Where B2B Companies Stand With Marketing Measurement

Measuring marketing performance is both a top priority and a persistent challenge for most B2B marketers. That's the primary theme of Demand Gen Report's 2018 Marketing Measurement and Attribution Benchmark Survey. The 2018 survey produced responses from 283 marketing executives, most of whom were based in the United States. Respondents represented several industries and a wide range of company sizes (from less than $10 million to more than $1 billion in annual revenue).

Eighty-seven percent of the survey respondents said that marketing measurement is a growing priority for their company. However, more than half of the respondents (54%) said their ability to measure and analyze marketing performance "needs improvement" or is "poor/inadequate." Another 34% rated their measurement capabilities as just "average."

It also appears that progress on measurement capabilities has been slow since last year. The following table shows how respondents rated their measurement capabilities in the 2018 survey and in the 2017 edition of the study. As the table shows, the percentage of respondents rating their capabilities as excellent decreased from 13% to 7%, while the percentage rating their capabilities as poor/inadequate increased from 9% to 14%.

It's not hard to understand why measuring the financial performance of marketing continues to be a major challenge. In most companies, the two most important reasons to measure marketing performance are:

1. To determine the economic value that marketing creates for the business; and
2. To enable marketing leaders to optimize their mix of marketing programs and channels based on economic performance

Both of these objectives require the use of financial metrics, and this requirement has a big impact on measurement complexity. It's relatively easy to measure the performance of most digital marketing tactics and some offline tactics (e.g. direct mail) using non-financial metrics. But it's another matter to measure the financial performance of a marketing program.

The crux of the challenge is attribution, which is the process of assigning both revenues and costs to marketing activities. It's impossible to accurately measure the financial performance of a marketing program or channel unless you can accurately assign both economic benefits and costs to it. So the accuracy of your measurement system ultimately depends on the accuracy of your attribution method or model.

The Demand Gen Report survey provides strong evidence that attribution is a significant barrier to effective marketing performance measurement. Only about 30% of the survey respondents indicated they are doing any attribution analysis as part of their marketing measurement efforts. Among those using attribution, only about half (51%) said they are using some form of multi-touch attribution, while 14% said they use last touch attribution, and 12% said they use first touch attribution.

Research from other firms points to the same conclusion. In a 2017 survey by Econsultancy, in-house marketers were asked to identify the specific attribution methods they are using and rate the effectiveness of each method. The following table shows the percentage of respondents using each attribution method, and the percentage rating each method as very or somewhat effective.

These findings are troublesome because the three most widely used attribution methods (and four of the top five) are methods that attribute all of the revenue from a sale to only one marketing touch point. Even more troublesome, large majorities of the survey respondents rated these methods as very or somewhat effective, when the reality is that no "single touch" attribution method will produce an accurate picture of marketing performance.

Developing an accurate marketing attribution model is not simple or easy. The current "state of the art" is data-driven or algorithmic attribution modeling, but even these advanced solutions aren't perfect. The bottom line is that measuring the financial performance of marketing - particularly at the tactic, program, and channel level - is likely to remain challenging for the foreseeable future.

So how can B2B marketing leaders measure and demonstrate the value of marketing given the complex and imperfect nature of attribution? There are no silver-bullet solutions, but I'll offer a few suggestions in a future post. 

Top image courtesy of Pat Pilon via Flickr CC.