Sunday, April 23, 2017
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
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
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:
- Unknown needs exist when there is a problem, challenge, or opportunity that a potential buyer is unaware of.
- 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.
- 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
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 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.