With the excitement of buying a new Marketing Technology (MarTech), often is the case that marketers buy into the vendor’s stated claim. You hear vendors claiming that their solution can make your marketing activities so much easier, more efficient and more profitable whilst providing marketers with a better way to engage with their customers. It’s because of this, that you don’t question them.
However, after drinking the Kool-Aid, signing the multi-year licence and paying for the implementation phase, the inevitable question arises; how can we prove the value of this MarTech investment?
Well, I would hope that you wouldn’t be asking that question at this stage. The question ideally belongs in the situation where you are considering why you need a MarTech system. Or at least before procuring a MarTech system and signing a multi-year contract.
If you are not asked to prove the value, then consider yourself lucky. But, in most cases, you will be asked to show what the benefit of deploying this MarTech would be, against not purchasing it (or against other options). This could be either another software solution, building the capability in-house, or potentially improving what you already have.
Let’s take a CDP as an example. You decide that you need to connect all your customer data so you can provide a better customer experience. This you believe will lead to the company selling more products. Therefore, you decide you need a CDP to connect all your customer data together.
So, how does the business make more money by providing a better customer experience? What is it that you can do with a CDP, that you couldn’t do without one (because you are unable to aggregate your customer data)?
The way to tackle this is to determine what it is you will be able to do, and how that will either save you money or make you more money.
Is it the case that having disaggregated customer data is causing a negative effect on your customer retention levels? Perhaps a customer complained about your service, but your customer service database did not communicate with your billing database. This may have resulted in you sending a customer a bill for a service that they are currently in the process of complaining about, thus, you end up losing them.
Here’s a “Proving Value” exercise:
If the above example is the case, then you can do a simple calculation on your current database to prove that being able to connect the customer across your two systems will lead to more revenue and potential savings for your business.
1. The first thing to do is look at the number of people who made a complaint in the last year (let’s say 100 people).
2. Then, of those complaining, how many left after receiving a bill for the service they were complaining about (let’s say 20 people) – If you can’t do that then that’s another discussion, and you should definitely get in touch with us.
3. Once you have done that calculation, you may decide that even if you could connect the data, you wouldn’t be able to save and retain everyone. Perhaps you could realistically retain at least 50% of them, so 10 people in total (50% of 20 people).
4. Then it’s a case of doing the maths:
a) You believe you can retain 10 people (50% of those who would have otherwise left).
b) The average value of a customer is £100 over 12 months.
c) Multiply the number of customers retained (10) by the revenue you get over 12 months (£100) – or if you want to be more accurate, the margin you make, but let’s keep it simple.
d) That gives you a total value of £1,000 (10 x £100) in a year.
e) Next, add the cost of recruiting new customers to replace these lost ones into your calculation; let’s say your average cost per acquisition is £20, so 10 x £20 = £200.
f) So the total value of getting a CDP to connect your customers is £1,200.
g) Finally, work out the annual cost of having a CDP.
h) You then subtract the annual cost of the CDP from what you hope to make or save.
The above exercise, though very rudimentary, should allow you to establish what you can either save or make in terms of revenue (or margin) by deploying this MarTech (a CDP in our example).
It’s worth noting that you should establish a baseline; show the business how many people you lose by not having a unified customer database which, in the above example, is 20 people. Then, use the type of calculation mentioned above to build a business case that suggests that purchasing a CDP would help save some of this lost revenue and also realise some gains, such as marketing costs. It might also be worth stating some targets, which your MarTech can be measured against to show the ROI.
These hypothetical exercises will put you in a good position to get a budget signed off. It also means you get to present your case in terms of sales and revenue as well as less tangible benefits such as a better customer experience.
Obviously, if the numbers do not stack up when you run these hypothetical exercises, you have two choices;
- Ignore it and hope that your MarTech will magically make your marketing better,
- Look at what you are currently doing, improve where you can and then later re-visit if you need that latest MarTech to get incremental gains.
There will be multiple benefits to a MarTech like a CDP, beyond just connecting customer data, for example; building unified customer profiles, delivering personalised experiences, increasing customer satisfaction or having a single place where you can provide governance on your data. I would suggest adding these into the business case calculations and seeing what numbers you end up with.
If, after all that, your MarTech doesn’t move the needle in a hypothetical business case calculation where you can afford to be generous with your assumptions, then it probably won’t deliver the value claimed in the real world. However, do be cautious with your assumptions; if they sound unrealistic, they are unlikely to be taken seriously. Also, you may find that you are asked to report on the ROI of your MarTech investment, so make your targets realistic and achievable. However, in my experience, that’s as much of a challenge as getting the budget signed off in the first place.
So, before you decide to purchase your latest MarTech, work out if you will get the value that is being claimed. It’s nice to believe a new piece of tech can solve all your marketing challenges, but unless the numbers stack up, it’s unlikely that it will once purchased.
At Be Data Solutions, we help our clients build a sustainable business case for any investment in technology, so drop us a line at email@example.com and let’s have a chat on how you can prove the value of your MarTech