The landscape for small, medium and enterprise businesses and their marketers today may be the most challenging of our lifetime. Several factors have created this “perfect storm” for marketers; an economic recession, increased competition, evolving technology, emerging marketing channels, etc. Therefore, the discussion between CMO’s and CFO’s ultimately leads to the Return on Investment (ROI). However, measuring a true ROI can be challenging when considering all factors that impact this “nirvana” of marketing metrics—sales efficiency, operational overhead, pricing strategies, etc.
While no marketer (or CFO) should ever give up on measuring a true ROI, it’s very useful to develop several cost-based marketing metrics that provide the business with a baseline for what it is generating from the marketing investment.
Cost-based metrics are the most powerful alternative to ROI measurement
Examples of cost-based marketing metrics include:
- Cost per Impression
- Cost per Response
- Cost per Lead
- Cost per Click
- Cost per Visitor
- Cost per Application
- Cost per New Customer
All of these cost-based marketing metrics are simply calculated by dividing the marketing cost by the total number generated (impressions, responses, leads, clicks, customers, etc.) With that information, you can work with your finance team to set realistic objectives that drive a profitable marketing campaign. For example, knowing that the business can afford to invest $200 per New Customer, you can work backwards to determine what the Cost per Lead needs to be based on established conversion rates:
- Target Cost per Customer = $200.00
- Established Conversion Rate = 10%
- Allowable Cost per Lead = $20.00
Armed with this information, CMO’s can evaluate which marketing campaigns generate action at cost that allows the business to be profitable. Not to mention, makes for a much easier conversation with the CFO when asking for additional budget!
