Return on marketing investment has become a hot topic as marketers seek to prove the value of their activities and programs and strive to bolster their credibility in the C-suite.  Today, marketers are using ROI for everything from justifying marketing budgets to measuring the performance of individual campaigns.

ROI has also become an important topic for marketing service providers.  MSP’s are routinely using case studies that include ROI calculations when pitching projects to prospective customers.  In many cases, they will also provide post-campaign reports to clients that contain a calculation of the ROI produced by the campaign.  Therefore, marketing ROI has become an important factor both for winning business from prospects and for winning additional work from existing customers.

In these circumstances, it’s critical for MSP’s to use accurate calculations of marketing ROI.  One very quick way to lose credibility with a prospect or client is to present a flawed ROI calculation.  Even if your immediate contact doesn’t catch the error, it’s likely that, sooner or later, someone in the customer organization will.

Given its increased use and popularity, you would think that the process for calculating marketing ROI is now well understood.  Unfortunately, I still see far too many examples of marketing ROI that has been calculated incorrectly – in many cases by people who should know better.

One of the most common errors is the use of increased revenues (sales) rather than increased profits when calculating marketing ROI.  You can see a detailed illustration of this problem here, but the essence of the issue is easy to describe.

The basic formula for calculating marketing ROI is:

ROI = (Gain from Marketing Investment – Cost of Marketing Investment) / Cost of Marketing Investment

For ROI purposes, Gain from Marketing Investment is the incremental gross profit (gross sales/revenues less cost of goods sold) produced by a marketing campaign or program.  Using incremental sales or revenues in the ROI calculation distorts ROI because most marketing campaigns are designed to increase sales volume.  And increases in sales volume are not free – there are always costs associated with producing and delivering the additional products or services.  Therefore, incremental gross profit is the real meaure of the “gain” produced by most marketing investments.

Using sales/revenues rather than gross profits will usually produce ROI numbers that look fantastic.  But the problem is, these ROI numbers are flat out wrong.  Way wrong.

Using accurate ROI calculations isn’t the only key to being a successful MSP, but it is an important factor in winning new business and building lasting client relationships.

In my recent post about B2B marketing automation, I suggested that the growing use of marketing automation technologies will create demand for a new group of marketing services.  To fully realize the benefits of marketing automation, B2B companies will need to define marketing and sales processes more precisely, and they will need to implement new marketing techniques.  Marketing service providers who can help B2B companies make these changes stand to win new clients and boost revenues.

The best way to identify the kinds of marketing services that are likely to see increased demand is to identify the tasks that B2B companies must perform in order to take full advantage of marketing automation systems.  There are eight major tasks that are essential to implementing and successfully using marketing automation technologies.  Most of these tasks provide the foundation for new marketing techniques that many B2B companies have not previously used.  Therefore, many B2B firms – especially small and mid-size companies – will need assistance to perform some or all of these tasks, and that’s what creates the opportunity for savvy marketing service providers.  I’ll describe two of these major tasks in this post, and I’ll cover the others in my next few posts.

Creating an Ideal Customer Profile – This task is right out of Marketing 101, and it should be a core component of every company’s marketing process, whether or not marketing automation is involved.  An ideal customer profile is simply a description of the kinds of companies that make the best customers and, by extension, the most attractive prospects.  The ideal customer is usually described in terms of “firmographics” such as industry classification, company size, and geographic location.  The ideal customer profile is used to shape lead generation programs, and it is one major component of the lead scoring system that will be set up as part of the marketing automation implementation.

Obviously, a marketing service provider cannot decide what a client’s ideal customer profile should be.  The role of the MSP is to lead the client through a process that is designed to ensure that all the right questions are asked and that all the appropriate factors are considered.

Developing Buyer Personas – Most B2B buying decisions are made (or significantly influenced) by a group of people rather than by one individual.  This is true even in relatively small companies.  Research firm MarketingSherpa says that in companies having between 100 and 500 employees, the average number of people involved in buying decisions is 6.8.  This buying group is usually composed of individuals who have different points of view regarding a proposed purchase.  For example, a “user buyer” will usually have different priorities than a “technical buyer” or an “economic buyer.”  To market to these buyers effectively, a company must develop marketing content that addresses the specific needs of each type of buyer in the buying group.  The basis for developing such content is buyer personas.

A buyer persona is a biographical sketch of a typical buyer.  It is more than a job title.  Buyer personas are written in narrative form, and they are written as if the archetypical buyer is a real human being.  A company needs to create a persona for each type of buyer who significantly influences the purchase decision.  Marketing automation systems enable companies to create and execute marketing programs that are customized for each type of buyer, but the starting point for leveraging this functionality is the creation of buyer personas.

To develop a complete buyer persona, marketers must answer several questions about each type of buyer.  Here are some examples:

• What are the buyer’s major business objectives and job responsibilities?
• What strategies and tactics does the buyer use to achieve his objectives and fulfill his responsibilities?
• What measures are used to evaluate the buyer’s job performance?
• What issues and problems keep the buyer awake a night?
• How old is the typical buyer? [Age range is OK]
• Is the buyer typically male or female?
• What is the typical buyer’s educational background?
• What sources does the buyer turn to for information?
• How would the buyer describe the issues he or she is facing?

As with the ideal customer profile, an MSP cannot build buyer personas “for” a client, but the MSP can lead the client through the process of developing buyer personas that will drive relevant and effective marketing.

In my next post, I’ll cover two more tasks relating to marketing automation that MSP’s can help B2B marketers perform.