What is Closed-loop Reporting?
What if there's a missing piece in your marketing puzzle that could change everything? This article delves into closed-loop reporting, a method that uncovers the true return on investment and answers the crucial question: what is and isn't working in your marketing and sales strategies
What if there's a missing piece in your marketing puzzle that could change everything?
Closed versus Open Loops
Before getting into closed-loop reporting - we first need to talk more broadly about different types of systems.
Imagine a system where input is transformed into output, but this output does not influence future inputs. This is the essence of an open loop - a cycle devoid of feedback to modify or improve its behavior.
Such a system is akin to a one-way street, where information travels in only one direction. It's reminiscent of Albert Einstein's famous quote: "Insanity is doing the same thing over and over again and expecting different results”. Open loops epitomize this sentiment. You're trapped in a cycle of repetition, unable to learn or advance from past actions. Surprisingly, despite its inherent inefficiencies, this model is commonplace in many organizations (more on why this is below).
Now, picture a system where the output circles back as a form of feedback, influencing and refining future inputs. This is the core of a closed-loop system.
In such a system, every output becomes a valuable lesson, feeding back into the system to refine and improve future actions. It's a dynamic, self-learning feedback loop, exceptionally powerful in scenarios filled with uncertainty. Essentially, with a closed-loop system, you're engineering a perpetual learning machine, continually evolving and enhancing its performance.
What is Closed-loop Reporting?
Closed-loop reporting is a process that lets marketing and sales teams gather and analyze data from various sources, ideally in real time. This process is all about making smarter decisions and improving strategies. It's a cycle of collecting data, analyzing it, making informed decisions, and then measuring the outcomes.
In essence, closed-loop reporting combines marketing and sales data. This allows us to optimize based on clear revenue signals and accurately report on the ROI of our efforts. It’s a practical approach to seeing the full impact of marketing and sales activities on revenue.
Closed-loop reporting is a process that lets marketing and sales teams gather and analyze data from various sources, ideally in real time.
Closed-loop Reporting Example
Closed-loop reporting tracks the entire customer journey, from initial engagement to the final sale. It's about understanding each touchpoint along the buyer's lifecycle.
Take, for instance, running Google Search ads. With closed-loop reporting, the process looks something like this:
- Google Search: We set up UTM parameters which are additions to a URL ie website.com/?utm_keyword=example - where “example” is the hypothetical keyword someone searched for.
- They click on the ad and go to your website: This UTM parameter carries over from the ad and tells us the source and more importantly the keyword that drove the visit.
- They browse multiple pages: Each page they visit is saved. This tells us about their digital body language. What they're interested in and provides contextual information and their potential interest level.
- They fill out a form: Their information is saved, which personally identifies who the person is with contact information.
- Marketing automation: The information regarding where this came from, in this case, Google search ads, as well as vital information such as the keyword they used and pages visited is merged into a record with their personal information in the system.
- CRM: The information from the marketing automation system syncs with your CRM. Your sales team saves vital information, such as lead quality.
- They become a customer: The deal is marked as “closed won” in the system, and information such as the deal value and time to close is saved
- Closed loop reporting: Using automated or manual methods, all of the marketing data as well as all of the sales data are combined and shared. This creates the feedback loop, where we know which particular keywords, for example, are driving the highest quality leads and ultimately the most sales. This is information that we would never have without a closed-loop system and drastically aids our optimization.
Key Benefits of Closed-loop Reporting
Closed-loop reporting transforms the way marketing and sales teams operate, offering multiple advantages:
- Data-Driven Decision-Making: This system allows for decisions based on real-time data from multiple sources, moving away from reliance on gut feelings or isolated experiences. Teams are equipped to make choices rooted in comprehensive, data-driven insights.
- Marketing and Sales Alignment: It bridges the traditional divide between marketing and sales. Both departments gain access to shared metrics and insights, fostering a unified approach and understanding.
- Boosted ROI: Continuous optimization of marketing and sales strategies, guided by solid data, leads to enhanced return on investment. Teams can identify and focus on the most effective tactics, leading to better results over time.
Consider the impact of closed-loop reporting in a real-world scenario involving two Google Search ad campaigns. Without closed-loop reporting, you might conclude that Campaign B is more effective due to its lower cost per lead. However, integrating sales data reveals a different story: Campaign A, despite higher costs, drives much higher deal values. This insight, which only closed-loop reporting can provide, is crucial for truly optimizing beyond surface-level metrics. It demonstrates the system's power to uncover the deeper, more valuable truths in your marketing efforts.
Challenges of Closed-loop Reporting
While the benefits of closed-loop reporting are clear, its implementation can be a complex task. Here's why not every organization manages to achieve it:
1. Technical Integration Across Diverse Systems
Closed-loop reporting requires seamless integration across various software systems in your tech stack. In our example above, using Google search ads, data must flow smoothly through:
- Google Ads
- Your website
- Marketing automation software (MAT)
- Customer Relationship Management (CRM) system
This means each component, from ad platforms to your CRM, must communicate effectively, which is often easier said than done.
2. Cross-Functional Team Collaboration
Effective closed-loop reporting isn't just about the technology; it's also about people. Different teams must work in harmony:
- Paid Media Specialists manage Google Ads.
- Website Developers handle website integrations.
- Growth Marketers set up Marketing Automation and CRM tools.
This level of coordination requires all teams to be aligned in their objectives and methods, ensuring data flows unimpeded through each stage.
3. Inter-Company Collaboration
Implementing closed-loop reporting often extends beyond the confines of a single company, especially for digital marketing agencies like ours. It involves:
- Partnering with clients to align marketing automation and CRM setups.
- Ensuring client sales teams are onboard and inputting valuable data into CRMs.
- Sharing insights and data that might not be automatically captured, requires open communication channels.
A Forrester Research paper and Content Marketing Institute research suggest that between 50-80% of companies fail in this endeavor.
Given these complexities, it's not surprising that a significant portion of businesses struggle to track ROI effectively. A and suggest that between 50-80% of companies fail in this endeavor. Without closed-loop reporting, it simply is not possible to report on ROI.
Our Commitment to Closed-loop Reporting
At Optimal, our mission is to drive tangible growth for great companies. We believe this is unachievable without the precision of closed-loop reporting. It's a foundational element of our process, setting us apart in our approach to digital marketing.
Our journey with closed-loop reporting begins as soon as we partner with a client. In the initial month, we focus on developing a closed-loop system map. This visual tool lays out the interconnected elements of your marketing and sales processes. It's not just a roadmap; it's a commitment to transparency and alignment with our clients. By clearly illustrating how each part of the system interplays, we ensure that everyone is on the same page, working towards a common goal.
“Less But Better”
Dieter Rams' philosophy of “Less But Better” resonates deeply with our approach. It’s not about ramping up efforts across the board; it's about honing in on what truly works. Closed-loop reporting illuminates the 80/20 principle in action: often, 20% of your efforts lead to 80% of your success. By identifying this crucial 20%, we can focus our energies more effectively, doubling down on what delivers real results.
Our approach to closed-loop reporting goes beyond mere wishful thinking; it's a fundamental part of our engagement with every client, reflected in our contracts and expectations. With closed-loop reporting, we don't just work hard; we work smart, ensuring that every action we take is informed, impactful, and in line with our goal of helping your company grow.