Thanks to technology and the Internet, chief marketing officers can now translate a campaign’s performance in measurable and numeric terms. CMOs often struggle to establish credibility when it comes to their strategies because, in the past, it was hard to quantify results.
The challenge becomes greater when CMOs have to convince chief executive officers of the merit of their efforts. Luckily, there are new technologies that enable CMOs to produce clear results that relate to the types of figures CEOs are concerned about. These include customer acquisition and profit.
Most CEOs only care about the net product and the cost of the campaign. They rarely bother with the nitty-gritty of the interim steps. During your presentation, there are specific points that senior leadership is looking for. Here are three marketing metrics that matter to your board to make them understand your proposal more easily and give your project the green light.
1 – Total Sales Marketing Cost
Also called Customer Acquisition Cost, this expense covers everything that costs money to produce your advertising campaign. These even include overhead cost, salaries and bonuses within the specific period. Once you have the total cost, divide it by the number of actual new customers during the same time frame. For example, if you shelled out $200,000 on sales and marketing efforts in a quarter and then recorded 50 new customers during the same three months, then your CAC is $4,000.
You then compute the marketing part of the CAC (or marketing percentage of CAC) and get its percentage from the total. Knowing this is crucial because it will tell you three things: 1 – your missed quotas that’s why your sale costs are down, 2 – you are overspending of marketing efforts, and 3 – you are raising sales productivity by upping the spend, thus providing more leads to sales.
For example, if a company has an in-house marketing team and employs simple sales processes, the MCAC will likely be between 20 to 50 percent. Meanwhile, a company that has a long and complicated sales cycle can expect an MCAC of 10 to 20 percent.
2 – Payback Time For CAC
This is simply how long it will take for your campaign to earn back what has been spent on every new client. To find out, get the CAC and then divide by the margin-adjusted monthly revenue for the new client. The result is the number of months it will take to recover the expense.
In the case of subscription-based services where client pay an annual or monthly fee, the projected payback time should be less than 12 months. Otherwise, your efforts will fall into the category of “profitable.” If it takes over a year for your investment to translate into income, it’s not likely that your CEO will agree to the campaign. After all, it doesn’t make sense to pour money into something that takes too long to gain value.
3 – Marketing-Driven Customer Behavior
This number reflects how much your business is attributed to your marketing efforts. To find out, take the total number of new clients you got in a specific period then look how many of them started based on a lead that your advertising effort put out. What is special about this metric is that it provides straightforward answers.
You can also determine the percentage of your new customers who were driven by your marketing efforts. For instance, if your sales team identified a potential customer and this person attended your marketing event and then later bought something, that new client is considered “marketing-influenced.”
Overall, what CEOs really care about it how much money is to be made and how fast it will be acquired. As CMOs, the objective is to translate these metrics into easily identifiable figures so that your board and senior leaders can meet you halfway.