Marketing ROI or Cost Per Desired Behavior?

ROI Marketing is unquestionably a strong movement within the market community. I embrace, even enthusiastically applaud, the concept. For a lot of years many companies lavishly threw marketing dollars around based, to a great extent, on emotional criteria and gut feelings.

Successful business management requires making decisions and allocating resources to maximize profits. By its very definition, maximizing ROI requires taking a hard look at the ratio of money gained or lost compared to the dollars invested.

Calculating ROI for overall marketing dollars spent over a period of time is a complex, but a somewhat manageable proposition if all the necessary data is incorporated into the calculations (and if the data is captured correctly and accurately).

Marketing ROI is really pretty easy to calculate if you sell low ring/low risk products, particularly if the company in question is fairly small and noncomplex. Say, for example, that you owned an online bookstore with annual sales of $1 million. If you spent $200,000 on various marketing programs and increased your sales to $2 million as a result of spending those dollars, you could say with a strong degree of certainty that you achieved a favorable ROI on your marketing investment. Given this extremely straight forward business model you could also pretty easily calculate ROI for many of the individual components of your marketing program.

However, I contend that calculating marketing ROI for most B2B marketers is a great deal more complex than our online bookstore example. Many if not most, B2B sales and marketing efforts are complex, take a good amount of time and require many different touch points to achieve success. I am sure that my friends and clients selling multi-million dollar capital equipment solutions would love for their sales process to be as simple as a couple of mouse clicks and a credit card payment. It just doesn't work this way.

Most B2B sales cycles are long and require marketing messages and sales activities to be strategically layered to achieve success. For this reason, I cringe every time I hear a B2B marketer talking about the ROI they achieved for a banner ad program on an industry web site or an ad they placed in magazine.

Let's look at digital media, as much of the marketing ROI discussion I am privy to resolves around digital rather than print media. Although the argument for the effectiveness of print media is a strong one, digital media affords us the opportunity to measure some things that are much more difficult to measure for a print advertising program. However, what are we really measuring--not ROI in most cases. Everyday I hear pharmaceutical industry suppliers say things like--"We spent $1,500 on website X and got 42 clicks on our ad. The program delivered a very strong ROI."

Unless banking regulations have change drastically without my knowledge, you can't take 42 clicks to the bank.

What is really being said is that we spent $1,500. Via an effective media environment and strong ad creative, we motivated 42 people to want to learn more about our products and solutions. Spending $1,500 and motivating 42 people to want to learn more about what you have to offer is great, but it is not a measurement of ROI. Perhaps we could call this Cost per Desired Behavior. We want someone to click on our ad to learn more--how much did it cost us per customer to achieve that desired behavior. In the $1,500 for 42 clicks example it cost $35.71 per desired behavior.

Is this Cost per Desired Behavior high or low? It depends on the market, on your potential customer base and on the dollar value of a typical customer. If you are selling a $1 million solution and there are really only 5,000 decision makers in the world for your product, $35.71 Cost per Behavior is probably quite good. If you are selling $0.50 widgets that are not consumed very quickly by your customer base, the same Cost per Behavior might be extremely high.

If we can agree that most B2B sales efforts are long, complex and require numerous touch points of sales and marketing messages, it becomes quite challenging (maybe impossible) to measure actual ROI for most isolated B2B marketing or sales activities. Which click on an ad, which client entertainment dinner, which white paper download, which trade show booth visit, which sales presentation, which print ad, which phone call convinced that big customer to sign on the dotted line? The answer is probably none of these specific activities did, but all of these activities in tandem achieved success.

The other question to ponder is whether or not a click or a download from a customer already in your sales pipeline, or perhaps an existing customer, is as valuable as a click or a download from a new prospect--someone not currently in your sales pipeline. I would argue that behaviors from customers currently in your sales pipeline or existing customers are even more valuable.

Digital media, unlike many other sales and marketing activities allows us to measure behavior. But, I think that it is important to understand what we are measuring in most cases--behavior, not ROI.