In any business, you receive money and you spend (invest) - the difference is PROFIT. Your investment needs a payback or else pretty PROFIT quickly becomes LOSS. The business needs to keep track of Return On Investment (ROI) as time goes on. Just ask your FD, he reports to the board on ROI every month.
But Return On Marketing Investment (ROMI) is notoriously hard to achieve. For example how do you measure the profit we get back from a piece of advertising? Or an event? To estimate ROMI, we use proxy measures like hits, email responses and leads. So far, so good.
Or maybe not so good. To measure ROI you need to have a VALUE, just ask your FD. So the real question is, how much £value has Marketing generated for our business?
- Hits and leads don't provide any answer to this question
- And measuring confirmed sales orders takes too long to be meaningful.
The nearest Proxy to completed sales is the Sales Pipeline - qualified opportunities within the Sales team, leading to orders. With a good tracking system you can easily mark Pipeline items as Marketing-generated.
That’s why good B2B marketers (and agencies) focus on
- Sales Pipeline Value (SPV) in hard currency produced by each campaign
- It’s the closest proxy you can get to the order value itself
- A simple forecasting system (or spreadsheet!) will produce a board-ready report showing the potential order book, including number of forecast sales and their value.
- The FD can then fold it into a proper company-wide forecast P&L.
This approach makes the FD's life easier and your sales estimates more accurate, the CEO gets a clearer picture of the business going forward and Marketing become a valuable star in the corporate firmament.
So, if you ever doubted why ROMI is so important in your company or how to make it count, now's the time to check your measurements. You'll be surprised at how much you contribute to your company's bottom line, so PUBLISH and be proud.