Sunday, April 23, 2017

What the Subscription Economy Means for B2B Marketers


One of the most profound business developments of the past few years has been the proliferation of companies using subscription-based business models. Of course, subscription-based businesses aren't new. We've been subscribing to newspapers and magazines for decades. What is new is that more and more kinds of goods are being repackaged as services and sold on a subscription basis.

The rapidly growing number of companies that offer "software-as-a-service" is probably the most prominent example of this phenomenon. Software applications that were once sold for a fixed price and distributed via CD's or Internet downloads are now sold on a subscription basis and accessed and used via the cloud. Think Salesforce, Office 365, and B2B marketing automation solutions. The media industry has also been disrupted by companies using subscription-based business models. Think Spotify and Netflix.

What really makes the subscription economy a profound business development is the range of products that can be sold on a subscription basis. GE offers a subscription model for its jet engines. Caterpillar is said to be moving toward selling metric tons of earth moved rather than earth moving equipment. I (and you) can "subscribe" to razors (Dollar Shave Club), groceries (Blue Apron), and even automobiles (Zipcar).

The subscription economy appears to be growing rapidly, and many subscription-based businesses are performing well. A recent study by MGI Research suggests that the subscription economy could exceed $100 billion by 2020. And a recent analysis by Zuora (a provider of software for subscription-based businesses) found that since the beginning of 2012, the sales of subscription-based businesses are growing nine times faster that sales of companies in the S & P 500, and more than four times the rate of US retail sales (including e-commerce).

So, what does the shift to subscription-based business mean for B2B marketers? First and foremost, it means that marketers should focus more of their time and attention on customer retention and growth.

In a subscription-based business, most of the economic value of a customer is realized in installments, over time, rather than when the initial "sale" is made. Because of customer acquisition costs, new customers are invariably unprofitable, and they will not become profitable until they have been "subscribers" for some period of time. So in essence, customer profitability depends directly on the length of the customer relationship, as the following diagram shows.
















Most marketers will acknowledge the importance of customer retention and growth, but most companies are still focused primarily on customer acquisition. In a 2016 global survey of more than 1,000 marketers by Econsultancy in association with IBM Watson Marketing, respondents said that, on average, 55% of their revenues are delivered by customer acquisition activities, and 45% are achieved through customer retention activities.

Delivering great experiences to existing customers is obviously critical for companies that have subscription-based business models because of the dynamics of customer profitability. But the same pattern of customer profitability is also found in many kinds of companies that don't use a true subscription model.

In many types of companies, for example, the first sale to a customer will not be sufficient to make that customer profitable because of the marketing and sales costs that must be incurred to acquire the customer. Most of the profits will result from the customer's subsequent purchases of additional or ancillary products. Epson may have earned some profit when I purchased a new printer about a year ago, but they've almost certainly realized significantly more profits from the multiple ink purchases I've made over the past year.

These dynamics of customer profitability mean that marketers in virtually all kinds of B2B companies should be more focused on nurturing relationships with existing customers.

Top image courtesy of Rob Enslin via Flickr CC.


Sunday, April 16, 2017

B2B Buyers Are Still Skeptical About Vendor Content


A recent research report by TrustRadius paints a rather sobering picture of the effectiveness of B2B content marketing. The B2B Buying Disconnect is based on the results of two surveys. One was a survey of 418 individuals who played a key role in a significant software purchase during the previous two years, and the second was a survey of 190 individuals who worked for software vendors in a marketing or sales leadership capacity.

Although the TrustRadius study focused exclusively on technology buyers and sellers, the results would almost certainly be similar in other cases involving complex B2B products or services.

In the buyer survey, TrustRadius asked participants to select which sources of information they used during their purchasing process from a list of 12 options. Then survey participants rated each information source in terms of helpfulness and trustworthiness. The table below depicts where each source of information ranked across these three dimensions.























There are three primary takeaways from these rankings.

Buyers prefer resources that provide direct experience with the product or service - Survey respondents ranked product demos and free trials as very helpful and very trustworthy.

Buyers value information from third parties - Respondents described referrals from friends, colleagues, or peers as very helpful and very trustworthy. Buyers also ranked user reviews and customer references as very helpful, and they rated conversations with analysts and recommendations by solution consultants as highly trustworthy.

Except for product demos, buyers place little value on most types of vendor-provided information - Survey respondents rated vendor sales reps and sales presentations fairly high in terms of helpfulness, but low in terms of trustworthiness. Respondents ranked vendor or product websites and vendor collateral (e.g. ebooks, case studies, webinars) as the least helpful and least trustworthy sources of information.

These research findings should be a wake-up call for B2B marketers. In the 2017 edition of the B2B content marketing survey by the Content Marketing Institute and MarketingProfs, only 34% of B2B marketers rated their content marketing strategy as extremely or very effective. The comparable percentage was 30% in 2016 and 38% in 2015. The buyer attitudes captured in the TrustRadius study explain (at least in part) why only a minority of companies are achieving a high level of success with content marketing.

As marketers, we need to expect and accept that many potential buyers will view our content with a skeptical eye. To overcome this skepticism, we need to "go the extra mile" to create content that is objective and non-promotional, and most importantly, content that delivers real value to our potential buyers.

Top image courtesy of Terry Johnston via Flickr CC.

Sunday, April 9, 2017

How to Weaken the Grip of the Status Quo


Astute marketing and sales professionals have long understood that their toughest competitor is usually the status quo. In most cases, no sale can be made unless prospects are first willing to consider changing their current methods and practices. Given the importance of the issue, it shouldn't be surprising that many marketing and sales experts have proposed several techniques for "breaking the grip of the status quo."

Recent research by several firms has shown that what business buyers are really looking for is fresh insights about the issues or challenges they are facing and about how to improve their business. Therefore, compelling insights can be an effective mechanism for loosening the grip of the status quo and creating a willingness to consider change.

So, what qualifies as insight, and what distinguishes it from other kinds of information that is used in marketing and sales messaging? CEB defines insight as information that disrupts a prospect's level of comfort with the status quo. Like thought leadership, compelling insights are credible and relevant, and they teach prospects something new. But in addition, insights simultaneously reveal - either directly or implicitly - the disadvantages and/or shortcomings of the prospect's status quo. The objective is to cause the prospect to feel a sense of urgency to act.

Developing insights that will resonate with potential buyers is not an easy task. It requires an in-depth understanding of your prospect's business and of the important developments or trends that are affecting or will impact his or her business.

But what makes developing insights really difficult is the need to bring a unique perspective to these underlying facts and circumstances. If your marketing messages and sales conversations make the same points that your competitors are making, you aren't really providing the kinds of insights that will prompt your prospects to act or differentiate your company from the competition.

One fertile source of effective insights is what Corporate Visions calls unconsidered needs. Corporate Visions identifies three basic types of unconsidered needs:

  1. Unknown needs exist when there is a problem, challenge, or opportunity that a potential buyer is unaware of.
  2. Unmet needs exist when a potential buyer is aware of a problem or challenge, but believes that there's no way to effectively address the problem or challenge. In other words, the buyer believes that the problem is just a "fact of life" that he or she must live with.
  3. Under-valued needs exist when a potential buyer is aware of a problem, challenge, or opportunity, but doesn't understand or appreciate its importance or how quickly its impact will be felt.
Insights can be developed around unconsidered needs in several ways:
  • They can describe the causes and effects of a previously unrecognized problem.
  • They can describe a new or innovative solution for a "fact of life" problem or challenge.
  • They can make the full ramifications and timing of a known issue or problem visible.
The status quo is a powerful competitor, and no technique will win with every potential buyer. But providing insights that disrupt a prospect's comfort with the status quo will give you the best chance to trigger a willingness to consider change.

Illustration courtesy of R/DV/RS via Flickr CC.

Sunday, April 2, 2017

The Attributes of Winning Thought Leadership Content


Two recent studies provide several important insights regarding the role and importance of thought leadership content in the marketing mix. Thought leadership content is often the primary means of creating the initial engagement with a potential buyer. Therefore, it plays a critical role in the marketing efforts of many B2B companies.

The Economist Group Study

Thought leadership disrupted:  New rules for the content age by The Economist Group was based on a survey (conducted in association with Hill+Knowlton Strategies) of 1,644 global marketing and business executives. This survey included both marketers (those who plan, develop, or manage thought leadership content) and executives (those who consume thought leadership content). The results discussed below are based on the responses of executives.

More than two-thirds (68%) of surveyed executives said they consume thought leadership content at least weekly, and almost as many (63%) said they had increased their consumption over the 12 months prior to the survey. However, 75% of executives also said they had become more selective in their content consumption over the preceding 12-24 months, and the executives reported that, on average, they engage with only about 25% of the thought leadership content they see every day.

When executives were asked why they consume thought leadership content, the top three reasons chosen were to encounter thoughts that go beyond current thinking (42%), to identify new business opportunities (34%), and to address existing business problems (28%).

When they were asked what qualities made thought leadership content compelling, the most popular attributes identified were innovative (40%), big picture (36%), transformative (36%), and credible (35%). In contrast, the adjectives most frequently associated with poor thought leadership content were superficial (34%), sales-driven (31%), and biased (28%).

The Grist Study

Last year, Grist, a B2B content marketing agency based in London, commissioned a study to better understand the views of business executives regarding thought leadership content. The Value of B2B Thought Leadership Survey was based on interviews of more than 200 senior executives at FTSE 350 companies.

When surveyed executives were asked why they consume thought leadership content, the three most frequently chosen reasons were to keep me informed of emerging trends (66%), to enable me to make better business decisions (60%), and to help me understand best practices (52%). When they were asked what qualities were most valuable in thought leadership content, the three most favored attributes were fresh thinking (46%), forward-thinking (30%), and evidence-led (29%).

The interviewers also asked participants what caused thought leadership content to fail. The top three attributes identified by executives were too generic - not directly relevant to me (63%), lack of original insight or ideas (58%), and promoting the advisor, rather than addressing my problems (53%).

The Grist study also sought to obtain data regarding the impact of thought leadership content. Surveyed executives said they consume 31% of the thought leadership content they encounter and that 28% of the content they come across has an impact on their decision-making.

The Takeaway

The results of these two studies provide important pointers for marketers who use thought leadership content in their marketing efforts. They demonstrate that effective thought leadership content must be objective and authoritative, and most importantly, it must provide unique and in-depth insights for the target audience.

Illustration courtesy of Abhijit Bhadurl via Flickr CC.

Sunday, March 26, 2017

Multiple Studies Reveal the Growing Adoption of ABM


Unless you've been very out of touch for the past couple of years, you're well aware that account-based marketing has become one of the hottest topics in the B2B marketing world. The hype surrounding ABM has been almost deafening, and based on the hype, it would be easy to conclude that ABM has already been widely adopted by B2B companies.

It does appear that a growing number of companies have implemented (or are at least piloting/testing) account-based marketing, so I thought it would be worthwhile to share the results of several recent research studies that provide insights regarding ABM adoption.

The 2017 Marketing Benchmark Report - North America by Marketo was based on the results of a Q4 2016 survey of contacts within the Marketo customer base (which includes both B2B and B2C companies). The survey produced 1,363 responses. Although the report doesn't provide detailed demographics for the respondents, it's likely that most were marketing leaders or practitioners. In this survey, 34% of the respondents said they were practicing ABM. Marketo also found that the ABM adoption rate was similar for companies of all sizes.

The 2017 State of B2B Digital Marketing Report by DemandWave was based on a survey of B2B marketers in the United States that was conducted in November and December of 2016. The survey produced 179 responses. In this survey, 37% of the respondents said they had tried or were currently using ABM.

In the 2016 ABM Benchmark Survey by Demand Gen Report, 23% of survey respondents said they had been using ABM "for some time," and another 24% said they had "recently launched" an ABM strategy. Demand Gen Report did not provide a description of the survey methodology or demographics for the survey respondents.

The 2016 State of Account Based Marketing (ABM) Study by SiriusDecisions provides some indirect evidence regarding ABM adoption. This study was based on a survey of 200+ B2B companies. In this research, 71% of respondents said they had staff that is fully or partially dedicated to ABM.

Collectively, these studies indicate that account-based marketing has made significant inroads among B2B companies. It's important to remember, however, that none of these surveys used a random sample of all B2B companies. I suspect that the overall ABM adoption rate is somewhat lower than these studies report. That doesn't mean that the shift to ABM isn't real. It just means that the adoption of ABM is still in its early stages.

Illustration courtesy of ccPixs.com via Flickr CC.

Sunday, March 19, 2017

Have We Really Improved Marketing Productivity?


The recent pace of change in B2B marketing has been nothing short of breathtaking. Over the past 10-15 years, new marketing technologies, channels, and techniques have appeared in rapid succession, and many of these innovations are now in widespread use. B2B marketing automation, content marketing, inbound marketing, and social media marketing are just of few of the technologies and techniques that have changed B2B marketing over the past decade or so.

By all indications, the pace of change is not slowing. During the past couple of years, many B2B companies have adopted account-based marketing, and many have begun using predictive marketing analytics technologies to support ABM and other marketing efforts. And just within the past few months, we've started to hear that machine learning and artificial intelligence will have a major impact on B2B marketing in the near future.

All of these innovations have promised to improve marketing effectiveness and efficiency, and numerous research studies purport to show that they are delivering a wide range of benefits. But have these innovations really improved the bottom-line productivity of B2B marketing? Can we show - in a credible and convincing way - that B2B marketing is more financially productive today than it was 10 or 15 years ago?

Obviously, these questions must be answered on a company-by-company basis. Some B2B marketers may be able to show that their marketing efforts have become significantly more productive over the past several years. But there is evidence suggesting that some aspects of B2B marketing performance haven't improved as much as we might have anticipated.

One indicator of B2B marketing and sales productivity is the efficiency of the demand generation process. Efficiency is usually measured by the percentage of potential buyers or leads who are "converting" from one lead stage to the next.

Many B2B companies use the Demand Waterfall model developed by SiriusDecisions to describe the stages of the lead-to-revenue process, and from time to time, SiriusDecisions publishes "average" and "best-in-class" conversion rates that link to the Demand Waterfall. The following table shows the conversion rates reported by SiriusDecisions for 2008 and 2014:

















What is most striking about this data is that it indicates there was essentially no improvement in conversion rates - particularly the overall lead-to-revenue conversion rate - between 2008 and 2014.

The 2008 conversion rates largely reflect marketing productivity before many of the marketing innovations mentioned above had become widely adopted. But research has shown that by 2014, a significant number of companies were using these technologies and techniques.

Of course, lead conversion rates aren't the only relevant measure of marketing productivity, and there may be a reasonable explanation for the lack of improvement shown in the SiriusDecisions data. For example, the 2014 conversion rates would not have captured the impact of the shift to account-based marketing that's occurred over the past couple of years. Nevertheless, this data should be a wake-up call for B2B marketers.

Senior company leaders are increasingly expecting marketers to demonstrate that their activities and programs are creating economic value for the enterprise and improving enterprise financial performance. Many senior leaders are no longer satisfied with the tactical performance indicators (campaign response rates, content downloads, etc.) that marketers have traditionally used to describe marketing performance. What senior business leaders really want to see is proof that marketing is delivering financial results and that the dollars they are investing in marketing are being spent as efficiently as possible.

The important point here is that the value of any marketing technology or method must ultimately be judged by whether its use improves marketing productivity. So that's what marketers must be prepared to demonstrate.

Top image courtesy of Kelly Teague via Flickr CC.

Sunday, March 12, 2017

ABM Success Requires "Unnatural" Teamwork


One of the most formidable challenges related to account-based marketing is the need to build and sustain a high level of teamwork among business functions that have historically operated more or less independently. ABM obviously requires a tight alignment between marketing and sales. And when ABM is used to expand relationships with existing customers, the need for alignment will also extend to the customer service/customer success function of a company.

Some ABM experts now speak in terms of account-based everything to make the point that ABM actually encompasses far more than marketing.

Unfortunately, some company leaders don't fully appreciate how much and what kind of teamwork is required for ABM success. For example, most ABM thought leaders and practitioners agree that marketing and sales should jointly:

This level of collaboration is necessary to create a solid foundation for a successful ABM program, but it's really just the starting point. To reap the maximum benefits from ABM, marketing and sales must jointly develop an engagement plan for each target account. This account plan will usually span several weeks to several months, and will likely include marketing and sales activities that must be closely coordinated to produce maximum results. 

In addition, marketing and sales must be ready to make on-the-fly adjustments to their account plan based on actual buyer responses and changing business conditions at each account.

Therefore, successful ABM requires marketing and sales (and in some cases customer service) to work collaboratively on an ongoing basis. This level of coordination is challenging for many companies because it represents a major change in how they have traditionally managed sales leads.

In many B2B companies, the demand generation process involves a series of "hand-offs" from one business function to another. For example, marketing passes leads to business/sales development, which passes leads on to sales. The metaphor often used is a relay race in which each member of the relay team runs for a specified distance and then passes the baton to the next runner. This approach makes it relatively easy to manage demand generation within traditional organizational structures.

The relay race approach has never been the optimum way to manage demand generation, and it won't be effective in an ABM program. To address this challenge, some companies create cross-functional account teams to manage and coordinate the activities relating to their ABM accounts. To use a sports analogy, an ABM account team functions more like a basketball team than a 4 x 100 meter relay team. In an ABM account team, every team member is involved (in one way or another) throughout the entire game, and their roles change on a fluid basis.

The important point here is that successful ABM requires an exceptional level of cross-functional teamwork that isn't "natural" for many companies. Some ABM pundits contend that account-based marketing will create better alignment between marketing and sales, but this just isn't so.

The decision to adopt ABM can be the catalyst for creating better marketing-sales alignment, but ABM won't cause such alignment to magically appear. It's more accurate to say that good alignment between marketing and sales is a necessary prerequisite for successful ABM. Therefore, company leaders must be prepared to create and implement the structures, processes, and culture that are required to make the necessary teamwork a reality.

Illustration courtesy of Katlene Niven via Flickr CC.