How to Prove the Value of Marketing Campaigns to Boards of Directors

2022-04-07 by EPR Staff
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A company’s board of directors is tasked with steering the company toward success by making important, often expensive decisions about where to invest and how to grow. They are responsible for the overall success of a company, and it is their duty to ensure that every dollar spent adds value.

Every business and board of directors is different. However, it’s safe to say that most boards want the same thing: to see their company grow. Decades ago, marketing’s role was to create awareness and generate demand. Now, it’s more than that; it’s about finding customers who are likely to buy a company’s products and services.

In a financial sense, marketing works best when its efforts can be directly linked to sales. If a marketing team can’t explain how their work is generating revenue, then it will be difficult for them to justify spending money on it to the board of directors.

Marketing is not an exact science, as there are many variables that come into play when trying to prove the value and results of marketing efforts. Even when a marketing automation tool is in place, for example, there are still several challenges that must be overcome in order to establish a direct link between marketing efforts and sales.

Demonstrating the Value of Marketing Efforts

There are several ways to demonstrate the value of marketing efforts, but to do this, the metrics that matter most to boards of directors must be understood. In general, the board is most concerned about the  top line. The board may also be interested in the impact of marketing efforts on customer acquisition, retention, and loyalty.

To demonstrate value to the board, marketers must articulate how their marketing efforts have improved customer acquisition, retention, and loyalty. The reason many marketers struggle with measurement is the difficulty of quantifying marketing efforts. In some cases, metrics that don’t reflect success and are not relevant to the board’s interests are used.

The goal of marketing is to acquire customers at a profit. To demonstrate the value of marketing to a board of directors, focus on four key metrics: customer acquisition cost (CAC), customer lifetime value (LTV), churn rate, and revenue growth. These four metrics directly relate to the impact marketing has on a business’s revenue.

Customer acquisition cost is an estimate of how much money it costs a business to get a new customer, from marketing costs to sales commissions. This metric demonstrates if efforts are generating enough profit for a business.

Customer lifetime value is an estimate of the net profit attributed to the entire future relationship with a customer. To calculate this metric, the average purchase value is multiplied by the average number of purchases per year, which is itself multiplied by the average customer retention time in years. This is then subtracted from the total average cost per customer per year.

Metrics and Data give Performance Insight

Provide meaningful metrics. While reporting on social media marketing efforts or SEO strategy, base reports on data that matters. Metrics like reach, impressions, and social media shares might be interesting to look at, but they don’t demonstrate value. Instead, look for ways to tie metrics back to revenue, or at least to cost savings.

Use hard data when possible, and include it with every report. For example, while running an e-commerce site, it is easy to show how many sales came from organic search traffic vs. paid search traffic vs. social media ads vs. email marketing campaigns vs. other sources of traffic. This information can be directly tied back to revenue and ROI.