You know the story about the fish that got away. It always seems to get bigger every time the fisherman recounts the epic adventure.
And it’s why Mark Twain, arguably the most celebrated narrator of tall tales, once warned: “Do not tell fish stories where the people know you; but particularly, don’t tell them where they know the fish.” In other words, don’t stretch the truth in front of an audience where you’re likely to be exposed as a fraud.
In the business world, exaggerating feats to make minnows look like whales is rarely a good idea. And yet when it comes to tracking Return on Investment (ROI), overestimating the impact of marketing on pipeline and closed deals can almost seem like business as usual.
But here’s what inflated, eye-rolling ROI figures will do for marketers:
- Destroy their credibility
- Ensure they’re not taken seriously
- Lessen influence in the organization
“If you are not measuring ROI in a smart and realistic way, then you’re shooting yourself in the foot,” said Adam New-Waterson, the chief marketing officer at LeanData. “You’re not helping your case. And the reality is that there often is very little credibility in ROI at all.”
More than ever, marketing teams are under the microscope to prove that their campaigns are driving business. Executives expect to see results. Budgets are tightening. And marketers are feeling the heat. They’re hungry to show how their heavy-lifting is contributing to revenue generation. Sometimes, they’re too hungry. They get in trouble when, in the effort to demonstrate their effectiveness, they start producing ROI figures that are, well, downright laughable.
They become like that big fish story. (It was twice the size of the boat!)
Take for instance, New-Waterson said, a marketing report where there are claims of ROI figures that read something like: 204 percent for a trade show, 109 percent for online ads . . . and then 12,000 percent for an email campaign.
“No one would trust you if you told them those numbers,” he added. “If you give a CFO those numbers, you will never have any credibility. You can’t play fast and loose with ROI like that.”
Not unless marketers want to risk reinforcing the stereotype of their department as the company’s arts-and-crafts division.
This isn’t to say that marketers are overtly fluffing their efforts. But when it comes to proving ROI of a any project or campaign, it’s way too easy to artificially inflate the numbers — often simply by omission. Go back to that email example. It doesn’t cost anything to launch a campaign, right? It’s just email. So of course the ROI should be high.
Uh, not quite.
How much do you pay on an annual basis for the marketing automation platform used to orchestrate that campaign?
“The problem is that when you pay for a big-ticket technology, marketers often don’t include that expense as part of the overall cost when it’s used in campaigns,” New-Waterson said. “What you should be doing is figuring out how many email campaigns are used in a given year and divide that into the cost of the platform. That’s a cost of doing business.”
And what about the people running that campaign? You know, your team members. Another common mistake in ROI measurement is not including the tangible cost of employee time spent working on a project. Maybe that trade show where you thought you had 1,000 percent ROI, might shrink to only 200 percent once you factor a dozen employees being away from the office and not working on other projects.
“Any real cost needs to be included,” New-Waterson added.
But it’s also frustrating, as any marketer knows, trying to pull together all the relevant costs that factor into a realistic ROI analysis — especially in a timely manner. Let’s say your company is doing a nationwide roadshow of executive dinners with key prospects in hopes of accelerating high-value deals through the pipeline.
There’s vendor costs. Restaurant costs. Travel costs. And so on. Getting anything close to an accurate price tag could take months. (Who hasn’t waited impatiently for someone to turn in their receipts?) Sometimes the complexity is such that you might never get close to the real total expense. And fuzzy numbers are difficult to defend.
Yet figuring out ROI is crucial.
“It’s always on the mind of a marketing leader,” New-Waterson said. “At the end of the year. At the end of the quarter. Right before a board meeting. Anytime you have to make a spending decision. You only have a fixed amount of money. And the best way to defend that you’re making the most out of your budget is to look at the historical proof that it was a wise decision.”
Figuring out your ROI can be done, he added. But it takes a lot of work.
Do it correctly, though, and you’ll do more than help your business. You’ll never be accused of peddling fishy numbers.
Cracking the Attribution Code
Marketing teams are under more pressure than ever to quantify their influence and justify budgets. At a time when marketers are expected to prove Return on Investment, LeanData is exploring the challenges they face and how it is possible to improve account reporting.