As a response to my posts 7 Reasons Why Marketing Automation Projects Fail and Marketing Automation ROI, several people mentioned that the benefits of Marketing Automation are not just increased sales. They are also increased efficiency. That made me think: aren’t benefits either cost savings, or increased revenue?
Marketing Automation Increases Revenue
The key marketing performance indicators suggested by SiriusDecisions are all related to revenue:
- Marketing sourced pipeline
- Marketing influenced pipeline
I believe there is a good reason for this: costs savings with Marketing Automation are marginal. The project itself will cost a fair amount of money, both for software as well as for expertise (either hiring an in-house expert, or hiring a marketing automation consultant). Will you save more than you’ve spent? I feel increased revenue is where the real benefits are. But let’s first take a look at efficiency and cost savings.
Marketing Automation & Efficiency
Especially large organizations often talk about efficiency increases as a result of marketing automation. Efficiency in itself is nice, but it’s hard to quantify: will it increase the quality of the work? How does quality impact the bottom line? Is productivity improved? Are there costs savings? Please explain to me the real and measurable benefit of efficiency gains.
Marketing Automation & Cost Savings
Cost savings may be the main result of efficiency gains. However, I don’t think that a marketing automation initiative has ever resulted in significant cost savings. The reason is: the large majority of marketing cost is people, and I have never heard of people being let go because marketing automation software eliminated their job. Maybe spending on lead generation can be better directed, so unprofitable programs can be cut. But in most large organizations there is a budget that needs to be spent: so if you cut on one program, you will spend more on another: more revenue, but no cost savings.
Where Do the Revenue Increases Come From?
That’s a valid question. I suggest three areas:
- More cost-effective lead generation
- Better conversion rates with lead nurturing
- More efficient sales force
Lead Generation: with close loop measurements, you can easily see the effectiveness of each lead generation campaign. One of the best examples is in Marketo’s “Secret Sauce” webinar. You improve your investment-to-pipeline ratio by focusing on the most cost-effective lead generation sources.
Lead Nurturing fixes funnel leakage. If you don’t properly nurture early-stage prospects, they will probably buy from a competitor. If you can increase conversion rates from inquiry to marketing qualified lead to sales-accepted lead, you get more marketing-sourced opportunities.
If sales receives better qualified and better educated leads, they can focus on the most promising opportunities. There are statistics that more sales people make their target if marketing automation does a good job nurturing and qualifying leads (I couldn’t find the source, if you know who published this research, please leave a comment).
So my conclusion is that the only metric that matters for Marketing Automation is increased revenue. I don’t claim that there can’t be any cost savings at all, just that they will be negligible compared to the increased revenue. I realize this is a fairly black-and-white statement, so please let me know what you think.
I can always increase revenue — all I need to do is increase spending. If you must choose a single metric, it should be ROI.
But, in practice, you need a lot of different metrics to understand what’s happening and where the opportunities lie.
With all my respect I completely don’t agree with you. If the revenue would have been single point of measuring the Marketing Automation then then entire domain Marketing Operation would have never existed. They would have been extinct dinosors.
What I would like to bring is certain scenario where I see instead of generating revenue effectiveness in the marketing process which is one of the major objective of any Marketing Automation.
Doesn’t using improved marketing process lessen the marketing budget on agencies, or campaigns? Can’t these money be then redirected to other campaigns which could not have taken due to budgetory constraint?
How can the investment cost on Marketing Automation measured based on a single year, shouldn’t we use TCO on Marketing Automation over three years compare to no Marketing Automation.
I hope my thoughts are not radical to other thoughts.
I would generalize your statement to say that the only metric that matters for _any_ marketing related effort is increased revenue.
I, too, would like to see this report: “There are statistics that more sales people make their target if marketing automation does a good job nurturing and qualifying leads (I couldn’t find the source, if you know who published this research, please leave a comment).”
Dale – EchoQuote
This is a great discussion, thanks for your comments!
David: totally agree ROI is what it’s all about (see also the title of this post). My point is: when looking at increasing ROI, do you focus on reducing cost or increasing revenue? My suggestion is to forget about cost savings and focus your Marketing Automation initiative exclusively on increasing sales.
James: the problem I have with a focus on cost-savings is that it positions Marketing (Operations) as a cost-center. I’m making the case for seeing Marketing Ops as a revenue center. But let me soften my own B&W statement: saving costs is always good, but when trying to justify a MA investment I would focus less on cost savings than on revenue.
Dale: let me see if I can find the source of this statement
I am with you on using increased revenue as the metric. 1. Marketing departments are being forced to be accountable for more of the bottom line, instead of acting as a cost center. Efficiency gains allow marketers to reallocate time towards effective programs > driving more revenue.
Honestly, I think, at least in terms of the marketing department, most organizations don’t care about efficiency if there is enough revenue coming in, and they are maximizing their marketing spend.
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I think you may be over-reaching on this one. There are 4 primary reasons to deploy any new technology:
(1) Increase productivity
(2) Automate a process which can in turn lead to greater efficiencies, lower costs, etc
(3) Implement some new process, achieve something you could not do by manual processes.
(4) Regulations (government, or perhaps CEO mandate)
From these 4 primary reasons for deploying any new technology you can reach for the effectiveness and efficiency gains, which lead you to productivity gains, and in turn to lower costs, increased revenues, increased competitiveness, perhaps just the ability to tread water at lower costs (no increase in revenues), etc. Trying to make a broad statement for all industries, and for firms of all sizes, that marketing automation leads to increased revenues is reaching over all the direct gains to a conclusion that may not be the primary motivator for many! Examples I have heard:
We want to leverage embedded best practices
Marketing wants more control of their output
We want to improve our market quality
We want to be able to validate our spending
We want to improve our data quality
We have been mandated to do more reporting by the CEO
We need to monitor the effectiveness of our channel
We want to nurture leads to readiness faster
We want more predictability in our business
p.s. and we want more revenue
Jame: fully agree
Kevin: thanks for all the examples. Especially revenue predictability is a big issue for public companies, which is often more important than maximizing the quarter’s revenue. So very good point.
Generally, I think there is a difference between the self-reported motivator for adopting marketing automation, and the real underlying reason. Take for example “CEO wants more reporting”: why does he want that? Probably because he thinks marketing is not accountable enough while spending a lot of money. Constantly referring to revenue may be simplistic, but it is what the C-suite AND the shareholders are most concerned about.
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Measuring ROI for revenue only leaves out a bigger picture of the benefits of implementing marketing automation. There are at least 6 capabilities that marketing automation enables that tie directly to the productivity of marketing staff without increased expense. click the link to read additional thoughts on the real return from marketing automation.
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