This post is the last of five segments in the How To Audit Your Marketing series. Visit the main post for an overview of why to conduct a marketing audit, things you'll want to consider, and what to do with the results of your marketing audit.
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NOTE: This article is about how to conduct an internal audit to understand your marketing performance. This is not a formal financial audit for tax, legal, or governance purposes.
Your final marketing audit seeks to understand how your marketing contributes to your organization’s profitability and financial goals. If executed with your overall business objectives in mind and designed to deliver measurable results, your marketing should be viewed as a contributor to revenue, not a cost center.
That said, marketing’s contribution is more difficult to measure than that of sales because, with the exception of ecommerce and point-of-sale activities, your marketing exists upstream of your sales activities. This means you may have do do some analysis or be willing to make certain assumptions about how to allocate your marketing revenue and spend.
Understanding how your marketing activities impact your bottom line allows you to make decisions about what marketing tactics to pursue and where you might want to look for efficiencies.
For the marketing financials audit, you'll need the following documents if you have them:
You’ll also want to think about how you’re going to document everything. A spreadsheet or note taking app can be helpful for keeping your notes organized. Use whatever works best for you to keep a lot of information together in one place.
Once you have everything together, let's get started!
To understand your marketing financials, you’ll want to look at the following:
You want to start by understanding the cost of your marketing activities. Do you have an annual marketing budget, and do you track your actual marketing spend against your planned amounts?
A budget tracker can help you understand how much you’re spending on each marketing tactic or initiative, and identify any costs that might warrant a closer review.
Your marketing budget can also help you understand your cost of marketing as a share of your overall expenses, and can be used to set a target spend for the year. As a general rule, cost of marketing should be between 2-5% of annual revenues for B2B companies and 5-10% for B2C companies.
If your marketing team is already tracking your marketing spend, this information will be in your marketing budget or financials.
Once you know how much you’re spending on your various marketing tactics or initiatives, you can use that information combined with the performance information from your marketing tactics audit to understand the effectiveness of your various marketing elements.
Divide the cost of a particular marketing program by the quantity of its KPI to understand the cost of each final result delivered. For example, if you ran a campaign designed to deliver sales leads, divide the cost of that campaign by the total number of leads generated to get your cost-per-lead.
You can compare these measures against each other and against your average revenue per lead to understand which marketing programs are delivering the best value for your organization.
When considering the value of marketing tactics, it’s important to remember your marketing funnel and that most tactics don’t deliver against a marketing goal all by themselves. Marketing attribution models, which we’ll talk about next, can help to allocate marketing value to each individual element. But, as long as you’ve mapped out your marketing tactics and how they work together (as you did in your marketing tactics audit), you can consider them as part of a whole program and assign value there.
If your marketing team is conducting cost-efficiency analyses, this information will be in your marketing financials or your marketing performance reporting.
Marketing attribution models analyze user data to assign credit for KPI conversions (ex: purchases, signups) across the various touchpoints in your marketing funnel (ex: ad clicks, website visits, emails).
Generally speaking, there are six different types of attribution modelling. The best model to use depends on your specific goals and customer journey.
Using marketing attribution can help you understand the financial contribution of each marketing tactic, so you can optimize your marketing efforts accordingly.
As with cost-efficiency analyses, if your marketing team is using marketing attribution, this information will likely be in your marketing financials or your marketing performance reporting.
Marketing revenue and Return on Marketing Investment (ROMI) are the holy grail of marketing financial reporting. These show you how your various marketing initiatives contributed to your bottom line and to the profitability of your business. But, they can be tricky to figure out.
ROMI is calculated by dividing the net profit of a marketing program by the overall cost of that program to get the percentage return on investment.
Because marketing generally integrates with other activities like sales, it can be difficult to determine what portion of revenues to allocate to your marketing program.
One way is to use tracking mechanisms like UTM codes in marketing campaigns to understand exactly how many sales or leads were generated by a specific campaign. Attribution models, as discussed above, can also help you allocate revenue to specific marketing and sales activities.
Another method is to conduct A/B tests with control groups, in which your marketing campaign is shown to only a portion of your target audience. Then, you can measure sales lift with the exposed audience compared to the control group to understand your campaign’s impact on sales.
Statistical analyses and historical patterns can also help you attribute marketing’s share of revenue, and some digital marketing platforms, especially those for e-commerce sites, have built-in ROMI analytics.
If your marketing or financial teams are calculating ROMI, you’ll likely find this information in your marketing performance reports or your financial reports.
Need some support with auditing your marketing financials? A fractional chief marketing officer like me can help.
With 20 years’ experience managing marketing projects big and small, across all aspects of marketing and communications, I can help you understand your current marketing spend and how your marketing dollars are contributing to your bottom line.
If you need help with the other parts of your marketing audit or determining your next steps once your audit is completed, I also offer marketing strategy, planning, and management services on a project or fractional basis. Get in touch if you’d like to learn more!
Analyzing your marketing financials can help you understand how your marketing program is contributing to the overall performance and financial health of your business. By understanding how your various marketing tactics impact your bottom line, you can make decisions about where to allocate your marketing dollars and what marketing initiatives are driving the most impact.
However, it’s important to consider your marketing financials comprehensively alongside other metrics like brand awareness and customer satisfaction, which are more difficult to connect to revenue but nonetheless matter to the overall health of your business.
If you found that you didn't have all the information to complete your marketing financials audit, don't worry. Marketing financials can be complicated, and most businesses don't employ the range of analyses required to fully allocate their marketing revenue. Start by working with your marketing and finance teams to understand your marketing spend, and go from there.
Having a clear picture of your marketing expenses and your cost-efficiency metrics will go a long way towards helping you understand which parts of your marketing program are delivering value for your business, and which might need to be adjusted.
From there, if it's important to your organization, you can work with your marketing team to implement the necessary tracking and attribution to understand the contribution of individual tactics and the return on your marketing spend. A marketing consultant (like me) can help.
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