Which Part of YouR Marketing is Helping Your Business the Most?
Tough question, isn’t it? At a Director-level or higher overseeing the marketing functions of your organization, it’s a critical question you must ask. You are the steward of the company’s marketing budget and the captain of the vessel responsible for getting your products and services into the market. Therefore, it is incumbent upon you to understand how effective your teams’ effort is at serving the company’s goals. But where to begin?
The Data Never Lies
When you analyze year-over-year budgets and actual marketing spend, you will begin to understand which activities are heaviest on the pocketbook. This is a good place to start. What did you do differently and what remained consistent? This gives you some indication of how many channels your team may have used throughout the year to promote your products and services.
If your organization has several product lines, business units or service offerings, it would be wise to do a tally of how much of the budget was spent related to each group. You’ll gain a clear understanding of how well you supported the products or services from an investment standpoint, and you can quickly see if the cash outlay was aligned to that year’s business strategy.
What you won’t find in a budget analysis is how effective the spend was at reaching your business goals. For example, you may have invested heavily in advertising of a new product and achieved 10 new clients with a trackable revenue stream of $x million attributed to this particular tactic. How do you know if you over or under spent if you don’t do further analysis to determine the effectiveness. Tracking effectiveness is a process that should be established before the budget is ever set. What does that mean?
Business Goals Drive Marketing Activities and Therefore Budget
Many companies set their marketing budgets by a percent increase or decrease over the previous year. While it certainly is efficient, it might not be the most effective. What I’ve found is that in most cases this sets the stage for stagnation and ‘doing what we’ve always done’ kind of marketing. You can better estimate the required budget if you start with the business goal and build out a tactical plan to support the goal. The beauty of working the process backward is that you make marketing an ROI machine instead of a production house.
Using the below hypothetical example, it works like this.
Say Hello to Business Unit A
Business Unit A is releasing a new product and they would like marketing support for the release. Seems like a reasonable request. What typically happens next is everyone talks about the marketing tactics: brochures, web pages, events, ads, etc. If this describes what happens in your organization, STOP! Do not fall into the trap of tactical thinking; instead align yourself with strategic marketing. What you should ask Business Unit A is:
How will you measure the effectiveness of your sales and marketing effort? This single question sets the tone for the follow-on questions and places the marketing initiative into the context of achieving a business goal. It will also give you a frame of reference by which to determine the appropriate tactics and engagement plans. In addition, it places the responsibility on sales and marketing to work together collaboratively to meet the objective. The answer to this question gives you a better idea of what kind of program will be required and how long you should anticipate managing the effort.
For example:
“We want 10% of existing clients to upgrade to the new product in the hopes of generating $X million in revenue,” is a very different objective than, “We want to bring in 10 new clients that generate $X million in Customer Lifetime Value (CLV).”
The marketing journey at various phases of the sales cycle will be quite different as will the duration of the program depending on the objective. Both of the above objectives require some understanding of the time frame necessary to meet the goal, but the second objective will have long term implications because CLV is cultivated over years whereas upgrades are more of a transactional measurement.
Understanding the business goals will help you further define the Key Performance Indicators (KPIs) needed to support the objective. KPIs such as number of new leads, number of product demos, cost per acquisition, sales cycle duration, Marketing Qualified Leads (MQLs) conversion rate, etc. will help you set individual targets for both the sales and marketing effort.
These next questions are components of the above initial question that will help you dive into greater detail with the stakeholders of Business Unit A.
A. Is the product/service a replacement to something existing in our portfolio? If so, this indicates that you will likely be doing an upgrade program and will predominantly communicate to your install base. You will also need to consider End of Life messaging for the incumbent product, and will want to reassure your install base that this change will minimally disrupt their operations (if at all). If the product is not a replacement, you definitely need the answer to the next question.
B. Does the product/service serve your existing market or a new market? This is an important question because new market development requires more marketing and sales effort. You have to earn credibility and, as the new kid in town, awareness building will be important. For example, if you have traditionally marketed your product in upstream E&P to geologists working in North America, and now want to expand your messaging to target the same audience in Russia, the marketing effort would likely need to reflect a combination of brand building and demand generation activities. You might need to create a new line of messaging and positioning to address the specific challenges of the region.
C. Who is the target audience and what is the best way to engage them? The answers to these questions will guide you to some of the first tactics to consider for the program. You can also use this question to check for consistency in the answer you received to question B. Armed with this information, you will have a much better understanding of the resource requirements.
D. Who is responsible for meeting the business goals? This is an interesting question because the answer is inevitably everyone. However, everyone cannot ultimately approve the messaging, positioning, tactics and expense, so you need one person that is fully engaged and committed as the “go/no-go, buck stops here” stakeholder. This person must be made aware of roadblocks, progress and overall health of the program throughout the duration of the marketing campaign. All too often, I see marketers that are engaged by stakeholders that lack authority only for the effort to fall on deaf ears when the decision-maker is unaware or has not sanctioned the budget for the program. It can save a lot of time and resources if the marketer knows the program is sponsored by a champion with budget and authority..
E. What is the budget allocated to help meet the objective? This question goes hand-in-hand with question D, but it’s worth highlighting as a separate investigative inquiry. There is nothing more frustrating to a marketer than to research and brainstorm a variety of options for a well-thought out program only to be told there is no budget for the initiative. To avoid this altogether and to establish realistic expectations among the entire collaborative team, you need to know how much money you can spend.
The component questions above are intended to be conversational in style, and are ultimately designed to get the right discussion started. All too often, product specialists and sales teams initiate discussions with marketing that begin as, “We need an XYZ marketing tactic.” It’s the job of the marketer to request more detailed information to ensure the tactic will deliver what the stakeholder is anticipating.
This next question (and sub-question) isn’t necessarily related to ROI as much as it is about aligning the functional operations to meet the business goal and evaluating the current processes. One could argue that a CMO or Director of Marketing should be asking this question irrespective of Business Unit A’s request, however I have found more often than not that is rarely discussed, particularly in oil and gas service companies where most functional departments operate in silos.
What is the current link between marketing demand generation and sales operations? Does it support or detract from the business objective? Many marketers fail to ask this question and it’s a critical part of budgeting. If the expectation is that marketing will be responsible for some internal sales activities, you need to budget appropriately for the effort. For example, I’ve worked with a few companies that hire outside agencies to help with cold-calling. Sometimes this is considered a sales expense, but sometimes it falls under the marketing outreach budget. A clear understanding of where marketing ends and sales begins helps with accountability, and ensures you are not solely thinking about tactics in your budget allocation, but also the resource requirements on human capital and technology. In addition, this question helps the stakeholders consider if the current business processes are appropriate, and guides the review of how best to track the actions and behaviors required to achieve the KPIs and ultimately the business goal.
So What’s Next?
With the information from these questions, and no doubt more as you will have had a very fruitful discussion with the business unit, you can now begin building a marketing program. Your program should reiterate the business goals and should reflect the input of Sales and Product Management so there is clear accountability (and ownership) to support the tactical plan. When you’ve identified what tactics you are willing to implement, you can do a summary budget per tactic. This gives you a rough estimate of how much of your larger annual budget will be allocated toward the effort.
After you’ve identified your tactics, you should prioritize them. How important is each tactic to achieving the business goal and what kind of return can you assign to the tactic to measure its effectiveness? This important step should be done together with Sales. It will give both teams a foundation for measuring the results of the tactic after deployment.
For example, if you decide to run a LinkedIn ad campaign and you budget $15,000, you would need to decide what statistics will be tracked to gauge whether the campaign is working. You could look at website traffic referred from LinkedIn, cost per click, number of new contacts with a particular title, number of leads that advanced in the marketing or sales pipeline, or any number of combinations of attributes. The point is that you have a goal in mind before you begin the tactic, you’ve aligned it with a specific KPI, and you have an action plan for what happens after the tactic has been launched.
Marketing dollars are valuable. It’s why placing the goal in advance of the tactic is so critical in the planning process. Lots of companies look at the marketing budget first when times get tough. But if you can demonstrate with data and facts how marketing is responsible for achieving the business goal, it becomes a lot easier to defend the expense. It also helps the company rethink the role of marketing when times are tough.
Every tactic in your program should have a set of desired outcomes and next steps clearly identified and documented so you can routinely monitor how well the tactic is delivering on your expectations.
But What About Brand Builders?
Sometimes it’s just necessary to be seen and heard. Mass communication activities such as print advertising, tradeshows, article submissions, abstracts and presentations, etc. are part of the marketing arsenal. While most of these events and activities are strictly for brand building and can be rather difficult to measure, there are still ways to assess their effectiveness.
In particular, if your organization or product stakeholders come to you with the complaint, “No one knows who we are,” you can do a brand survey to understand the sentiment and benchmark your year-over-year brand evolution. The key point is that you start with some understanding of where you are today, so you can test the impact of your brand building activities.
In other cases, for example article submissions, you can obtain reprints in PDF format, and utilize them in nurture stream, social media or as a website marketing as an asset. The beauty of using them in electronic communications is that you can test variations of messaging to see if your target audience finds the article relevant based on clicks, downloads, likes and shares. The same can be said of technical papers, abstracts and presentations. These thought-leadership pieces are a great way of demonstrating expertise and sharing knowledge with your community. While arguably your brand will benefit from the initial exposure, you will gain much greater value from the reuse if you also do some simple A|B tests to help optimize ROI on other tactics. Content strategists often talk about the power of reusing material in multiple external communication vehicles, but don’t forget to leverage these pieces for inbound marketing purposes as well.
I’m often asked about tradeshows and their overall value. This is a bit of a tough question because sometimes they are quite helpful in new market development or for boosting brand awareness. They can also be used alongside other tactics in a more integrated method to support personal engagement or guerilla marketing. However they are tremendously expensive in terms of both human capital and cash outlays. The question I encourage people to ask is whether or not they know a sale was directly related to exhibiting at a show, or would they have made the sale anyway? You might find you would have just as much impact with greater reach and possibly better results by reallocating the budget to support a variety of other tactics. This is not to say you can’t take advantage of the occasion of the tradeshow to do marketing. Perhaps consider hosting an event, workshop or whisper suite in lieu of renting a booth. If your company has been in business for decades, your brand is probably already highly recognizable and your core clients are likely getting regular calls from your sales team. Do you really need to spend $100k+ on exhibiting at a tradeshow?
Print advertising is also quite difficult to measure. With most publishers offering an online version of their magazine, it’s getting harder and harder to maintain readership and loyalty. I would suggest using print advertising strategically for product launches, new market development, and for new brands and rebrands that are critical to the long term objectives of the organization. If you opt to do print advertising, consider using the initiative to test and validate your messaging with a focus group, or maybe run a poll through social media with the ads. You can also do a before and after brand survey to see if the advertising effort helped improve recognition.
Lastly, you should include a unique call-to-action with an accompanying marketing reference webpage where you can track the number of visitors to the site based on that specific referral, and don’t forget to keep the message and look & feel of the ad consistent with your other tactics.
Overall brand building activities can be quite powerful under the right business goal, however exercise caution when adding them into your program and really scrutinize if they are the best use of your resources. You should also look for every opportunity possible to extend their value by repurposing the effort to support inbound marketing objectives as well.
Closing Thoughts
The number one reason you want to work your budget backward from the bottom up is to be able to assign targets and goals to the expense.
- When you know what’s working, you can invest more heavily.
- When you see something isn’t reaching your expected goals, you can fine-tune the messaging, placement, or other variables to optimize the outcome.
- If you still find it to be ineffective, you can quickly abandon the activity and reallocate the budget.
Although this article is focused largely on monitoring the individual tactics as micro-goals, you still need to do a consolidated roll-up on the entire program by evaluating whether the KPIs were met. This is the best way to truly understand how well the marketing effort is supporting the macro business goal, and offers the greatest insight into ROI. To do this requires regular communication between Sales, Marketing and Product Management so the team can systematically modify the program, and can make evidence-based decisions on what to do next.
What if you are surpassing every KPI and still not meeting your overall business objective? Is this a positive or negative marketing ROI? How would you know what variables to test if you don’t have a well-defined methodology and a framework established in the beginning? A lot of finger-pointing and internal mayhem ensues when targets are missed, but with an ROI-centric marketing program, you have much greater control over how to proceed.
Lastly, data-driven marketing is a great way to support the company and maintain job security. People that provide irrefutable proof as to their team’s effectiveness are an asset.