A few of you asked me last week if I had any examples of how to use the cloud to demonstrate marketing ROI. The easy answer is yes, but… determining the ROI of marketing spend (and activity) can be done in a lot of different ways. “The cloud” isn’t a magic button. It’s a toolkit, just like anything else you can use to make your business work better for you. The harder and more reasonable answer is, as always, the same question that tends to open any serious discussion about the ROI of [insert activity here]: what are you trying to accomplish? Acquire new customers? Boost sales of product Y since it has been lagging behind product X? Increase the buy rate of your existing customers? Increase the average spend per purchase of your existing customers? Increase lifetime customer value?
Why don’t we look at increasing Lifetime Customer Value. It’s one of the most overlooked growth strategies in business development and a great place to measure ROI. Before you get to the strategy, the trial and error, the creative thinking and the execution, you need to first be able to measure Lifetime Customer Value pretty consistently: 1) baseline your LTV, then 2) measure against that baseline at regular intervals to see if the activity you invested in that is meant to drive this increase had any effect.
As you will see in Kiss Metrics’ brilliant little infographic cheat sheet below, the calculations are relatively straightforward. You could do them in Excel or on a basic calculator. The hard part is the acquisition of the data, then the management of the data. You need a little bit of computing power there. You need some server space. Essentially, as a CMO or marketing project manager, you need to sit down with your CTO and your CIO and work out how exactly the tech is going to allow you to get the data in, manipulate it however it needs to be manipulated for analysis, and then turn it into reports and insights to decision-makers and bean-counters (since, you know, ROI is still on people’s minds.) Some companies are capable of managing hardware and software of this scale in-house. Most will have to turn to cloud solutions in order to fulfill some or all of the pieces that require more than just basic algebra. Some of that could be software applications (CRM, sales management systems, etc.) and some of it could be hardware-related (data storage and/or extra computing power).
The thing to remember here is that if ROI is one of your priority tasks, “the cloud” isn’t just a magic ROI-calculating unicorn app. The cloud simply allows you to carry out tasks much faster and at a much lower cost than before, (and in some cases, allows you to do things you couldn’t do at all ten years ago). In this particular instance, that task is measuring Lifetime Customer Value and relating changes in it to ROI, but that is just one among thousands of potential uses.
The cloud is an enabler. That’s it. You have to hitch your processes to it, new or old. You have to give it purpose and bend it to your will if it is to yield value. The bending is by far the easiest part of it. Without some degree of operational and strategic fluency somewhere in the organization (in this instance, from the CMO) and an understanding of how technology plugs into operations to deliver on the organization’s needs, “the cloud” is basically just a really hot high performance car sitting in a garage. Like the organizations it serves, it wants to be driven. It wants to feel the road. It wants to see what’s on the other side of every next hill. In other words, companies and the cloud need competent, driven, insightful, leaders at the wheel to ask the right questions, set goals, decide on a direction, and work to score wins. That is how the cloud can fulfill the promise of its potential value. If you aren’t already trying to build a better company, the cloud is only going to act as a sort of technical support for your organization’s basic IT needs. But if you are trying to build a better company, and are looking for smart solutions, new ways of doing things, and working to gain every possible advantage you can, IT could become one of your most valuable assets – right alongside your CMO, assuming you scored a very good one.
Here is Kiss Metrics’ Customer Lifetime Value cheat sheet:
So there you have it: Lifetime Customer Value. One of the many intersecting points between IT, Marketing and ROI (social media related or not). The tactics are up to you, but the processes are all laid out. Now go build something.
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This post was brought to you by IBM for Midsize Business and opinions are my own. To read more on this topic, visit IBM’s Midsize Insider. Dedicated to providing businesses with expertise, solutions and tools that are specific to small and midsized companies, the Midsize Business program provides businesses with the materials and knowledge they need to become engines of a smarter planet.
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If you haven’t already, dig into Social Media ROI – Managing and Measuring Social Media Efforts in your Organization, the #1 Social Business desk reference for executives and digital managers. (Now also available in German, Korean, Japanese and Spanish.)