Did your CEO ask you to validate your new marketing budget? Were you able to quantify how your marketing efforts will contribute to revenue in the coming year? Do you have a plan for what optimal marketing mix of programs and campaigns will achieve your goals and meet your budget? Two of the biggest challenges that face Chief Marketing Officers are:
- How to best allocate your marketing budget to future programs?
- How to predict the incremental revenue that comes with an increased marketing budget?
The secret to answering both of these questions is Optimization! In case you missed our last two blog posts (here and here), Google defines optimization as, “the action of making the best or most effective use of a situation or resource.” This blog post will focus on how you can use optimization to answer these two questions.
Optimal Marketing Mix
How to best invest your marketing program spend to maximize conversion rates to qualified leads and won deals, which ultimately drive revenue.
An optimal marketing mix is a plan for allocating your marketing dollars across your future marketing programs. It is optimal because the allocation maximizes revenue. We can demonstrate that optimization will increase marketing effectiveness by up to 15%. This might seem like a tall order, but you already have the data you need in your marketing automation platform to make it happen.
The first step is to measure how effective your marketing programs have been in the past. You should use a revenue attribute model to measure each marketing programs’ effectiveness. To make this work, you must first connect each marketing lead to a sales opportunity. This connection will provide the framework to measure each program’s return on investment (ROI). Program ROI, in turn, sets the foundation for predicting future returns to pipeline and revenue.
3 Factors to Consider
Returns to Revenue
It is important to understand the revenue returns associated with each incremental dollar you spend on a marketing program. In most cases, the returns to revenue will decrease with each incremental dollar you spend. There are some programs, however, that have to hit “critical mass” before revenue returns are meaningful. We characterize these programs with an S-curve. These programs are most effective when you run them with bounded marketing investment (both minimum and maximum spend).
Each marketing program returns value at some time in the future. If you are trying to meet monthly, quarterly, and yearly goals you will have to run programs in a way that meets them. For example, you might start a drip email campaign in January, but not realize returns from it until July. If you need to fulfill a pipeline target in March, you will need to run a faster program like a webinar.
Some programs complement one another. When run in combination, these programs return more revenue than if they were run separately. Other programs are substitutes for one another and should not be run at the same time. You should consider both complement and substitute programs when planning your marketing mix.
Optimize Program Mix
After you consider each of these factors, you can use your historical data and industry knowledge to run an optimization. The marketing optimization will maximize your returns to revenue given your established budget. The outcome will allocate your budget to each potential program for all future time period (typically weeks).
After effectively allocated your marketing budget, you need to know how much more revenue you will get if you increase your budget? Optimization can help here, too. Once you have an optimization developed, you can easily change your budget and compare the results to your original plan. This is called what-if analysis. You will easily be able to predict how much your revenue will change with an adjustment in your budget.
By spending the time to plan your optimal marketing mix you can increase your company’s revenue by up to 15%. You can easily get started with the data you have in your marketing automation platform (Marketo, Hubspot, Eloqua). Email us at email@example.com to learn more about how ORM Technologies can help with your optimal marketing mix. If you would like more information on optimization, our Optimization for Sales and Marketing white paper offers insight as to how it can improve your marketing organization.