Demand Gen Report's 2018 Marketing Measurement & Attribution Benchmark Survey makes one point abundantly clear: Measuring marketing performance is both a top priority and a major challenge for most B2B marketers.
Eighty-seven percent of the survey respondents said that measuring marketing performance is a growing priority for their company, but more than half (54%) also said their ability to measure and analyze marketing performance needs improvement or is poor/inadequate.
The widespread interest in measuring marketing performance indicates that the demand for performance measurement software is poised to grow substantially. In a September 2018 report, Forrester Research said that marketers spent about $1.09 billion on marketing measurement solutions in 2017, and the firm estimates that spending on such solutions will reach $2.1 billion by 2023.
The Demand Gen research also revealed what is motivating marketers to improve their measurement capabilities. When survey participants were asked what is increasing their need for deeper metrics, the top two drivers identified were:
- The desire to show marketing's impact on pipeline and revenue (70% of respondents)
- The push to show ROI from all marketing investments (60%)
As these results show, the key motivations for improving marketing measurement capabilities are to demonstrate the economic value that marketing creates for the business and to optimize the mix of marketing programs based on economic performance.
Both of these objectives require the use of financial metrics, and this makes marketing measurement more challenging. The heart of the challenge is attribution, which is the process of assigning revenue and costs to marketing programs.
There are three robust methods for attributing revenue to, and measuring the financial impact of, advertising and marketing programs. Two of these methods - marketing mix modeling (MMM) and multi-touch attribution (MTA) - have been in use for several years. The newest and most sophisticated method is unified marketing measurement (UMM).
Marketing Mix Modeling
Marketing mix modeling involves the use of advanced statistical techniques to estimate the impact of advertising and marketing activities on incremental sales and/or other desired outcomes. Marketing mix models are usually based on many months of historical information about sales and marketing/advertising spending across both digital and offline channels. MMM also incorporates factors such as weather, competitive activity, seasonality, and overall economic conditions.
MMM is a top-down approach that estimates the impact of distinct marketing programs and channels on incremental revenue. These models do not evaluate the actions of individual prospects or customers. Because MMM is backward-looking and doesn't consider the actions and responses of individual people, it doesn't provide the timeliness or level of detailed information that are required to support tactical marketing decisions.
Unlike MMM, multi-touch attribution is a bottom-up approach that analyzes information about the actions and behaviors of individual prospects and customers. Ideally, this data will include every exposure that an individual has had to a marketer's messages and his or her responses (or lack thereof) to those messages.
Most MTA solutions focus exclusively or primarily on estimating the financial impact of digital marketing activities, and their ability to capture the impact of offline marketing activities is limited. Therefore, MTA solutions can overstate the amount of revenue attributable to digital marketing programs. MTA solutions can also be inaccurate because they don't usually account for a baseline of revenue that would exist without any marketing efforts.
Most robust MTA solutions use advanced statistical techniques and computer algorithms to assign revenue to marketing activities, rather than relying on simplistic pre-set "rules" (such as first-touch, last-touch, etc.) that often produce wildly inaccurate results.
Unified Marketing Measurement
Given the inherent limitations of MMM and MTA, a growing number of companies have begun using a method known as unified marketing measurement that leverages the strengths and eliminates the weaknesses of MMM and MTA. UMM solutions are capable of measuring the impact of both digital and offline marketing activities, and they combine a top-down and bottom-up approach. In its report, Forrester estimated that UMM solutions now account for 28% of the measurement solution market.
What About Cost?
These advanced marketing measurement solutions aren't exactly cheap. In a report published last year, Gartner estimated that companies pay from $100,000 to $250,000 on average for a one year MMM or MTA solution. And the cost can be much higher.
Notwithstanding the cost, advanced marketing measurement solutions can be a smart investment for many companies. In its report, Forrester noted that these solutions often enable a 15% improvement in marketing ROI, and that overall spending on marketing measurement represents only 0.2% of total marketing spending.
Illustration courtesy of Kari Bluff via Flickr CC.