The last blog series discussed how using Marketing Contribution to Revenue (MCtR) was not necessarily a great idea. However, marketing must somehow be shown to be impacting revenue, otherwise, why bother? To answer this linkage question we proposed two linkage metrics. The first is Expected Revenue (ER) which was discussed in the last blog posting. In this posting we will discuss the second linkage metric, Program Revenue (PR).
Program Revenue (PR), simply stated, is the sales revenue closed that was generated as a result of a marketing program. This definition is filled with holes, double counting possibilities and grey areas in its use. But like most B2B marketing measurements, nothing is really black and white. Hence summing up all the program PR and declaring that this is marketing’s revenue contribution is not particularly useful or accurate. Program Revenue simply validates that a program was attached to someone who eventually was attached to an opportunity that closed. Said another way, PR simply means a deal was done with someone and somewhere along the line, this person responded to the marketing program. This is a good example of correlation vs. causation. No implication is made that this marketing program caused the deal to be closed, just that this person’s participation in the program and the deal closing is correlated.
It is impossible to know if the person who responded to an email piece in Dec of 2012 then went on to do another six marketing actions, purchased the product due to this one email. What you can tell is that email is getting responded to at a certain percentage, and a certain percentage of people who see the email are also in the group of people who purchase. Hence to conclude the email contributes to a deal is not bad leap of faith, but it is correlation, not causation. Perhaps it is a logical correlation. Of course if they clicked the email, landed on a “BUY” page and swiped a credit card, then you could claim correlation. But this is not the case for a vast majority of B2B transactions.
Where marketers get into trouble, is when they claim that the email “drove $x in revenue.” There are way too many factors between email response and deal closing to make this assumption.
So what good is PR then?
Measuring Program Revenue (PR) helps to eliminate those programs which although they appear to have acceptable initial response rates, never end up being attached to people who cross the finish line and actually become customers. PR helps to eliminate the bad programs instead of ranking the good programs.
We have seen PR used very effectively to terminate third party media contracts. In these programs, media companies guarantee leads at a fixed cost. These companies use their own impressions usually on sites that require registration to send leads to the advertiser. The data quality is usually good and the cost can be less than Adwords. When the trouble starts is on the initial rep opportunity creation rate statistics. Since these prospects passed in their contact information on third party sites, when reps contact the people, there may not be a mental connection to the rep’s company. Opportunity creation rates can be abysmal.
That is OK you think, the cost per name was cheap, the data quality is high, we will just nurture these names and see of they show up 6, 8, 12 months from now with revenue attached to them due to some other program.
This is where PR is so effective at cleansing bad programs and bad lead suppliers from the marketing budget. If little to no revenue ever shows up from a program no matter how far back you look, then there is a good bet the names being provided aren’t even in the right zone to be a prospect.
PR helps to tie revenue back to programs. But this metric is really only for internal marketing consumption to weed out bad programs. ER is the key metric to show marketing’s potential contribution to revenue.
StoryMetrix 