There’s an old saying in marketing: “Half of all marketing dollars are wasted. We just don’t know which half.” It’s a humorous exaggeration, but it is true that marketing effectiveness can be hard to measure, especially in B2B, where the long sales cycle makes it difficult to know exactly which part of your sales or marketing campaign helped close a deal. But it is possible to accurately measure marketing ROI. You’re probably already collecting tons of data on your ads, blogs, social media posts, email campaigns, and leads. The trick is to lock in on the data that is actually useful: projected customer count, customer acquisition cost, and customer lifetime value.

Measuring

An acceptable marketing ROI varies by industry, type of marketing (digital or traditional), and what your goals for marketing are. Your marketing budget could amount to as much as 15% of your revenue. Depending on these factors, a “good” ROI could be anything between 2:1 and 10:1 (that is, two dollars in revenue for every dollar spent on marketing). So before doing anything else, research what an acceptable ROI looks like in your industry.

Projected Customer Count: To determine your projected customer count, look at your current number of customers, your current number of leads, and your close rate. From there, project how much you expect to grow given your market share, how much you are willing to spend on growth, and your goals for growth. Use this number to estimate your annual revenue.

Customer Acquisition Cost: This measures how much you spent to acquire a customer. CAC includes all costs associated with acquiring a customer within a certain period of time: marketing budget, ad spend, the cost of producing sales materials, marketing salaries, sales salaries—everything that went into converting a lead. To determine your CAC, divide the total amount spent by the number of customers acquired in a given time period.

Customer Lifetime Value: It would be a mistake to measure your ROI against a single purchase. When calculating your marketing ROI, account for not just their first purchase but every purchase you expect them to make over the course of their relationship with you. This is such an important concept that we wrote a whole article on it, which you can read here.

When you take all of these numbers into account, you start to get a sense of who your best customers are. These are the high-value customers who cost little to acquire but generate a lot of revenue over the course of their relationship with you. Zeroing in on those customers and eliminating low-value customers (the ones who cost more to acquire than what they generate in revenue) is how you optimize your ROI.

Optimizing

If you don’t know who you’re selling to, you are hurting your ROI by chasing after leads who aren’t a good fit for your business. There are a number of reasons a lead might not be a good fit: they can’t afford your products, what you sell doesn’t fit in with the kinds of products they normally stock, their customers haven’t shown interest in this kind of product in the past, etc.

Even if a business does buy the kinds of products you sell, they still might not be a good fit for other reasons. The main driver of buyer decisions in B2B is not what you sell but how you sell it. The strongest B2B relationships are between businesses with similar ways of working and communication styles. We often think of B2B sales decision-making as being more cerebral than retail sales, but there is as much emotion involved in B2B as B2C.

To minimize CAC (Customer Acquisition Cost) and maximize CLV (Customer Lifetime Value), identify your ideal customer by creating an ideal customer profile. An ICP will help focus your marketing content and sales approach while also helping you identify your highest-value customers.

Once you’ve identified your ideal customer, map the customer journey and create content for your ideal customer designed to help them at each stage of their journey. Understanding your ideal customer and their journey from discovery to purchase will shorten the sales cycle by getting the right information to the right person at the right moment.

Strategy Helps You Measure the Right Things

Measuring marketing ROI is a lot easier if you know which data is important and which is not. To filter out the noise, start with a clear strategy and goals and select the right KPIs based on those goals. Understanding just how effective your marketing is can be tricky, but it’s not impossible.