For B2B marketing campaigns to be worth the investment, they need to be sufficiently profitable, but how do you measure the ROI of a B2B PR campaign?
In the following, I look at how you can best go about measuring the ROI of a B2B marketing campaign, I will focus on sales activation (also called demand activation) PR campaigns and leave brand building aside. That does not mean that brand building is not or should not be a major concern to B2B firms, actually, for many B2B companies, brand building will be more important than sales activation in the current crisis as I made clear earlier, but the fact of the matter is that both campaign types come with very different sets of objectives warranting very distinct measures of success.
Seven out of ten digital marketers measure the ROI of their campaigns, a recent report from LinkedIn Marketing Solutions tells us. That might at first sight be a high number, but it still leaves no less than a third of marketers not assessing the contribution of their work to the bottom line.
The cost of the marketing investment
There is no getting around it. If you want to understand the contribution of a marketing campaign to your company’s profits, you will have to measure ROI and this is done by off-setting the return of your campaign against your investments. Let’s start with a look at the expenses.
Your expenses are all the costs that went into a campaign. In my random example, I promoted the launch of a new medical device, a no-touch hospital disinfection robot. I launched the robot through an integrated owned, earned and paid campaign.
Here is a look at some of the expenses I will have made.
- Art work
- Graphic design banners and social media posts
- Graphic design white paper
- Purchase of stock images
- Press release
- Blog post
- Guest article
- White paper
- Landing page
- Social media posts
- Banner ad writing
- Ad placements
- Banner ads
- Sponsored articles
- Sponsored LinkedIn articles
- Sponsored tweets
If you use external resources (a marketing / PR agency for example), these expenses will simply amount to whatever they invoice you. You will also have to take into consideration your own labor of course. Companies will often do this through working with a blended rate that they apply to everybody who works on the project, so it will be important for everyone to keep track of their time spend for this assessment to be accurate enough.
The value of CLV to outcome measurement
I have set as the goal of my marketing campaign to generate 400 leads that have a combined financial value of $158,000.
The way I calculated the value of a lead ($395) was by calculating ‘down’ as I moved up through the sales funnel, starting from the CLV (Customer Lifetime Value) of the average customer that buys a robot (I will come back to that) and then working with the conversion rates up through the funnel. Let’s say our company manages to convert 12,5 percent of leads into opportunities and 4 percent of opportunities into sales. This means you need 200 leads for a sale!
So what are the returns when a sale actually comes through?
- An average robot costs $100,000 (70,000 gross profit)
- 50 percent of clients who buy a robot buy the maintenance pack for $5,000 (4,000 gross profit)
- 10 percent of clients buy within the first year a second robot (70,000 gross profit)
Add all of this up and the CLV of a customer who buys his or her first robot is $79,000. The value of my lead is one 200th of that, which equals $395.
Time for a short intermission.
Calculations of CLV are no easy exercises. In this example, I am keeping things pretty simple, however, for some products and services, calculations will become (far) more elaborate – take CLV calculations for SaaS services for example, where you might end up juggling a MRR (monthly recurring revenue) that is subject to expansion or contraction during the lifetime of a client because that client might decide to downgrade or upgrade a subscription or delete or add users.
Fact of the matter is, your CLV will be an estimate at best, but being short of perfection is much preferred over not putting in the time to calculate CLV as best as you can. How could anyone, whether they are a medical devices company, a SaaS company, or even a professional services firm, assess the past or predict the future return on any PR spend if they do not even know what a client is worth to them?
Determining the ROI of the marketing campaign
Let’s revert back to our simulation and start adding up the numbers.
We beat expectations and landed not 400 but 450 leads through the campaign. As said, we had already determined that one lead is worth $395. Our campaign yielded a financial return of $177,750.
All the work listed above amounted to $10,000 worth of internal labor and $25,000 worth of external costs making for a total cost of $35,000.
The ROI of the B2B marketing campaign (or ROMI – return on marketing investment) is calculated as follows:
(return from investment – cost of investment) / cost of investment * 100 percent.
In this example, the ROI of the campaign amounts to 408 percent. An ROI of 300 percent or more can be considered satisfying. This campaign passed the test.
Two final considerations need to be added to the ROI calculation.
The aforementioned funnel conversion rates are not set in stone. Any marketing campaign is an opportunity to learn, which will allow you to continue to improve your conversion rates. An efficient approach to lead attribution will be instrumental to understanding where you need to double down next time. With every campaign, the goal should be to generate leads that come with a lesser cost and higher and faster conversion to opportunities and sales further down the funnel .
Measurement of lead generation can not happen too quickly. Clearly, for an integrated marketing campaign that kicks off on March 1st you will not be able to gauge leads generated on March 31st – in our example you should be able to acquire a clear picture of results about three months later (the actual B2B sales cycle will take considerably longer of course).
Did you enjoy this article on how to measure the ROI of a B2B marketing campaign?
You might also like this article on why PR professionals should embrace ROI measurements.
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