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How Do I Justify The Price Tag on a New Marketing Automation System?

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When you’re making the case to your higher-ups about investing in marketing automation, it’s natural to focus on all the cool things the software will do for you and your company. As a marketer, you’re probably giddy with the prospect of having this software and the new, creative projects you’ll be able to tackle with its help. I was in your shoes not so long ago, and I know this feeling of elation all too well.

Unfortunately, whoever holds the purse strings in your office doesn’t care about those awesome features. I know… what ’s wrong with them?

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It’s because the C-people with the purse strings only speak ROI. They don’t care that you’ll be able to tweet more now that your software integrates with Hootsuite. Or that you can create cooler templates with the WYSIWYG HTML editor. They only want to know: How much will it cost me and what will I get out of it?

If you’ve already done a few demos, then you probably know the answer to the first part of the question. (If you haven’t, check out our article on Marketing Automation Pricing Models). But before you send your boss into sticker shock, focus on how you’ll answer the second part of that question.

You can answer the “what will I get out of it” question, or in other words, the ROI, by calculating two parts of the equation: cost-saving factors and revenue-generating factors.

Some marketers, like Jep Castelein at Leadsloth, believe that you should only consider the revenue-generating factors when determining the ROI of marketing automation programs. And while the revenue-generating factors are pretty great (more on those later), I maintain that there are, in fact, cost-savings as a result of increased efficiencies.

Cost Saving Factors of Marketing Automation

As Jep mentions, the major costs in marketing are typically the people. And while marketing automation software might not cause anybody to be fired thanks to the increased efficiencies, it certainly frees up marketers’ time to work on other, more impactful initiatives. This means that their overall output per-person will be greater with marketing automation. So, if it would have taken your email marketing person 4 hours to set up a campaign , and now it takes them 1, you just gained 3 additional hours for them to get started on another campaign. You’re not necessarily paying them any less, but your cost per project goes down.

Here are four examples of how resources can be freed up (not just in your marketing department) with the help of marketing automation software, to create cost-savings that you can work into your overall ROI equation:

  1. Marketing automation programs minimize the time you currently spend segmenting and cleaning up email lists. Many CRMs and databases require you to download a list of contacts and then upload that list into your email marketing provider for each email blast (assuming the two tools are not integrated). Someone also has to organize that file, check for formatting consistencies, remove dead contacts, etc. before uploading the list. Businesses will often hire interns to do this work, or they may contract it out to data clean-up services. While marketing automation software won’t clean up all your data for you, it will eliminate this tedious process of importing and exporting contacts since the software can automatically sync with your CRM. Goodbye monkey work!
  2. The time it takes to deploy a well-targeted campaign with marketing automation is significantly less than a batch and blast email deployment. Ever sat in a meeting where someone says, the email should say ABC for group 1, DEF for group 2, and GHI for group 3… and you’ll have that out by tomorrow afternoon, right? And in the back of your mind, you’re calculating how many different lists you’ll need to pull, emails you’ll need to write, and tests you’ll need to do just to come up with three versions of the same email? With marketing automation, it’s just one. One list, one email, one test… and send. Thanks to the dynamic content abilities with most marketing automation programs, you can display different messaging to the same list of recipients based on the criteria in their marketing automation contact record.
  3. Do you constantly have to bug your tech team to pull a report for you so you can justify the success of your campaigns? Not anymore. Marketing automation comes with built-in reporting and tracking. This saves your tech team the time of pulling reports so they can focus more on building your product or improving your website (i.e. things that generate revenue). This also gives marketing better access to the numbers they need in order to make more informed, strategic decisions moving forward.
  4. Okay, I know I said nobody would care about the WYSIWYG editor. But do you have a designer your company pays to create landing pages and email templates for you? Do you outsource that work? What if you could do all of that in-house now or give your designer time to work on more important stuff instead? The efficiencies marketing automation programs create with regards to design work can be huge, and you don’t have to be an HTML expert to enjoy these cost-saving benefits.

Revenue Generating Factors of Marketing Automation

What most marketing automation ROI calculations will focus on, however, are not the cost-saving factors above, but the revenue generating opportunities (like Jep at LeadSloth). It’s likely because these benefits speak more to the sales-minded individuals usually involved with purchasing a marketing automation program. “I don’t care how much money we’ll save, how much money will I make?!? Cha-ching!”

Marketo, a marketing automation software vendor, has put together this handy calculator to show you exactly how much more revenue you’ll generate with marketing automation software. If you’re part of a small company, though, or you’d have to bug tech for the data, you may find it difficult to fill in the blanks in this calculator. Here are some of the factors that go into the equation so you can get a rough estimate based on data you have now:

    1. Marketing automation programs send more targeted messages to your prospects. As a result, your current response rates will increase. If your email open rate is currently 15% using batch and blast methods, it might go up to 20 or 25% with the help of marketing automation. So if 10% more people open your email, and your click-throughs stay the same at 5%, then your total number of clicks just went up by half a percent. But, with marketing automation, the content of the email is likely more relevant to your recipients since it is easily customizable based on their preferences, causing click-throughs to spike up from 5% to 20%. So now your total clicks went up by another 15%. More clicks= more leads. More leads= more opportunities. More opportunites= more sales.
    2. Thanks to the reporting and tracking features we talked about in the cost-saving benefits, you’ll also get greater insight into your prospects’ behaviors using marketing automation software. As a result, you can better qualify leads based on patterns and indications you see over time. Better qualified marketing leads means that sales will be more likely to follow up with those leads, and thus the number of sales-accepted leads will go up.
    3. Additionally, because sales has better insight into where leads came from and a holistic view of that prospect’s interactions with your company, they’ll be better able to sell that prospect on your product or service. As a result, your sales team can create more sales opportunities. A higher number of opportunities means that you’ll increase sales, assuming your close rate stays constant.

But how do you put all of those together to get to the ROI again?

If you really like math, here’s how:

{[(Your Salary / 235 Annual Working Days / 8 hours) x (# of hours spent on segmenting email lists + # of hours uploading lists + # of hours testing emails) – (cost of data clean-up service + cost of outsourced designer)] + [% change in inquiries x (current conversion rate + 20%) * average sales price] – [Marketing Automation Annual Price x # of years of expected use]} / Initial Investment in Marketing Automation = ROI

Easy peasy, huh? Riiiiggghhhht. What I’m trying to say is that it’s nearly impossible to arrive at a perfect dollar valuation of what you’ll net from your marketing automation investment. But if you can phrase your justification for the software in terms of cost-savings and revenue-generating factors, you’ll be much more likely to get the green light from the higher ups. And get back to all that tweeting!

Looking for Marketing Automation software? Check out Capterra's list of the best Marketing Automation software solutions.

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About the Author

Katie Hollar

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Katie is the Director of Marketing at Capterra - a free resource that helps businesses find the right software. Katie has a love of all things marketing, but she is particularly fond of social media and marketing automation. She is a UVA grad (Wahoowa!) and in her free time enjoys reading, running, and cooking. Follow her on Twitter @khollar.

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