Four Simple Tips for Private Equity Managers to Calculate Digital Marketing ‘ROI’

Finance folk are known for their financial modelling prowess and ability to forecast returns. But private equity and other fund managers have not always taken that strength and applied it to their marketing efforts.

That is a mistake. But fortunately an easily fixable one.

Recently, CapX Partners’ Eric Starr delivered for us a convincing presentation on the power of newly available marketing techniques born out of today’s technology. In the webinar Moving Beyond Coffee: Unlock Deal Flow with Digital Marketing Eric made a powerful case for the marketing value of content-rich websites (including using blogs), a conscious SEO strategy and targeted e-marketing campaigns. Equally important, though, is the ability to measure the impact of these efforts.

“Otherwise how do you know that it’s all worth it?” Eric rhetorically asked his audience.

GPs that can calculate the “ROI” of newly implemented digital marketing efforts can set clearer performance targets for deal origination staff, monitor the effectiveness of one strategy over another, and present hard numbers when convincing leaders at the firm of its value during budgeting time. And it doesn’t take all that much effort either. During the webcast, Eric provided a few basic pointers to get started:

1. Create a baseline of your current deal flow

If you’re not already tracking your deal flow, start now. Most firms do, but the baseline should consider overall M&A activity across sectors to control for the cyclical nature of deal flow. The baseline should also consider both qualitative and quantitative factors. So not only number of deals seen in a given time period, but what percentage of those deals reached various stages in the investment process. A digital marketing strategy that results in a large percentage of deals that fail to pass a signed LOI, for instance, should be reevaluated.

2. Take the long view 

After creating your baseline, Eric urged patience. It takes “at minimum six months” for a sustained digital marketing campaign to pay dividends, he elaborated. “The fairer thing to do would be to give it a year.”

Soon after, the firm can then begin monitoring the quality and quantity of deal flow on a quarterly or annual basis. But if tracking quarterly deal flow trends based on, say, second round bids seems like an Excel sheet nightmare, fear not. Eric mentioned Navatar Private Equity as his way of capturing comprehensive, ongoing deal flow analytics at the click of a button. The system automatically generates deal trend analysis reports based on defined time periods and investment stages for evaluation purposes.

3. Measure interactions from beginning to end  

Fund professionals today can attend an industry conference, collect 25 business cards and then enter the names into a tool like Navatar Private Equity as part of a new email marketing campaign that tailors its message to an interesting theme or trend extracted from the event. Then, the firm can monitor who bothered clicking the email, and if a relationship develops, track the quality and number of deals the new contact generated years after that initial handshake. Using this integrated data, the firm can thus analyze not only the ‘ROI’ of the trade conference ticket, but the email marketing campaign attached to it as well.

4. Realize the limits of the process 

Still, there are limits to the exercise. Any marketing campaign invariably includes inherently non-quantifiable elements that nonetheless contribute to the success of an overall deal origination strategy. A smart blog post, for instance, can bring eyeballs to your website. But the associated increase in brand recognition is tough to capture in the data.

That said, firms have advanced leaps and bounds in not only embracing search engine optimization and online content strategy, but in understanding the gains and costs related as well. Happily, that makes marketing an increasingly digitized and easily measurable endeavor.

See below for a full replay of “Moving Beyond Coffee: Unlock Deal Flow with Digital Marketing.”