Following a previous article on marketing metrics, many of you raised the question of measuring marketing impact on the company bottom line. While the general consultant answer – “it depends” – would hold true here as well, my real answer to most of you in the enterprise software world is simple but disappointing: YOU CANNOT. I can hear some of you crying foul as you're reading this answer: “With all the talk about ROI, marketing still refuses to be measured.

What good are all these marketing metrics if you cannot measure the impact on the bottom line?” Before you get all excited, let me ask you some similar questions: Can you measure the impact of your product development on your bottom line? Can you measure the impact of every sales call on the bottom line? Reality is that your company's bottom line is impacted by too many variables. Establishing statistical dependencies when many variables are involved requires large samples of data.

In response to a recent IDC survey, only two out of the ninety companies surveyed had overall marketing ROI measurements, and these two were companies with over $10B in sales. You may have this kind of data if you are a large company or if you sell low-cost software. But for a young enterprise software company that closes 10-50 deals a year, it's going to take a while before you have enough data points to establish these dependencies.

In this timeframe, many of the variables are going to continuously change - the economy, your product, the number of references you can provide – to name just a few. I am also leery when people try to attribute a sale to specific marketing activity.

This may work when you sell online, but in a solution-selling environment, where the sale cycle is 6-18 months long, there are likely to be multiple marketing activities that contribute to each sale.

Does it mean you have to give up measuring your marketing? Not at all. Here is what you can do:

Define Measurable Goals

How do you know what these goals should be? At Cisco, every employee is compensated based on measurement, but the measurement is not the company's bottom line but rather customer satisfaction rating.

Cisco measures customer satisfaction because its management has a vision that ties it to long-term bottom line results. Do they have the mathematical formula to prove it? Maybe by now they do, but probably not when they started. The same type of vision is what you need to develop for your marketing.

To define meaningful goals, you have to define your own Marketing Impact Model. This model translates your vision of how marketing will impact the bottom line into measurable metrics. The model I like to suggest has to do with the level of permission established with your target customers. For each marketing activity, you can measure one or more of the following:

• Capture: how many new target customer permissions have been established as a result of the activity?
• Maintain: how many target customer contacts have responded to this specific communication?
• Upgrade: how many target customer contacts have responded in a way that gives you permission to take the dialogue to the next level? (we'll be writing about upgrading permission in one of our upcoming issues).
• Cost: what was the cost of each of the above? This is just one possible model.

You may have a different one. What's important is that you have one explicitly defined, and that you get your entire marketing team and your management to buy into it.

Embark on Measurable Activities

In the previous article, I argued that every activity is measurable. It is also true that some activities are more measurable than others. Online activities are more measurable than offline activities. For example, e-mail is easier to measure than print mail. With e-mail, you can easily test different messages at very low cost, while printing multiple versions would be costly. You can measure not only response rates, but also open rates, which tell you how many people read your message and can help you fine-tune future campaigns for better results (see the article Analyze This: Enhancing Email Response below).