Improve Your Marketing ROI with a Monthly Scorecard

It’s a dilemma as old as business itself: “I could cut my marketing expenses in half if I knew which half to cut.” With most businesses focused on driving the fat out of their operations, it’s time to figure out which marketing efforts are working and which need to be eliminated. Increasingly, business owners want to know how effectively their companies’ marketing dollars are being put to use. What is the return on their marketing investment?

ROI means nothing less than accountability. If I give you $100, I expect $150 in return. A marketing expense should be no different. By looking at marketing more as a quantifiable science than as a short-lived art, businesses can start to determine marketing ROI. A monthly marketing scorecard can help you stay on track. Here are five steps to help you develop a scorecard that will improve your marketing efforts.

1. First, do a marketing audit. Look at your marketing efforts objectively. Pinpoint where you excel and where you have work to do. Start by answering some basic questions:
• Who are your customers?
• What are they buying and how much are they buying?
• What do they think of your products and services?
• Which past marketing programs have worked and which haven’t? Why? Talk to your customers, employees and vendors to get a quick snapshot of what your marketing efforts look like. Take action on what you learn.
2. Quantify every marketing program. Now set up a simple monthly scorecard to track each of your marketing programs. You can use this to evaluate past efforts (if you have the data) and/or make this the cornerstone for quantifying all future programs. Here are some areas to include when setting up metrics for measurement:
• What is the goal of the effort? Are you trying to capture new customers? Upgrade potential customers from prospects to clients? Maintain existing customer relationships?
• Identify each specific message used to reach these customers. Track different messages separately.
• Track all marketing channels where your company expects to generate results — Web sites, sales collateral, TV, radio, print, event sponsorships, direct mail, etc.
• Note design elements that are specific to each marketing program.
• Tally all direct costs associated with each program.
• Calculate both tangible (sales) and intangible (awareness) results. Example metrics include direct mail response rates, Web site hits, specific product/service sales, response rates to specific messages and/or sales promotions, in-store traffic, the number of new and repeat customers, awareness by channel (how did you hear about us?), profit per customer, customer acquisition cost, etc.

3. Link marketing to financial performance. Add a final metric to your marketing scorecard — ROI for the specific marketing program. Of course, calculating marketing ROI isn’t as simple as figuring out ROI on new equipment. It’s relatively simple to look at incremental costs and revenues associated with specific hard assets. Associated revenues and/or sales are less straightforward. This is the critical part of determining what’s working and what isn’t. You need to connect to the financials. Just like an income statement, a marketing scorecard lets you know if you’re in the black or the red.

   Selecting the right timeframe is also important. Many marketing expenditures don’t have an immediate impact. Some marketing programs might take as long as 18 months before you see a measurable change in consumer attitudes and behaviors.

4. Test, track and optimize. If properly set up, you run a marketing program for a set time period, tracking on a monthly basis, and optimize the program as you go. At the end, you have real results — this channel works, that one doesn’t. Change one variable at a time, keep testing and tracking. But never implement a program without first having a method in place to track its effectiveness.

   It can be a creative challenge figuring out how to measure some programs. But would you be willing to commit to an expense with no obvious return? It’s worth the effort to determine a measurement of effectiveness.

5. Maximize programs with high ROI. Use data from the monthly marketing scorecard and marketing audit to brainstorm new ideas. Then look at the ideas realistically and acknowledge that, within budgets and time constraints, you can’t implement every idea. Instead, prioritize and implement a few ideas you can do well, based on the highest possible ROI. Use existing metrics to estimate results.

   Your marketing programs need to pay off instead of being a black hole. Implementing the monthly scorecard will dramatically change your view of marketing programs — moving from emotional to rational. But like any management function, managing your marketing efforts requires the experience and knowledge to create a vision and the means to measure it, combined with the patience to learn and adjust.

Vistage Associate Erica Olsen is principal of M3 Planning, based in Reno, Nev.