Prove the Business Value of Marketing With 3 Metrics

Marketing leaders should take a cue from their C-suite peers and use executive dashboards with clear metrics to communicate the business value of their programs.

Chief marketing officers (CMOs) must show howmarketing activitiescontribute to the business bottom line. Other members of the C-suite, from the CEO and CFO to the head of sales, want evidence of return from the 10%+ of revenue that goes to marketing.

Marketers, for their part, have never had more data available to share. Yet many still find it hard toidentify metricsthat correlate to their goals and share them in a convincing way. For instance, they aim to increase customer leads by 5%, but struggle to draw a line that connects marketing actions to lead generation. The irony, lost on no one, is that the executives most skilled at storytelling are tongue-tied when it comes to communicating their function’s success.

“Marketers have never had more data available to share..”

“I constantly hear from marketing leaders about their struggles to effectively measure and prove the value of marketing’s performance with business stakeholders, says Marc Brown, Senior Director Analyst, Gartner. “Many marketing leaders find themselves ill-prepared, lacking cross-functional buy-in and the analytics skills to measure marketing’s value.”

Marketers can address this challenge by going back to the basics ofreporting metrics.Like finance and sales executives, marketing leaders must construct executive dashboards that use a balance of reporting metrics to tie program results to business outcomes.

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Executive dashboards and the three reporting metrics

The most effective dashboards leverage leading indicators, lagging indicators and operational performance.

Leading indicatorspredict future actions or outcomes based on qualitative or quantitative findings. Examples of leading indicators include brand recognition by the target audience or the number of app downloads, site visits or requests for information. Marketing leaders use leading indicators to guide proactive actions that nudge a prospect to the next level of the sales funnel.

Lagging indicatorsmeasure the quantitative impact of past actions. They show marketers and their stakeholders what actually happened as the result of a campaign or a program. Examples of lagging indicator metrics include return on investment from a campaign or sales conversion from a particular channel.

Operational metricsmeasure the performance of campaigns and programs compared to past campaigns and industry benchmarks. Typical operational metrics include open rates, response rates, engagement rates, time spent on the site, and so on. Marketers use them to assess how well their tactics work overall and in the broader context of their competitive market.

Know your audience

Using a balance of leading, lagging and operational metrics, marketers can create custom dashboards for each executive stakeholder that prioritize metrics that matter to the specific audience.

For example, CEOs will want to know details about customer retention rates, customer loyalty and brand recognition (all leading indicators), as well as customer acquisition growth (lagging indicator) and marketing-sourced leads (operational metrics). The head of sales, in contrast, will want metrics that communicate pipeline health (leading indicator), the number of active programs (lagging indicator) and the number of generated leads and opportunities (operational).

Marketersshouldn’t try to guess what their stakeholders want to know. Work instead with the CEO, the board of directors, sales and finance leaders to develop meaningful goals and agree on the metrics associated with them.

Use leading, lagging and operational metrics to both communicate and drive results

Relevant reporting metrics serve multiple purposes. They primarily help marketers communicate impact to their fellow executives —but marketers should also use them to drive decisions.

For example, marketers can identify the lagging indicators they want to see and then work backward using historical in-house performance and industry data to identify what the corresponding leading indicators would need to look like. Marketers can then make decisions about where to invest time, money and talent to push these metrics in a positive direction.

Operational indicators likewise show when the corresponding programs perform as they should, and signal the need for improvement when they don’t.

Used in this way, leading, lagging and operational metrics can serve the dual purpose of better cross-functional communication and stronger marketing decision making.