3 Solid Tips To Determine ROI of Fractional CMOs
More businesses are investing in a San Diego fractional CMO agency as the competition among brands intensifies in the Golden State, and the once-tried-and-tested strategies now need a revamp.
Although FCMOs are popular as a cost-effective alternative to hiring full-time C-suite executives, they still cost money. This spending can be excessive for startups and small- and medium-scale enterprises.
How do you know you are getting your money’s worth? This blog post shares three solid tips:
- Clearly define your marketing objectives.
- Identify and measure your key performance indicators (KPIs).
- Determine the level of efficiency and productivity of your team.
Learn how to execute these ideas in the article below!
Wondering what a Fractional CMO can do for your business? Watch this video below.
Why Should You Measure a Fractional CMO’s ROI?
Before we learn the how, let us talk about the why. Why must you determine the returns from hiring an FCMO? Here are a few reasons:
- Impostors are abundant. Real fractional CMOs usually hold a master’s or bachelor’s degree in marketing and have spent decades in the industry. They have the authority and know-how to lead a marketing team and strategize on behalf of their clients.
- Businesses should know how to effectively allocate financial resources. Fractional CMOs can still cost thousands. Knowing their ROI helps organizations decide whether to continue, modify, or end their relationship.
- Assessing returns adds more information about business growth. It helps you gauge fractional marketing leadership’s overall effectiveness and influence on business outcomes. These include influence on revenue growth, brand awareness, customer acquisition, and client retention.
- It promotes accountability and transparency. Stakeholders, such as business owners and other officers, can evaluate an FCMO’s performance more objectively.
Anyone working with or considering hiring a San Diego fractional CMO agency should make return evaluations non-negotiable. The question, though, is: how do you do it? Here are the best tips:
1. Clearly Define Your Marketing Objectives
Fractional CMOs wear many hats, but some companies work with them for specific reasons. It could be to help increase the number of leads or revenues, improve customer retention, or optimize marketing campaigns. These professionals can also lead your in-house advertising department.
Either way, you should know why you engaged them in the first place. For that, you must set clear marketing objectives. From there, you can determine the KPIs to help you measure a CMO’s contribution to your business.
Using the acronym SMART can simplify the process. For example, you are a new San Diego urgent care facility wanting to boost brand awareness. Your statement of objectives might look like this:
- Specific: Increase brand awareness by leveraging the expertise of the fractional CMO to develop and implement a targeted marketing strategy.
- Measurable: Achieve a 20% increase in new patient inquiries and a 15% growth in social media followers through an FCMO’s marketing initiatives.
- Achievable: The fractional CMO will conduct a thorough analysis of the local market, identify target audience segments, develop a comprehensive marketing plan, and oversee its execution with the support of the urgent care facility’s marketing team.
- Relevant: Enhancing brand awareness matters for the urgent care facility’s growth and success. The fractional CMO will bring industry knowledge to drive effective strategies that align with the business’s goals.
- Time-bound: Attain the specified results within the first three months of the fractional CMO’s engagement, continually evaluating progress and adjusting strategies as necessary.
2. Identify and Measure Your KPIs
There is no shortage of KPIs or metrics to help you determine the success (or failure) of your marketing decisions. The problem lies in identifying which ones matter, depending on the information you would like to know or the objectives you want to hit.
Calculating a fractional CMO’s return is challenging because it has no concrete formula. Most use the standard ROI equation: take the difference between net profit and the cost of hiring an FCMO, and divide it by the cost.
The “net profit” is the additional revenue generated or cost savings achieved due to the fractional CMO’s efforts. This can include increased patient inquiries, higher patient conversion rates, improved marketing campaign effectiveness, and reduced marketing costs.
The “cost of hiring a fractional CMO” covers the fees or compensation and any additional expenses associated with their engagement, such as marketing tools, software, or advertising budgets.
For simplicity’s sake, let us say your business earned $550,000 in one year after taxes and expenses while you spent $70,000 on a project-based or part-time chief marketing officer. Using the formula above, the ROI is 6.85%.
However, in reality, KPIs can be quantifiable or non-quantifiable.
|Quantifiable KPIs||Non-Quantifiable KPIs|
Cost per acquisition
Social media engagement (e.g., followers, likes, comments)
Partnerships and collaborations
Non-quantifiable metrics are usually subjective, making them more challenging to measure. Fortunately, many tools exist to streamline the process and improve data accuracy. Surveys, feedback forms, focus groups, and ratings are excellent options for gathering information for analysis.
3. Determine Your Team’s Efficiency and Productivity Level
Do you have a small, inexperienced marketing team? This can be one of the signs to hire a fractional CMO.
As market thought leaders, FCMOs can mentor and guide your employees in several ways. An FCMO can share their understanding of the latest trends, strategies, and tactics and provide
valuable insights that help your team streamline their workflow. An FCMO guides your marketing team to learn from their experiences and acquire new skills, enhancing their capabilities in areas such as market research, campaign planning, digital marketing, branding, and analytics.
This way, your marketing department becomes resilient and quick to respond proactively to changes inside and outside the organization. It can also grow to be more productive and cost-effective.
However, what is the best way to determine whether your FCMO is leading your marketing team well? Here are some tips:
- Look for signs of efficiency. These can include timely completion of assignments, effective collaboration among team members, and adherence to established processes and workflows.
- Consider the quality and accuracy of the work delivered.
- Evaluate their communication and collaboration. Can team members share ideas openly? Are they receptive to suggestions?
- Examine the tangible outputs or results of your team. This can refer to the successful launch of initiatives, such as content or marketing material, and achieving specific targets outlined in the marketing plan.
- Seek feedback from team members, including their perception of the fractional CMO’s contributions.
- Conduct regular performance reviews to evaluate individual and collective achievements, identify strengths and areas for improvement, and provide necessary support and resources.
The benefits of working with an FCMO cannot be understated, especially if you are a growing startup or an established business wanting to elevate your marketing results. However, from a business perspective, it can still be an investment or an expense. Use this guide to help you measure the returns.
To maximize your spending, hire a San Diego fractional CMO agency with years of experience growing businesses in your niche. Digital Authority Partner (DAP) is a forward-looking, analytical company with part-time marketing leaders prepared to help you scale.
Contact us to learn more.
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