The point is that if you could break Wanamaker’s curse, you could use the metric to create a virtuous circle of doubling down on what works, and cutting out what doesn’t. But how to measure the return on investment (RoI) of your marketing budget? It’s not hard to guess the RoI of trade show drayage fees (hint: close to zero), but what about a one hour webinar drawing 400 in the 10am PST time slot versus spending a half-day of quality time with twenty prospective customers at seminar in a hotel conference room in Santa Clara?
There are various schools of thought on how to measure these disparate events on an equal footing. One is first touch: assign all credit for a sale to the marketing event that first brought the customer to your company. Another is last touch: what was the event immediately before the sale? Both of these are naïve and misleading in my opinion, especially in the long sales cycle typical of B2B sales. The reality is that (in B2B at least) it takes several touches to turn a stranger into a friend and a friend into a customer. The marketing metric should take this reality into account. To use a golf analogy, you don’t just credit the drive or the putt. It’s often a good fairway shot that makes you break par.
We’ve come up with a custom spreadsheet that captures this golf metaphor. Technically it’s called ‘contribution margin’ but ‘fairway’ is a good way to think about it. For each sale, we look back in time and ask, “Which of our events really touched the company that made this purchase?” Our custom spreadsheet yields an apples-to-apples comparison of each marketing event. You’ll have a rational basis for increasing investment on the best types, and put the weaker ones on a ‘get well program’ or drop them. As you learn what’s effective over time, you’ll see your RoI and contribution margin improve.
Test drive our Marketing Program Effectiveness custom spreadsheet today and break Wanamaker’s curse!