Marketing Forecasting That’s Highly Accountable
Forget Fluffy Forecasting – Marketing Needs To Get Real
Forecasts matter. MD’s, FD’s and board members are impressed by accurate, forward-looking forecasts; especially those that cover a longer time frame. At most companies this is the single biggest reason why sales has more credibility (and power) than marketing .
But when those responsible for marketing are able to make revenue forecasts, and importantly deliver against them with equal or greater accuracy. At this point marketing or marketers will leverage a key competitive advantage in establishing their own impact within their business
Now its really important to note we are not discussing “traditional” marketing forecasts, which take the form of a top-down market size analysis. Whilst these forecasts can be useful for strategic planning, they don’t have the sufficient granular and actionable data required to compliment the sales forecast.
Highly accountable marketing forecasts enable the person who heads marketing to make statements such as, “Next quarter, marketing will generate an incremental 3 new deals worth £80,000 of sales that are not currently in the sales forecast.
”Done correctly, the marketing forecast gives marketing the confidence on meeting the goal, and ensuring the head of sales relies on marketing’s input to make a valid forecast for the period.
Marketing Forecasting, Processes & Technology
At board meetings, the number one topic of discussion is never about an upcoming marketing campaign or changes to the website strategy. It’s almost always the sales forecast, and there’s usually little to no input from marketing.
It’s no wonder most executives don’t consider marketing to be an essential part of the revenue team. Long-Term Visibility Sales forecasts are based on what specific accounts will do at specific times, so they become increasingly inaccurate the further out you look.
This is compounded with shorter the sales cycle, where problem is worse. In contrast, when marketing takes responsibility for the early stages of the revenue cycle, they have better visibility into future period revenue.
Experienced marketers can forecast how many new prospects, leads, opportunities, and customers marketing will yield in future periods. They can do this because they know how many prospects are in each revenue cycle stage – and how they are likely to move through each stage over time.
An Alternative Methodology for Marketing Forecasting
Though the process can be relatively sophisticated, the methodology for making accurate marketing forecasts is simple in concept.
- Model the stages of the revenue cycle, and then measure how each type of lead moves through the various stages (conversion percentage and velocity). This was discussed in greater detail in this article marketing revenue analytics
- Get accurate inputs for how many new leads of each type the marketing team will put into the system over future periods. (starting to sound like there might be some marketing accountability)
- Model the flow of current and new leads through the various stages over time.
- Review the results and apply management judgment to finalize the forecast
Get Accurate Inputs – Avoid “Rubbish in Rubbish out”
Marketing forecasts are subject to the rule of “garbage in, garbage out”. You will need an accurate estimate of how many new leads will flow into the system in any given period, by type, to serve as the fuel for your revenue engine.
Model Flow through the Revenue Stages
By modelling how existing and new leads will convert through the various revenue stages over time you can project your forward revenue cycle.
If you have a detailed understanding of conversion rates and your inputs are accurate, you will create a solid projection of what the revenue funnel will deliver in future periods. Lots of “if’s” but this is why we need to get away from “fluffy” marketing
Review Results and Apply Marketing Management Decisions
“Beware”, these numbers are just estimates and for simplicity make assumptions that your conversion rates will remain steady over time. Marketing and sales can and will affect the conversion rates, and you need to take this into account. That is why it’s essential for marketers to apply critical analysis to their model projections before finalising their forecasts.
For example, marketers in larger companies will need to “consolidate” the marketing forecasts from multiple divisions (geo location, products, etc.) into a single top-level forecast. This may require reducing the forecasts from groups that continually overestimate their results.
Marketing Forecasting and Implementation
Marketing People, Marketing Processes and Marketing Technology
As with any business transformation, the success of your marketing measurement program depends on how well you implement it. This requires you to set in place the right marketing people, the right marketing processes and utilise the right marketing technology.
Marketing People and Marketing Culture
If you don’t have the right people driving the process, even the most efficient methods and latest cutting-edge technology are useless. Effective marketers must start the process by asking themselves the following questions:
- What types of people are required to implement marketing measurement?
- Are there high performance marketers in the business, or do you need to look outside of the business?
- What skills does the business mix need to develop
- How can a culture of analytics be created within the business?
What type of marketing people are analysts?
- In a perfect world, every business would have a full-time marketing analyst to complete this work
- The pace of marketing analytics business adoption will be faster if you have a dedicated resource in place. However, most businesses are faced with the reality of embarking on their marketing measurement journeys with only existing staff. Therefore analytics ownership needs to be assigned to someone who has the skills, adequate support, and coverage to be successful.
- If you aren’t getting the metrics you need, it’s probably because you haven’t made them a priority.
Marketing Skills Required?
A love of numbers & analytical capabilities:
Someone with analytical skills will be able to visualise, absorb and articulate large amounts of data and complex concepts. This will allow them to make decisions to solve existing problems based on the available information. Don’t forget the mantra “rubbish in rubbish out”, it doesn’t matter what skills you have if you don’t have the right data
In order to explain the results of a given project in ways that enable a business to improve its operations, a marketing analyst must possess excellent written, oral and visual communication skills.
Such capabilities begin ineffective interpersonal communication and extend to listening and group facilitation skills across a full platform of modalities: electronic communication, telephone and face-to-face conversations, group presentations, and so on.
Testing and experimentation.
A willingness to test and problem solve with new approaches are talents an ideal marketing analyst needs to possess.
Data networks, databases, and operating systems work and there integration are fundamental for a marketing analyst role. Its important to know each technology’s potential uses and limitations and how they work together or could be integrated.
But it isn’t just data, data, data a marketing analyst must understand your businesses unique products, services, industry and operations. A great analyst who isn’t familiar with your business, won’t be able to interpret your data.
Numbers are Great – Creating a Culture of Analytics
Conducting analysis is only about a third of the analytics journey. The other two-thirds involves driving it into all current business workflows in a way that prompts your organisation to use and act on your valuable conclusions. The adage data, information and knowledge comes to mind.
Schedule quality marketing time.
Now for many businesses especially small to medium businesses this applies to “strategic marketing and strategic planning” per se. In the current environment, the speed at which marketing operates today does not accommodate time for analytics. Nor does it allow time for reflection around implementing analytical conclusions to improve operational efficiency and company revenues.
If you want to benefit from your marketing metrics, analytics are something for which you need to allocate specific periods of dedicated quality time.
A facts and numbers mentality.
Unfortunately the historical focus on “soft marketing metrics” has caused marketing to operate outside of frameworks that are beneficial to fact-based decisions and accountability. For marketing measurement to be successful, you need to bias your mindset toward hard financial metrics.
It’s pointless to set target goals if you don’t also hold people accountable for meeting them. Now I did mention earlier the opportunity for marketing to start being financially accountable.
Avoid the HIPPO curse
Many businesses regardless of size suffer from the curse of the H.I.P.P.O.: the “Highest Paid Person’s Opinion.” This holds true for businesses of all size. Marketing may refrain from conducting valuable analysis and simply wait for their bosses opinion. Worse still they might allow a H.I.P.P.O. to override the facts presented by the analytics.
Maybe you yourself are the H.I.P.P.O. or perhaps this is the case within your business. In either case, it is essential to do what you can to ensure all relevant data and insights are communicated before the H.I.P.P.O. comes out. Act on information instead of gut.
Bias toward insight, not data.
It can be tempting to believe your success will increase with every additional metric you measure, but this is not the case. You have probably heard the saying “data analysis paralysis”
When done correctly, metrics can create a virtuous circle, in which the right metrics create the support for more useful and actionable metrics. If not, you’ll encourage a vicious cycle with the opposite scenario
Marketing Forecasting Processes
In the article on Marketing ROI Planning, we discussed the components of an effective ROI process. These included what to measure, when to measure and how to measure. So how can you manage and implement the changes necessary in your business for this marketing measurement system to succeed.
As previously discussed Marketing ROI is a marathon, not a sprint (no marketing silver bullets). To be successful, you need to take a methodical approach over the long term in several key areas:
Think big: As with many projects, you’ll position yourself for greater success if you begin with a BHAG (Big hairy audacious goal) and clearly articulated vision of what you want your measurement end-outcome to resemble.
Start small. In the Return On Investment race slow and steady wins, proceed with smaller manageable, bite size steps.
Aim for small quick victories – that will help you get buy-in across your business, increasing your chances for success over the medium and long term.
Refine as you develop. As you continuously evolve and adapt your marketing measurement system over time, you’ll refine it so it improves and gets better. Importantly you may not end up where you thought you would when you started, but you’ll likely end up in a better place.
In addition to well-defined principles, you need to formalise and systemise the methods you’ll use to implement your marketing ROI processes. Well-defined methods (and stages) will ensure your metrics’ efficiency and effectiveness.
Whatever principles and methods you decide to use, those responsible for marketing should be able to answer any of the questions below instantly:
- What would be the expected ROI if we increased your budget by 10%?
- What would be the impact on sales closed?
- What would be the impact on sales if we decreased the marketing budget by 10%?
So can you answer immediately the questions above, if not now may be the time to invest in non fluffy marketing measurement
Marketing Measurement Checklist
#1: Define your data collection and storage approaches. How will you collect your data across multiple channels, including your customer database, ad networks, search engines, in-house spreadsheets, etc.? You can build your data warehouse internally or rely on outside agencies or analytics providers.
#2: Identify your Key Performance Indicators(KPIs). When you involve key stakeholders who will use your data in their daily business functions to measure how well they’re achieving their goals, you ensure their sponsorship of the marketing measurement process.
#3: Assign granular KPIs to your unique campaigns .Determine the impact of individual campaigns and channels, as well as their influence on other channels and campaigns, and your marketing measurement success as a whole. It’s helpful to integrate historical data into your metrics as well to uncover historical trends.
4: Formalize campaign data collection and tracking. This is where you establish business rules around when and how to measure what you want to measure – and identify who will oversee each phase of the process.
5.Integrate sales transaction data from all sources. You’ll establish a virtuous cycle for your marketing ROI when you close the loop of your measurements.
6: Produce visual reports of your marketing success. Be discerning in how much data you incorporate into these scorecards. Too much information will overwhelm your ability to quantify the business revenue impacts of your individual and collective marketing investments.
7.Employ your data to calculate true impact. Assign values to each channel, campaign and attribute across all marketing touch points to deliver true metrics that represent how effective each source is ingenerating revenue.
8: Where individual user data is unavailable, use “top down” attribution. Mathematical algorithms exist to calculate the value of individual marketing touches that you can’t access on a user level, such as offline channels like media, print and radio.
9: Analyse and optimize. It’s time to act on the business intelligence you gather with the system you’ve set in place.
- Which channels are performing best?
- Which campaign mix and variations?
- Integrate historical data trends with your “what if” scenarios to adjust and improve your marketing investments moving forward.
10. ROI-wash, rinse and repeat. “an enterprise marketing measurement system is not a once installed leave it project.” Enable stakeholder buy-in with small victories at first, and build your initiatives as you see what works and what doesn’t
Marketing Forecasting Technology
The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Bill Gates – Microsoft
Given the importance and potential of effective marketing measurement, as well as the scope of the problems that companies who don’t use such metrics experience, there is no lack of vendors promoting “the next best thing” in marketing measurement technology.
While Excel spreadsheets and other ad hoc tools can do a lot for companies, they cannot function as solutions for businesses that want to implement a robust analytics process. In contrast, automated measurement processes provide much more definitive, reliable and timely insight.
Automation frees up analysts’ time from information collection and presentation, and allows them instead to focus on gaining valuable insight into that data and refine their actions toward better results. This gets the analysis completed faster and better.
Marketing Automation Must-Haves
A successful analytics solution requires four components:
1.Central Marketing Database.
Analytics require access to highly detailed marketing data, so marketers need to begin tracking this information now – preferably in one place. Required information will include historical data around when marketing programs ran, what their attributes were, who they touched, how much they cost, and so on. Without this information, analytics are essentially worthless.
2. Time Series Analytics.
Unless an operational system stores historical data, a marketer cannot measure or understand marketing trends. Yet the majority of marketing and sales systems are operational and do not store historical information –requiring marketers who want to analyse their metrics for prior time periods to manually take data “snapshots” from their Excel spreadsheets.
However, time series analytics give marketers a full picture of their performance trends over time because the engine is powered by a historical data mart.
3.Powerful and Easy Analysers.
Very few of the marketers who want and need to consume analytics data are business analysts. For such an audience, powerful analysers and dashboards are required, so marketers can explore the data trends and gain insight into their programs without wasting valuable time in acquiring the expertise needed to manoeuvre the technology, build custom reports, and soon. Just make sure your marketing automation solution offers tools that are both easy and powerful!
4.Ad Hoc Reporting and Dashboards.
On the other hand, business analyst experts will need complete flexibility to delve deeply into the data and customize their own ad hoc reports. In this case, table-like reports and charts are most effective and allow analysts to “follow the scent” of particular insights as far as they need to go.
According to Gartner, companies that automate their lead management business processes between marketing and sales before 2012 will increase their conversion rates by at least 50%. Many companies will also see a 5% to 10% increase in revenue by 2015.
Marketing Forecasting & Implementation Summary
Marketing forecasting allows a company to anticipate future market trends and make informed decisions about product development, advertising, and sales strategies. By identifying potential opportunities and threats, a company can adjust its marketing efforts to capitalize on favorable conditions and mitigate negative ones. This can help to increase market share, improve customer satisfaction, and ultimately drive revenue growth. Additionally, implementation of the forecasting strategies can help a company allocate its resources more effectively, resulting in a more efficient marketing campaign and better return on investment.
The top 10 benefits can be summarised as
- Identifying future market trends and opportunities
- Making informed decisions about product development and advertising
- Anticipating and mitigating potential threats
- Increasing market share and customer satisfaction
- Driving revenue growth
- Improving efficiency of marketing campaigns
- Achieving better return on investment
- Allocating resources more effectively
- Identifying potential shifts in consumer behaviour
- Enhancing strategic planning and decision-making
If you would like to know more about marketing metrics and analysis contact Andrew Goode MBA, MSc, FCIM Click here to arrange a call
Other articles linked with marketing metrics that may provide additional insight. Marketing metrics and analytics, marketing ROI Planning , marketing revenue analytics, Marketing Measurement Metrics and marketing Campaign measurement