| December 02, 2019
Why does a LinkedIn report find that most digital marketers do not really measure ROI? Because ROI is the return on marketing investment measured over the sales cycle, divided by the cost of that investment over the same time frame. Therefore, most digital marketers do not measure ROI because they measure too quickly and use the wrong metrics.
Before I consider the findings from the LinkedIn report just let me back up a step. Earlier this year, Kantar launched its Mastering Momentum report that encouraged marketers to balance their investment across three stages of the buyer lifecycle: experience, exposure and activation. Implicit in this framework is the fact that in the vast majority of cases people do not suddenly jump up and buy a brand the moment they see it advertised. If they are a user today they will wait until the jar is nearly empty, their contract is up, or their car fails its inspection. Similarly, when it comes to new buyers, advertising must wait for its chance to have an influence when, at some point in the future, a person decides they have a need of the category. In many cases, this might be years in the future.
The LinkedIn report takes similar thinking and applies it to the B2B world. The LinkedIn report suggests that the typical B2B sales cycle length is six months but reports a big difference between existing customers and new ones. According to the report only 22 percent of sales to existing customers are completed within a month, but that figure drops to 5 percent for new customers, and the majority of sales take over three months to complete. Why might this be a problem? Because LinkedIn finds that 77 percent of digital marketers try to prove their ROI within one month.
Now, it might be that an assessment of ROI at one month is still predictive of the total impact of a marketing campaign…provided you use the right metrics. However, the LinkedIn report highlights that many marketers are using convenience metrics which only have a tangential relationship with future sales. Some metrics, like brand lift, do identify whether there is a change in the buyer mindset indicative of future behaviour. Others, like lead generation, measure the immediate behavioural outcome. But most, like reach, click-through-rate and cost-per-click, tell you nothing about whether a campaign is likely to be successful. (Would now be a good time to remind readers that there is no proven correlation between click-through and either brand lift or sales?)
As the LinkedIn report highlights, the fundamental problem with proving a real ROI on digital ad spend is that the wrong metrics are being used to assess the wrong outcomes. But, actually, the situation is even worse that suggested in the report. Why? Because likely the B2B sales cycle was measured from the first point of contact with a prospective customer, not when the selling company first came onto the buyer’s radar. Which means that during the preceding time frame the buyer was off the seller’s radar, we have no idea what made them respond to a sales call or reach out for help.
I realize that there is a huge pressure on all of us to demonstrate return on investment, but it simply does not help make a case for marketing investment if we limit our attention to what is happening right here, right now, if only because most buyers are not ready to buy right now. But what do you think? Please share your thoughts.