Making Money On-line: Strategic ROI vs Attribution: CMOs Must Know the Difference

Tuesday, 13 June 2017

Strategic ROI vs Attribution: CMOs Must Know the Difference

For CMOs, and all marketers tasked with driving revenue, the constantly-looming question we try to answer is, “where should I spend my next marketing dollar to drive the most impact?”

An entire job function has been built to answer this question, Marketing Operations, and an entirely new marketing discipline has emerged because of it, Marketing Performance Management. In the meantime, point-solution marketing technologies such as Attribution have emerged all in the name of helping marketers find a simple answer to this question.

Here’s the thing, ask any marketer who has gone down the path of trying to accurately and confidently determine where to place resources and you’ll hear the same thing: It’s not so simple.

Two Paths to the Truth

Let’s be honest, there is no magic solution to help any marketer make perfect decisions. And that is why companies who do succeed demonstrate a mature Marketing Performance Management approach. It helps marketers solve the pain of uncertainty.

There are different types of analysis within MPM that help marketers answer the question of “where should I spend the next dollar,” two important examples are Strategic ROI and tactical attribution.

Of the two, most marketers are more familiar with attribution. Whether first-touch or last-touch, or a more advanced custom weighted methodology, attribution is certainly a tool in the marketer’s MPM toolbox. However, marketers are often too quick to put all their eggs in the attribution basket. The reality is, attribution can be valuable, but it limits the true measurement of what’s working. I believe advanced attribution should be one of the last items a marketer takes on in the quest to discover the truth to what’s working.

Strategic ROI is a more holistic approach to understanding what marketing has invested in and what financial results have been delivered at global, product or regional levels.

Like attribution, Strategic ROI isn’t the end-all-be-all for marketers, but it provides an important view for marketing executives when determining what worked, what didn’t and where to spend their next dollar.

Let’s take a deeper dive into the two areas in the table below:

Runmarketing Table

Here is the key takeaway: both of these are valuable approaches to measurement, but they each answer different questions.

Strategic ROI is a high-level approach that allows marketing executives to take a portfolio view of their organization(s). It lets them determine if the overall marketing department is performing to the right expectations, and more importantly, look at what the best mix of activities and campaigns are to exceed targets.

Attribution is a tactical view into each and every marketing campaign and allows demand generation marketers and field marketers to look at which campaigns are contributing to pipeline and revenue. This helps marketers on the ground determine if they should run certain activities again and look back at results to understand which activities produced results.

Allison Snow, Senior Research Analyst at Forrester summarizes it well.

“The attributes of MPM sharply contrast to those of marketing measurement. If B2B marketing measurement represents what a driver sees in a car’s rearview mirror, then MPM serves as the headlights and the steering wheel of the car itself that improve both visibility and control for the driver.”

Marketing Executives, Start with Strategic ROI

Based on what we’ve seen in marketing organizations within Microsoft, Red Hat, VMWare, Box.com and many more, it’s our belief that marketing executives should focus on Strategic ROI first. A couple of reasons for this:

This changes the conversation from “What did this activity do for me?” to “What is marketing’s overarching goals? Are we meeting/beating expectations?” and “What is the right formula for success?

With Attribution, marketers can look at a webinar or event and determine whether it produced results, but cannot visualize the bigger picture as, traditionally, investment and target data, such as investment against a specific object or target results, is not included within attribution.

Strategic ROI is a more direct approach. All it requires is that a marketing organization and its data be organized in a consistent fashion with how revenue is reported in the business. When these two ingredients are in place, Strategic ROI can be calculated.

(Note: Marketing Performance Management systems, like Allocadia, manage this organization.)

With attribution, there isn’t a one-size-fits-all way of calculating and analyzing results. Every marketing department has a different approach when looking at this analysis. Attribution invites complexity, as there are many ways to look at the data.

Beyond that, Attribution is reliant on sales process and detailed CRM data (think contact roles that sales reps must assign manually in the CRM or marketing and sales operations must be automated with even more technology) to be accurate and up to date. Just 18% of U.S. organizations have an optimized level of data quality, according to Experian. Poor data is an extra challenge that many marketers are not well-equipped to overcome.

So, what holds marketers back from achieving success with Strategic ROI?

For starters, the triangulating data adds another layer as you are not only factoring in marketing and sales data, but financial actuals as well. Our industry benchmark study found that only 8% of organizations have marketing, sales and finance data in one data warehouse that acts as a “single source of truth” and only 28% feel marketing’s data is accounted for and well formatted (this includes that initial 8%).

However, the rewards for moving forward with accurate strategic ROI measurements are proven. High performing marketing organizations (aka those that companies are expecting revenue increases and marketing budget increases) are 2-2.5X more likely than underperforming organizations to have marketing and sales data that is always or often consistent and aligned to the company’s overall objectives.

To become truly strategic members of the organization, CMOs must be able to demonstrate stewardship over every dollar spent. Only Strategic ROI can deliver that level of prescriptive, actionable insight. Attribution, to its credit, is an important part of the journey, but not the end game many CMOs and marketing executives will need to maintain trust, and job security.

Is your CMO prepared to calculate and analyze attribution, as well as demonstrate ROI? Download The Data-Driven CMO to see what other CMOs have to say.