Why ROI is undermining B2B marketing effectiveness

ROI in B2B marketing was meant as a noble metric to evaluate the effectiveness of marketing investments. But in our quest to prove the return to our CEO and CFO, we’ve tried to apply metrics to tactical outcomes to justify our budgets. 

Complex B2B buying situations take months, involve many stakeholders and rely on things we can’t know or see because buyers choose to self-educate until they refine their shortlist. Therefore, it simply doesn’t make sense to report things like:

• Every dollar spent on email returns $X in revenue.
• Our display ads created #X MQLs.
• Campaign A contributed $X to pipeline.

ROI in B2B marketing is distracting us from what drives effectiveness. Without effectiveness, there is limited ROI to report. It’s not a tactic or two that makes the difference. It’s the entirety of brand plus demand. And each of those plays impacts different timelines — the former impacts the latter.

We consented to the devaluation of B2B marketing

I’m not saying ROI isn’t essential; it is. But the way we apply it today is like short-sheeting our beds.

Once marketing automation systems came along, we had data. We got giddy with the ability to report activity as outcomes — email opens, clicks, content views, time spent on page, depth of scroll, recency and frequency of website visits and growth in website traffic. Then, social media allowed us to count followers, post impressions and comments and more.

These are valuable gauges to evaluate execution. But in isolation, each lacks the story of the buying journey. We use ROI to report on pieces and parts, not the overall impact.

Short-term demand capture effects are simpler than long-term brand investments because they’re closer to revenue and provide data for reporting your leadership team wants. About 71% of CMOs say they pursue marketing tactics they can measure more easily.

Dr. Debbie Qaqish interviewed 31 marketing leaders about the shift from strategy to tactics, a trend she calls “the big squeeze,” detailed in the report “The Big Squeeze in Marketing” (registration required). It includes many quotes from the interviews, including:

• “Every dollar spent on marketing has to show a direct correlation to pipeline. If it’s not measurable, it’s not valuable.”

The mandate for ROI distracts us from finding and pursuing growth opportunities in the market — not all of which are measurable in the short term.

Dig deeper: The effectiveness crisis in B2B marketing

How ROI took over B2B marketing

ROI is the rallying cry of CEOs and CFOs. Executives demand we prove ROI for every marketing program, tactic and strategy a brand uses. However, the metric lacks meaning without a focus on the overall marketing effort. Using data this way, we’ve trained our companies to focus on the short term — ignoring the long term, as if buying complex solutions is straightforward.

We know better, don’t we? We know that without investment in brand to drive demand, there is no demand to capture. Our buyers have changed, taken control, pushed sales reps to the backend of their process and are forcing our hand. Add to this the recognition that a tiny percentage of our potential customers are in-market at any time.

What worked in the past won’t work in the future. The meltdown of growth-at-all-costs in SaaS indicates the need for agility and a call to rethink how we go to market.

But we find ourselves stuck trying to shift ROI thinking in our leadership back to the big picture of marketing impact. We need to revive respect for the fundamentals of marketing and effectiveness, which make for a worthwhile investment in future growth — both for the short and long term.

Dig deeper: Smarter attribution strategies to help B2B marketers prove campaign value

A new way to measure brand investment

The IPA’s recent report, “Marketing is an Investment” (registration required), explores how U.K. and U.S. investment analysts perceive marketing. The research reveals a growing belief that effective marketing — especially brand-building — should be viewed as a long-term investment, not just a short-term cost. The report even suggests rethinking financial accounting practices, proposing that marketing spend be treated more like capital expenditure rather than written off as an operational expense in the period it occurs.

When the IPA asked investment analysts if marketing spend should be treated like technology R&D, where it is capitalized, 50% said yes, and 83% agreed that brand/marketing is very important in their analysis of companies. Both answers say that if brand investment is effective, much of its value will show up in the medium to longer term.

Dig deeper: How B2B marketing is becoming a strategic growth driver

B2B marketers must make the intangible tangible

The real challenge is learning how to market to our CEOs and CFOs — most of whom have limited understanding of marketing fundamentals. That gap and our overreliance on ROI to justify spend, often works against us.

What if we could get our CFO to run an “off the books” comparison that tracks brand investment as capital expense (capex) and performance marketing as operational expense (opex)? Sure, there are details to work out, but it could be an internal validation until accounting rules change. 

We include brand assets in the valuation when we sell a company. Why isn’t investment in brand a line item on the balance sheet that bolsters overall company value?

To prove the impact of marketing spend, we need to quit trying to force a square peg into a round hole. Instead, we need to show the ongoing value of brand investment over the longer term as a factor driving both present and future growth.

Another possibility is to benchmark customer acquisition cost (CAC) and customer lifetime value (CLTV) and measure improvements. If brand investment works, you should see lower CAC and higher CLTV over time. CFOs can relate to those metrics. Both outcomes point to higher profits — not operational expenses.

A Wynter survey of CFOs found that 73% are supportive or cautious but open to brand marketing. They’re simply frustrated by vague claims, marketers’ inability to speak the language of finance and brand initiatives without ties to financial outcomes or competitive differentiation.

How are you building support with your CFO for B2B brand marketing?

Dig deeper: A 3-step guide to unlocking marketing ROI with causal AI