Sunday, November 17, 2019

Two Ways to Improve Your ROI Credibility


With the fourth quarter of 2019 well underway, many marketing leaders will have already started planning for 2020. In most cases, the planning process will include an analysis of how well marketing performed in 2019. and many marketing leaders will use return on investment (ROI) as the primary tool for conducting this assessment.

Over the past two-plus decades, ROI has become the "gold standard" for measuring marketing performance and for communicating the performance and value of marketing to senior company leaders. So you would think that, by now, marketing leaders would thoroughly understand what marketing ROI is, and how to calculate it correctly. Unfortunately, however, that is not always the case, as a recent survey conducted by LinkedIn Marketing Solutions makes clear.

The LinkedIn Research

The Long and Short of ROI report is based on a survey of 4,000 B2B and B2C marketing professionals from 19 countries. Survey respondents worked in a wide range of industry sectors, including technology, financial services, professional services, and manufacturing. The survey was conducted in June 2019.

Most of the results presented in the survey report refer to "digital marketers." Unfortunately, the report does not define who "digital marketers" are, nor does it indicate whether all of the survey respondents were "digital marketers." With that caveat in mind, here are the "headline" findings from the LinkedIn study:

  • 70% of digital marketers claim they are currently measuring ROI.
  • 77% of digital marketers measure ROI during the first month of a campaign, even though 55% of those marketers reported having a sales cycle that is at least three months long.
  • When most digital marketers say they are measuring ROI, they are actually measuring a variety of key performance indicators (KPIs), but not true ROI.
  • 63% of digital marketers don't have a high level of confidence in the "ROI" metrics they are currently using.
The LinkedIn survey report argues that marketers should (a) clearly distinguish between KPI-based metrics and ROI, and (b) measure ROI over the length of the sales cycle in order to obtain accurate results.
When You Say ROI . . .Mean ROI
The findings of the LinkedIn survey highlight two of the still all-too-prevalent ways that many marketers are misusing ROI. First, many marketers use "ROI" as a catch-all term to describe a wide variety of benefits produced by marketing activities. But return on investment is a specific financial metric that has a well-established meaning among management and financial professionals.
This means that none of the following constitutes ROI:
  • Increased brand awareness
  • Increased market share
  • Increased customer lifetime value
  • Increased average deal size
  • Improved conversion rates
  • Improved response rates
  • Improved NPS/customer satisfaction scores
For many companies, tracking some or all of these performance measures will be valuable, but they do not constitute marketing ROI. Calling any of these benefits "ROI" reflects a misunderstanding of what ROI is, and if a marketing leader presents one of these kinds of ROI calculations to a CEO or CFO, his or her credibility will be weakened.
Calculate ROI Correctly
The second way that many marketers misuse ROI is to calculate it incorrectly. The basic formula for marketing ROI (MROI) is:

MROI = (Gain from Marketing Investment - Cost of Marketing Investment) / Cost of Marketing Investment

So the basic MROI formula contains only three components:
  1. The financial gain from the marketing investment
  2. The cost of the marketing investment
  3. Time - Although the formula doesn't expressly contain a "time" value, MROI is always measured for a defined period of time.
While the basic MROI formula appears to be quite simple, that simplicity is deceptive. In reality, calculating MROI accurately can become a complex task because every component of the formula presents questions that require thoughtful answers and sound judgment calls.
I've addressed many of these issues in several previous posts, so I won't repeat that material here. However, I've provided links to my ROI-related posts below. If you're involved in calculating MROI, I encourage you to take a look at these posts and carefully consider the issues they discuss.

Image courtesy of Rick B via Flickr CC.

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Sunday, November 10, 2019

A Fresh Look at Millennial B2B Buyers


The role of millennials in B2B buying decisions, and their distinctive attitudes and behaviors as business buyers have become major topics of interest for B2B marketing and sales professionals over the past five years. Since 2014, numerous research studies - including studies by the IBM Institute for Business Value, Google/Millward Brown Digital, Merit, and Heinz Marketing/SnapApp - have focused specifically on this subject.

A few days ago, Demand Gen Report published the results of new research - conducted in partnership with The Mx Group - that provides a current take on the roles, perspectives, and preferences of millennial business buyers. The B2B Millennial Buyer Survey Report is based on a survey of "close to" 200 millennials - people born between 1981 and 1996 - working for B2B companies.

The Demand Gen survey results provide numerous specific insights about the attitudes and behaviors of millennial B2B buyers, but I suggest there are three key takeaways from this research.

Millennials Take Charge

Many millennials have risen to leadership positions and are now exercising significant authority in B2B purchase decisions. Fifty-six percent of the respondents in the Demand Gen survey held director-level positions or above, and another 42% held managerial positions. Twenty-one percent of the respondents were vice presidents or held C-suite positions.

Forty-four percent of the survey respondents indicated they are a primary decision maker at their company for purchases valued at $10,000 or more. Another one-third of the respondents reported being a key influencer and/or recommender.

Other research has confirmed the growing responsibility and authority of millennial B2B buyers. For example, in a 2015 survey of 1,469 employed millennials by Merit, 73% of the respondents said they were involved in B2B buying decisions, and approximately one-third (34%) of the respondents reported being the sole decision maker for their department

A Preference for Peer/Colleague/User Content

The millennial buyers surveyed by Demand Gen expressed a strong preference for learning about products or services from peers, colleagues, and other users. When the survey participants were asked what types of content were most helpful in their buying decisions, the top choice was user reviews (61% of respondents), and case studies came in third (34% of respondents).

When the survey participants were asked what resources they usually depend on when researching business purchase decisions, the top choice was review sites (49% of respondents).

The desire to learn from peers also influences how millennial buyers use social media. When asked what role social media plays in their process for researching potential purchases, a majority of the survey respondents said they browse existing discussions to learn more about their topic of interest (63%) or ask for suggestions and recommendations from other users (55%).

On this issue, it's clear that millennial B2B buyers aren't significantly different from other business buyers. Recent research has shown that buyers of all generations are now relying more on information from peers, colleagues, users, and other independent third parties. For example, in a 2019 survey of 712 business technology buyers by TrustRadius, participants were asked to rate the trustworthiness of fifteen sources of information used in buying decisions. Four of the seven most trusted sources involved independent third parties (peers, friends, or colleagues, users, analysts, and communities or forums).

The Challenges Haven't Changed (Much)

The Demand Gen survey also revealed that millennial B2B buyers face many of the same challenges that all business buyers confront. More than half (52%) of the survey respondents said there are too many people involved in buying decisions at their company, and nearly half (49%) complained that their buying group is often indecisive and misaligned.

The next three most frequently identified challenges were:
  • Difficulty getting budget allocated (39% of respondents)
  • Lack of trust from senior management/not taken seriously (38%)
  • Difficulty proving clear potential of ROI (28%)
While a lack of senior management trust may be a slightly bigger challenge for younger buyers, it's likely that B2B buyers of all generations would say they're affected by the challenges identified in this survey.

Image courtesy of Jeff Djevdet (www.speedpropertybuyers.co.uk) via Flicker CC.

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Sunday, November 3, 2019

Two Observations on the New CMI/MarketingProfs Content Marketing Survey


A few days ago, the Content Marketing Institute and MarketingProfs published the findings of their latest content marketing survey. The B2B Content Marketing 2020:  Benchmarks, Budgets, and Trends - North America report is based on 679 survey responses from content marketers and marketing executives with B2B companies in North America. All respondents were with companies that have been using content marketing for at least one year.

The annual CMI/MarketingProfs survey has become one of the most popular and widely-cited research studies in the content marketing world. The latest survey has already triggered several articles and blog posts, and I'm sure many more are now being written.

In many ways, the findings from the latest survey echo those in previous versions of the study. For example, they tell us that having a documented content marketing strategy is vital for success, and that top-performing content marketers prioritize the information needs of their audience over their company's promotional messages.

In this post, I'll focus on how some of the attributes of top-performing content marketers have changed since last year's survey, and I'll argue the latest survey shows that most small and mid-size companies should be outsourcing more of their content marketing activities.

Notable Changes in the Attributes of Top Performers

CMI and MarketingProfs provide survey data for both "most successful" and "least successful" content marketers. The survey defines "most successful" marketers as those respondents who characterized their company's content marketing effort as extremely successful or very successful at achieving the company's desired results. "Least successful" marketers are those respondents who described their content marketing program as minimally successful or not at all successful.

The survey report compares most successful to least successful content marketers across several attributes and practices, and as might be expected, there are substantial differences between the two groups. It's also useful to look at how the most successful marketers have evolved over the past year.

The following table depicts how the most successful marketers rated several attributes of their content marketing program in both the latest survey and in last year's survey:

















This table shows that in the latest survey, higher percentages of the most successful content marketers reported that their organization's content marketing is sophisticated and/or mature, that they have a documented content marketing strategy, and that they have successfully used content marketing to build loyalty with customers, nurture subscribers, audiences, or leads, and generate revenue.

Somewhat surprisingly, the share of the most successful marketers who said they measure content marketing ROI fell by five percentage points. This could be interpreted as a step backward, but I don't believe that's wholly accurate. I would argue that the change is more likely due to the recognition by sophisticated content marketers that the primary focus of marketing measurement should not be on content marketing per se. Here's my view on this topic.

Small and Mid-Size Companies Underutilize Outsourcing

In this year's survey, half of all respondents said they outsource at least one content marketing activity. However, the use of outsourcing varies greatly depending on company size, as the following chart shows:





















Only 37% of respondents from small companies (1-99 employees) said they outsource any content marketing activity, compared to 56% of respondents from mid-size companies (100-999 employees), and 71% of respondents from large companies (1,000+ employees).

These findings suggest that many small and mid-size companies are outsourcing less than they should to optimize their content marketing program. Other findings from the survey show that 44% of small company respondents have no employees working full time on content marketing, and another 29% have only one full time content marketer. More surprising, just over half (53%) of survey respondents from mid-size companies reported having no or only one full time employee dedicated to content marketing.

As the use of content marketing has continued to grow, the competition for buyer attention and mindshare has become more intense. One effect of this heightened competition is that a significant amount of high-quality content has become a prerequisite for content marketing success.

The survey data suggests that many small and mid-size companies aren't committing enough internal resources to create and sustain an effective content marketing program. Under these circumstances, outsourcing some aspects of content marketing - particularly content development - can be a smart and cost-effective way to close the gap.

Top image source:  Content Marketing Institute/MarketingProfs

Sunday, October 27, 2019

New Insights on the State of Marketing Technology


A recent survey by WARC and BDO (with interviews by the University of Bristol) provides more evidence that the role of technology in marketing is continuing to grow. Martech:  2020 and Beyond is based on a survey of more than 750 brands and agencies located in North America, the U.K., Europe, and APAC. The survey was fielded in June and July 2019.

The explosive proliferation of marketing technologies has been widely discussed and well documented. The inaugural (2011) edition of Scott Brinker's marketing technology landscape graphic included about 150 companies. The 2019 version of the graphic includes 7,040 technology solutions.

Market Size and Growth

WARC and BDO estimate that total spending on marketing technology in North America and the U.K. will reach $65.9 billion this year, up from $52.4 billion in 2018. This equates to a year-over-year growth rate of 25.8%. WARC and BDO had previously estimated that 2017 spending in these two markets was $34.3 billion. So, in North America and the U.K., the market for marketing technology has nearly doubled over the past two years.

The WARC/BDO study found that marketers' commitment to technology is still growing. On average companies in North America and the U.K. will spend 26% of their total marketing budget in 2019 on technology tools and services, compared to 23% of the budget in 2018. While spending on technology seems to have leveled off in the U.K., it's still growing robustly in North America, as the following table shows:











A slight majority (53%) of the global survey respondents expect their spending on marketing technology to remain stable over the 12 months following the survey. However, of those respondents who believe their technology spending will increase, 51% expect the growth to be more than 10%. Growth expectations among North American respondents were more temperate. Only 35% of those respondents expect spending increases of more than 10%.

Need and Utilization

Fifty-five percent of the global survey respondents said they have all the marketing technology tools they need, but the findings regarding technology utilization were decidedly mixed, as the following table shows:













As the table indicates, only 24% of the respondents reported that they have all the tools they need and fully utilize them, while 41% acknowledged that they aren't fully utilizing the technology tools they have.

Among respondents from North American companies:

  • Only 15% said they have all the technology tools they need and are fully utilizing them.
  • 57% said they don't have all the technology tools they need.
  • 45% said they aren't fully utilizing the technology tools they have.
Current Uses
In terms of how companies are using marketing technologies, more than half of the survey respondents reported using a technology tool to support each of the following marketing disciplines or activities:
  • Email (79% of respondents)
  • Social media (77%)
  • Content marketing and management (68%)
  • Customer relationship management (65%)
  • Analytics, measurement and insights (65%)
  • Mobile (60%)
  • Data management (60%)
  • Advertising technology (58%)
  • Commerce, lead generation and sales (53%)
Key Takeaways
The WARC/BDO survey provides two important takeaways for marketers. First, the marketing technology space is extremely dynamic. The number of technology solutions available to marketers is still increasing, although the pace of development may be slowing slightly. And second, it's likely that most marketers will always be challenged to keep up with the rapid pace of technological innovation.
Top image source:  WARC/BDO

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Sunday, October 20, 2019

Three Key Takeaways from Gartner's New CMO Spend Survey


Gartner has just published the results of its 2019-2020 CMO Spend Survey. The research report is based on survey responses from 342 marketing executives in North America and the U.K. at companies with $500 million to $5 billion or more in annual revenue.

The Gartner study produced several valuable data points, but I want to focus on three takeaways that I found particularly interesting.

Marketing Budget Growth

Gartner's survey indicates that marketing budgets will come in at 10.5% of company revenue in 2019, down from 11.2% in 2018. This agrees closely with the August 2019 edition of The CMO Survey, which found that current marketing budgets represent 9.8% of firm revenues.

However, most of the Gartner survey respondents were optimistic that their marketing budgets will increase in 2020, as the following table shows:










Gartner observed that this CMO optimism exists despite widespread concerns about a global economic slowdown among many economists and financial industry pundits. In fact, when survey participants were asked how the overall economic environment would likely affect their company's performance over the next 18-24 months, 86% of respondents indicated they believe the future impacts will be positive.

The above table also shows that marketing executives with B2B manufacturing companies are significantly less optimistic about future budget growth than other marketing leaders. In my view, this is likely due to the economic slowdown in manufacturing that is already occurring, and to the uncertainty surrounding Brexit in the U.K.

Martech Spending Falls

Gartner's study found that spending on marketing technology represents 26% of the total marketing budget in 2019, down from 29% in 2018. However, Gartner does not believe that this year-over-year decline indicates that marketing leaders are reducing their long-term commitment to technology.

In the research report, Gartner observed that spending on marketing technology has varied considerably over the years and that part of this variability is due to normal investment cycles. The report also referred to other Gartner research, which had found that some marketers are struggling to implement and fully utilize new technology tools.

I generally agree with Gartner's thinking on this issue. The explosive proliferation of marketing technologies is well documented. And with most technology tools, it takes time to assimilate a new technology and begin to fully utilize it. So, it's not surprising that technology spending is volatile, and we shouldn't read too much into a one-year decline.

The Rise of Marketing Operations

The third interesting takeaway from the Gartner CMO Spend Survey relates to the growing importance of marketing operations. The Gartner survey asked participants what capabilities they consider most vital for the execution of their marketing strategy over the next 18 months. The following table shows the percentage of respondents who included each capability in their top three choices:

























As the table shows, 30% of survey respondents included marketing operations as a top three capability. Survey respondents also estimated they they are currently spending 12.6% of their marketing budget on marketing operations. Other research by Gartner (the 2019 Marketing Organization Survey) found that two-thirds of marketing organizations now have a discrete marketing operations function.

Gartner argues that the growing complexity of marketing and a shift toward a more decentralized marketing organizational structure are driving the need for a marketing operations function that is focused on creating excellence in planning and execution across the entire marketing organization. Gartner also observed that the scope of the marketing operations function is growing, and now includes diverse responsibilities such as technology management, talent management, budgeting, and supplier management.

Top image source:  Gartner, Inc.

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Sunday, October 13, 2019

Where Marketers are Missing the Mark with Customers



The New York chapter of the American Marketing Association has just published a research report that should be required reading for marketers. The Techlash is Here report addresses several aspects of marketing in the world's two largest economies - the United States and China. While the findings about China are interesting, this post will focus on the U.S. results.

The U.S. part of the research consisted of two quantitative surveys and several interviews with marketing leaders. One survey included 502 marketing executives - about 200 from agencies and approximately 300 from brand owners. The second survey polled 508 U.S. consumers. The consumer sample was matched to population data through weighting.

This research revealed two significant disconnects between U.S. consumers and U.S. marketers, one pertaining to social media, and one relating to the appetite for, and concerns about, new marketing technologies and practices.

The Social Media Marketing Bubble

According to Investopedia, a bubble is "created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior." The AMA New York surveys suggest that a different kind of bubble may exist in the social media marketing space.

In the consumer survey, respondents said they expect their use of social media to decline over the next three years. The net change (the proportion of respondents expecting to spend more time on social media minus the proportion who expect to spend less time) was -6%. The survey also found that Facebook use is likely to show no net growth over the next three years, while the use of Twitter, Snapchat, and LinkedIn will decline over that period.

U.S. marketers, on the other hand, plan to substantially increase spending on social media advertising over the next three years. In the marketer survey, social media generated the strongest indication of increased spending (net 68%), followed by web display ads (net 51%) and email (net 47%).

Other research has found a similar exuberance for social media among marketers. In the August 2019 edition of The CMO Survey, respondents said they expect spending on social media to increase from 11.9% of their current marketing budget to 22.5% of the budget in five years.

The Techlash is Here report describes the emerging social media marketing bubble (my term, not theirs) as follows:

"American marketers are overindexing on many social media now and plan to increase spending even as consumer use flatlines or falls off. Currently, the share of ad spend devoted to social media in America . . . is 150% of the proportion of consumer media time they receive."

The Technology Disconnect

The AMA New York surveys also investigated the attitudes of U.S. marketers and consumers about nine specific marketing/advertising technologies and techniques. In this research, between two-fifths and three-fifths of U.S. marketers said they plan to increase their use of every one of those nine innovations, as the following table shows:


A striking disconnect between marketers and consumers becomes apparent when we look at the results of the consumer survey. As the table below shows, none of the nine technologies or techniques is viewed favorably by a majority of U.S. consumers. Four of the nine did receive a favorable plurality by survey respondents, but five of the nine technologies and techniques are viewed unfavorably by a plurality of U.S. consumers.



















Once again, the survey report describes the current situation in compelling terms:

"American marketers overrate the perceived positives of marketing innovations:  most expect that U.S. consumers will consistently welcome them . . . On average, nearly four out of five (78%) expect American consumers will agree with each benefit claim we tested. The proportion of marketers who say consumers will agree substantially exceeds that of consumers who do on every one of them - by an average of 27 points."

The Takeaway

The AMA New York research should serve as a wake-up call for marketers. It highlights the risks inherent in getting caught up in the hype that inevitably surrounds new marketing channels, techniques, and technologies. While this research dealt with important disconnects between marketers and consumers, many of the study findings will apply to B2B marketers and business buyers.

Marketers' exuberance for new technologies and techniques is often attributed to the fear-of-missing-out or the shiny object syndrome. This view is overly harsh, but it does contain some truth. FOMO can actually be a positive thing when it motivates us to experiment and test new tactics and tools. But if it isn't tightly controlled, FOMO can also result in bad - or at least ineffective - marketing investments.

The findings of the AMA New York research regarding personalization are particularly noteworthy. As I have previously written, marketers are facing a true conundrum regarding when and how much personalization should be used. In fact, I would argue that the personalization-privacy paradox will be an "elephant-in-the-room" issue for marketers in 2020. I'll have more to say about that in a future post.

Top image courtesy of Artura Pardavila III via Flickr CC.

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Sunday, October 6, 2019

When "Prove You Know Me" Personalization is Essential


A few months ago, I published a post arguing that marketers who want to improve the effectiveness of personalized marketing should focus primarily on making personalization pragmatically useful to recipients. This argument was based on the results of several research studies, including a 2018 survey by Gartner/CEB that polled more than 2,500 consumers in North America, Europe, and Asia-Pacific.

One objective of this study was to identify what types of personalized messages are most effective. Survey participants were asked several questions about the content of personalized messages they had recently received. From the participants' responses, Gartner/CEB identified two types of personalization based on what consumers perceived was the primary intent of the message:

  • "Prove You Know Me" Personalization - Consumers perceived that these types of messages were primarily intended to demonstrate that the company "knows" the recipient. So, for example, they may have explicitly mentioned a previous purchase made by the recipient, or they might have mentioned that the recipient had recently viewed a particular product.
  • "Help Me" Personalization - Consumers perceived that these types of messages were primarily intended to help the recipient in some way. For example, they may have made it easier for the recipient to complete a purchase, or helped the recipient understand how to better use a product.
To measure the comparative effectiveness of these types of persosnalization, Gartner/CEB created a "Commercial Benefit Index" that considered four consumer intent and behavior factors - brand intent, purchase, repurchase, and increase in shopping cart size. When Gartner/CEB analyzed the impact produced by each type of personalization, they found that "Help Me" personalization produced a 16% increase in the CBI, while "Prove You Know Me" personalization resulted in a 4% decline in the CBI.

Where "Prove You Know Me" Personalization Really Helps
As any good lawyer will tell you, "There's an exception to every rule." The evidence is clear that "helpfulness" is the most powerful driver of effective personalization. But there are some points in your relationship with a customer or prospect where demonstrating that you "know" him or her can be critical to advancing the relationship.
One of these points is when you are seeking to have the first person-to-person conversation with a prospect. Many prospects prefer to conduct early-stage research and information gathering on their own, and to avoid conversations with vendor reps until later in their decision-making process. Overcoming this reluctance is difficult, and that's where an injection of "Prove You Know Me" personalization can be highly effective.
To illustrate this point, below is the text of an email message that I recently received from a client development representative at a sales technology company. I received this message after attending one of the company's webinars. I've altered the text to conceal the real names of the company and the rep.

"David,
Thanks for attending our webinar with Jones & Company, "The Secret Sauce for a High-Performing Sales Organization."
Hopefully, you enjoyed the webinar - John and Joe had some great insights on . . .
  • The current state and challenges of sales enablement in the age of the modern business buyer
  • Why a buyer-centric sales enablement approach is vital to an organization's revenue growth
  • How the right software can accelerate sales enablement efforts and help win more deals
Would love to get your feedback from the webinar.
Are you available this Friday for a quick 15 minute chat?
Best,
Roger Smith"

On the surface, this appears to be a well-constructed email. It's concise and not overly promotional. But it didn't convince me to reply and schedule a telephone conversation. What "Roger" failed to do in this message is show me that he knew some basic things about me and my business, and explain why a telephone conversation could be worthwhile.
If "Roger" had spent two or three minutes scanning through my LinkedIn profile, he would have gained a basic understanding of what I do. My profile also contains links to the 127 articles that I've published at LinkedIn. If "Roger" had spent another two of three minutes scanning through the titles of these articles, he could have obtained a pretty good understanding of my professional interests and focus.
With this information, "Roger" could have easily added a short paragraph to the email that would have made me more inclined to schedule a telephone conversation. That paragraph could have looked something like this:
"I see from your LinkedIn profile that you work with B2B companies to develop marketing strategies and marketing content. I also noticed that you've written several articles about improving marketing and sales productivity. I'd like to get your thoughts about the role that sales enablement technology plays in improving sales productivity.
Are you available this Friday for a brief telephone conversation?"
This approach would have demonstrated that "Roger" had made an effort to "get to know" me and my business, and the proposed topic of the telephone conversation is one that could be useful for both "Roger" and me.
Some readers may be thinking:  "There's no way we can have our business development reps spend this much time on every prospect." That's not what I'm recommending. This approach is reserved for prospects whose engagement with your company suggests that they may be ready to take the relationship to a higher level by beginning to have person-to-person conversations with your reps.

Image courtesy of Marco Verch (trendingtopics) via Flickr CC.

Sunday, September 29, 2019

Why It's So Hard for Companies to Change


In 2013, Scott Brinker, Hubspot's VP Platform Ecosystem, and the author of the widely-read Chief Marketing Technologist blog, published a post that introduced Martec's Law. In essence, Martec's Law states that technology changes at an exponential (very fast) rate, but organizations change at a logarithmic (much slower) rate. (See Scott's graph below.)
















The rapid development of marketing technology is well documented. The 2014 edition of Scott's marketing technology landscape supergraphic contained 947 technology providers. The 2019 edition of the supergraphic contained more than 7,000 technology solutions.

Scott argued that the core problem encapsulated by Martec's Law is that "technology is changing faster than organizations can absorb change." And it's clear that this problem extends far beyond marketing.

Over the past few years, digital transformation - which can be defined as the use of digital technologies to create new, or reengineer existing, processes, culture, and customer experience - has become an important strategic objective objective for many companies. However, the evidence indicates that most digital transformation initiatives have not succeeded.

In recent research by McKinsey & Company, only 16% of survey respondents said their organizations' digital transformations have successfully improved performance and also equipped them to sustain changes over the long term.

So why is change so hard? Hundreds of books and articles have attempted to explain why change is difficult for most organizations, and what business leaders can do to create a greater willingness and capacity to change. While many of these books and articles have contained valuable advice, it seems clear that no one has really identified the "silver bullet" that will consistently boost the capacity for change.

Clayton Christensen has developed a framework that can help us understand why organizational change is difficult. Christensen described this framework in an article in the Harvard Business Review (co-authored with Michael Overdorf), and elaborated on it in The Innovator's Solution (co-authored with Michael Raynor). Christensen developed this framework to help business leaders succeed at disruptive innovation, but it is equally useful for identifying the factors that determine how effectively a company can make any significant, far-reaching change.

According to Christensen, the ability of an organization to succeed with any significant transformation depends on three types of capabilities - resources, processes, and values.

Resources - Resources include people and tangible business assets such as cash, facilities, equipment, and technology solutions. Resources can also include intangible assets like intellectual property and relationships with suppliers and customers.

Processes - Processes are the activities that organizations perform to transform resource inputs into finished products or services.

Values - Values include the ethical principles that an organization "lives by," but the term has a broader meaning in this framework. It also includes the criteria or standards that people in the organization use to set priorities and make decisions. Therefore, values include the myriad of (mostly unwritten) cultural rules and norms that influence how people in the organization think and act.

Resources, processes, and values largely dictate what an organization can and cannot accomplish. And they both enable and constrain an organization's capacity for change.

To understand why organizational change is difficult, it's critical to keep two points in mind about resources, processes, and values. First, any significant change or transformation will require changes in all three organizational capabilities. In other words, any successful transformation will likely require the organization to find or develop new resources (or redeploy existing resources), develop new processes (or reengineer existing processes), and modify its values.

The second important point is that the three organizational capabilities are not equally easy to change. Resources are usually the most flexible capability and are relatively easy to change. Processes are usually less flexible than resources and are therefore somewhat more difficult to change.

Clearly though, the most difficult capability to change is values. Values are difficult to change because they tend to develop slowly and over time, they become deeply ingrained in an organization's cultural DNA. When change initiatives don't succeed, it's most likely because company leaders have underestimated (a) the need to change core company values, or (b) how difficult those changes are to make.

Christensen's RPV framework doesn't make organizational change easier to accomplish, but it can help business leaders, including those in marketing, to identify where the greatest barriers to change are likely to exist.

Top image courtesy of R/DV/RS via Flickr CC.

Sunday, September 22, 2019

The Power and Peril of Performance Metrics


Measuring performance has been a major feature of the business landscape ever since double entry accounting made its appearance in the 14th or 15th century. "You can't manage what you can't measure" is one of the most widely-repeated cliches in the business world, and it's been an article of faith for several generations of executives and managers.

It's easy to understand why business leaders view performance measurement as critical for effective management. Metrics give us a way to make sense of our environment and to describe our objectives and results in concrete terms that are easy to understand and communicate.

The fixation on performance measurement has affected virtually all business functions, including marketing. For the past several years, marketers have faced growing pressure to prove the financial impact of their activities and programs. As a result, they're placing greater emphasis on measuring the performance of marketing tactics and channels, and some marketing leaders are allocating budgets and basing marketing mix decisions on performance metrics.

Overall, this has been a positive development. It's hard to argue that business leaders, including marketers, shouldn't measure the performance of their activities and use metrics to guide important decisions. But, it's also important to remember that performance metrics must be used carefully because they can produce unintended consequences. These unintended consequences can result from several factors, but two are particularly important.

The Power of Performance Metrics

The first important thing to remember about performance metrics is that they have the power to shape human behavior. Almost a decade ago, Dan Ariely, the noted behavioral economist and author of Predictably Irrational, described the power of performance measures in a column for the Harvard Business Review. He wrote:

"Human beings adjust behavior based on the metrics they're held against. Anything you measure will impel a person to optimize his score on that metric. What you measure is what you'll get. Period. This phenomenon plays out time and again in research studies."

So the power of performance measurements to cause us to change our behaviors is reason enough to use them with care.

The Surrogation Problem

Another factor that makes performance metrics potentially dangerous is a psychological phenomenon known as surrogation. Surrogation is the human tendency to lose sight of the real objective or strategy and instead focus only (or almost entirely) on the metrics that are meant to represent the objective or strategy. In other words, we have a strong tendency to decide (often subconsciously) that scoring well on the metric is the desired objective or strategy.

The process of surrogation is easy to illustrate. Suppose that one of your company's important objectives is to provide outstanding customer experiences, and you decide to measure progress on that objective using a customer survey. The surveys are conducted periodically, and the results are shared with customer-facing employees and frequently discussed at management and staff meetings.

Under these circumstances, some employees may begin to think that the objective is to maximize scores on the customer survey, rather than to deliver outstanding customer experiences. This can become a serious problem if those managers or employees begin to entice customers to give only high scores on the survey even if they weren't completely happy with their experience.

Surrogation is likely to occur when three conditions exist:

  1. The actual objective or strategy is complex and relatively abstract.
  2. The metric is concrete and easy to understand.
  3. The person involved does not consciously reject the substitution of the metric for the actual objective or strategy.
In an article appearing in the current issue of the Harvard Business Review, Michael Harris and Bill Tayler describe three ways to reduce the odds of surrogation occurring:
  1. Make sure the actual objective or strategy is thoroughly understood by all relevant managers and employees. Involve as many of these people as possible in the formulation of the objective or strategy.
  2. Avoid linking compensation to metrics. Research has shown that tying compensation to metrics increases the likelihood that surrogation will occur.
  3. Use multiple metrics. Surrogation is less likely to occur if multiple metrics are used to measure the success of a strategy or the attainment of an objective.
As noted earlier, measuring the performance of marketing quantitatively has now become a common practice, and overall, this is a positive development. But marketing leaders must recognize that like any business tool, performance metrics need to be used carefully and wisely.

Image courtesy of James Whatley via Flickr CC.

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Sunday, September 15, 2019

B2B Highlights From the August CMO Survey


The findings of the August edition of The CMO Survey by Duke University's Fuqua School of Business, the American Marketing Association, and Deloitte were published a few days ago. The latest results are based on responses from 341 marketing leaders at U.S. B2B and B2C companies. Sixty-four percent of the respondents were affiliated with B2B companies, and 95% were VP-level or above.

The CMO Survey is conducted semi-annually, and it's a valuable resource for capturing the views of U.S. marketing leaders about the overall economic and competitive environment, and about major trends in marketing. In addition to overall results, survey findings are reported by four economic sectors - B2B product companies, B2B services companies, B2C product companies, and B2C services companies.

In this post, I'll review a few of the major findings in the August 2019 edition of the survey. Unless otherwise indicated, the results discussed in this post are based exclusively on the responses of B2B marketers.

Marketing Spending

On average, marketing expenses amount to 9.8% of total company revenues across all survey respondents, up from 7.3% in the August 2018 survey. The percentages were slightly lower for B2B companies - 8.6% for B2B product companies, and 8.7% for B2B services companies.

Survey respondents were optimistic about the growth of marketing budgets in the near-term future. On average, respondents from B2B product companies expect their marketing budgets to increase by 7.1% in the next 12 months. For B2B services companies, the average expected increase is 10.1%.

Paid Media Spending Allocation

The survey asked participants to indicate how their spending on paid media is allocated across seven specific channels and a "Paid Other" category. The following table shows the mean allocation for respondents from B2B product companies and B2B services companies:
















What stands out to me in these findings is the size of the "Paid Other" category. B2B product companies are devoting nearly 40% of their total paid media spending to the "other" category, while B2B services companies are devoting nearly half of their spending to that category. According to the survey report, when participants were asked to clarify which "Paid Other" media they meant, the respondents most frequently identified trade shows, sponsorships, and direct mail.

Social Media Marketing

One of the more fascinating topics addressed by The CMO Survey is social media marketing. For the past several years, survey respondents have been consistently predicting that their spending on social media marketing will increase substantially. In the latest survey, respondents from B2B product companies predicted that their social media spending will more than double in five years. Respondents from B2B services companies predicted a spending increase of about 83% in five years.

Survey respondents have also consistently said that the use of social media is not making a significant contribution to company performance. The survey has been asking participants to rate the contribution of social media marketing on a seven-point scale, where 1=not at all, and 7=very highly.

In the latest survey, the mean overall score was only 3.3, and that score has remained almost unchanged since 2016. Among respondents from B2B product companies, the mean score was just 3.05, and for respondents from B2B services companies, the mean score was 3.48.

On the face of it, these results don't seem to be logical. Why would marketing leaders substantially increase spending on an activity that is not making a significant contribution to company performance?

One possibility is that actual spending on social media marketing has not increased as rapidly as survey respondents were forecasting. An analysis in an earlier edition of the survey indicates that this has been true in the recent past, and I think it's likely still true today. Therefore, I would argue that spending on social media marketing will not increase as rapidly or by as much as respondents in the August survey have predicted.

Top image source:  The CMO Survey (www.cmosurvey.org).

Sunday, September 8, 2019

How to Address the Marketing Measurement Paradox


One of the marketing thought leaders I pay close attention to is Mark Schaefer. Mark is the author of several highly-regarded books and the principal author of the widely-read {grow} blog.

Last month, Mark published a blog post arguing that today's marketers are working in a world dominated by malignant complexity. Mark wrote that malignant complexity means "that the insane complications and unintended consequences of rapid technological change makes it difficult to understand our world, let alone predict what's next."

In the future, Mark wrote, the most successful marketers will have to relax their expectations for "predictable outcomes and reliable measures." He summed up his view this way:

"In an age of malignant complexity and unrelenting change, some aspects of marketing measurement will become a leap of faith. In some cases, the speed of business will outstrip our ability to forecast and measure. Perhaps non-measured, speed-driven marketing management will become the norm, a best practice."

Mark's post is sure to raise the eyebrows of many marketing leaders because the conventional wisdom in the marketing community is that measuring the performance of marketing is now more achievable than ever. But then, Mark has always been willing to tell us when he believes "the emperor has no clothes." If you need proof of that, go back and read his 2014 blog post about "content shock."

Expressions of the conventional wisdom are easy to find. For example, I took the following quotation from the website of a major provider of marketing technologies:

"Building analytics into your marketing strategy empowers your marketing and sales teams by giving you the ability to measure the impact of each marketing investment. Data enables marketers to confidently identify which parts of the marketing efforts deliver the optimal return on investment (ROI), including the performance of channels, specific calls-to-action (CTAs), and individual pieces of content, such as blog posts or gated resource guides."

A more skeptical view is captured in the following quotation from a recent article published at the Harvard Business Review website:

"Marketing's environment is typically much 'noisier' that the factory floor in terms of unknown, unpredictable, and uncontrollable factors confounding precise measurement. Marketing activities can also be subject to systems effects where the portfolio of marketing tactics work together to create an outcome . . . Marketing actions may also work over multiple time frames . . . Finally, it is often difficult to attribute financial outcomes solely to marketing, because businesses frequently take actions across functions that can drive results."

Which of these views is correct? The answer is, both are accurate, at least in part. Some aspects of marketing performance are more measurable now than ever, largely because of the explosion of available data about customers and the expanding capabilities of marketing and analytics technologies. At the same time, however, measuring the impact of marketing on business financial outcomes is just as difficult and challenging today as ever.

So how should marketing leaders deal with the measurement challenge? The first step is to accept the measurement paradox part of the reality of marketing. F. Scott Fitzgerald once said, "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function."

Marketing leaders must also effectively communicate the realities of marketing to other senior business leaders. This means the senior marketing leader needs to have evidence-based conversations with other senior executives about what aspects of marketing can be measured precisely, and what aspects will always require the use of assumptions, correlations, and probabilities.

These discussions will help establish reasonable expectations for marketing measurement and simultaneously enhance the credibility of the marketing leader in the C-suite.

Illustration courtesy of Zeev Barkan via Flickr CC.

Sunday, September 1, 2019

Think Beyond Surveys for More Effective Research


In my last post, I discussed some of the major findings from the State of Original Research for Marketing 2019 survey by Mantis Research and BuzzSumo. This research found that a substantial number of companies have made original research an integral part of their marketing efforts.

Sixty-one percent of the survey respondents who had conducted research reported that it had met or exceeded their expectations, and 88% said they plan to conduct additional research in the next 12 months.

I also argued in my post that for most large and mid-size B2B companies, and for many smaller B2B firms, original research has now become essential for effective marketing. The shorthand version of my argument is this:

  • Effective B2B marketing requires the development and use of real thought leadership content.
  • Real thought leadership content must be both novel and authoritative.
  • The only way to consistently develop novel and authoritative content is by conducting original research.
Original Research is More Than Surveys
When most marketers think about original research, surveys are usually the first thing that comes to mind. In the Mantis Research/BuzzSumo study, surveys were the type of research most frequently used by respondents for marketing purposes.

Surveys are popular because they can provide compelling data and because they have become easier and less expensive to use. Several firms now offer free or inexpensive tools for conducting surveys. (Note:  If you need advice on selecting a survey tool, check out this excellent blog post by Clare McDermott with Mantis Research.)
It's important to recognize, however, that original research encompasses more than quantitative surveys, and that other methods of original research can also be highly effective in the right circumstances. The following diagram shows the major categories of original research and the research methods that fall in each category:






















As the diagram shows, there are two major categories of original research - secondary and primary. Secondary research involves the review and analysis of data or research that has been published by others. This includes data published by governmental entities,  and data and/or research published within academia and by other private organizations (consulting firms, research firms, other business organizations, etc.).
Primary research, on the other hand, is research that you conduct yourself (or hire someone to conduct for you). It involves going directly to a source to gather or compile information. The diagram shows several of the most common methods or types of primary research. In addition to surveys, three of these methods can be particularly powerful when used in the right circumstances.
Interviews
Interviews can be used on a stand-alone basis or in conjunction with other primary research methods. The major advantage of interviews is that they enable the use of open-ended questions and therefore can produce more in-depth and nuanced answers.
When used on a stand-alone basis, the interviewees essentially take the place of the survey panel. In my experience, however, one of the best ways to use interviews is as a preliminary step in a research project that will ultimately include a survey. In this case, the interviews are used to identify what topics may be important to potential survey participants, and to help determine how to formulate survey questions.
Analysis of Proprietary Data
This method involves the analysis of data that is proprietary to your company. For example, if your company provides some type of SaaS software application, this research method could be used to compile and analyze data regarding how your customers are using the application. A good example of research featuring this method is the 2019 State of B2B Content Consumption and Demand Report for Marketers produced by NetLine Corporation.
Experiments or Tests
This research method is widely used in social sciences such as psychology and behavioral economics. When you conduct an experiment, you expose participants to alternative versions of a hypothetical situation, and then ask them a set of questions regarding their experience. The objective is usually to measure differences in certain aspects of the alternatives. A field test is similar to an experiment except that the alternatives are presented in a real-world setting. An "A/B test" is a good example of a type of field test used frequently in marketing.
Corporate Visions is a company that uses experiments and tests fairly extensively. For example, the firm has used this research method to test the effectiveness of various levels of personalization and to evaluate what types of sales/marketing messaging is most effective at persuading business executives to move forward with a purchase.
Expand Your Research Palette
Don't misunderstand my point here. Surveys will always be an important and valuable method for conducting primary research. But diversifying the research methods you use can have several benefits. Each research method has strengths and weaknesses, and each excels at eliciting certain kinds of information. By using a variety of research methods, you can consistently produce thought leadership content that is novel, authoritative, and compelling. And that, in turn, will make your marketing more effective.

Top image courtesy of versionz via Flickr CC.

Sunday, August 25, 2019

Effective B2B Marketing Demands Original Research


A few days ago, Mantis Research and BuzzSumo published the results of their latest survey regarding the use of original research in marketing. The State of Original Research for Marketing 2019 survey was fielded in May and June of this year and produced 644 responses from global marketers. Forty-seven percent of the respondents were from the United States, and 70% were affiliated with B2B companies.

Both Michele Linn with Mantis Research and Chris McCormick with BuzzSumo have written excellent summaries of the research results. You can find Michele's summary here and Chris' summary here. If you're a B2B marketer, I encourage you to read both of these articles, and even better, take the time to review the full survey report.

In the 2019 survey, 39% of the respondents said they had published the results of original research within the 12 months preceding the survey. The comparable percentage in the 2018 version of the survey was 47%. Chris McCormick believes this drop is primarily due to a shift in the demographics of the survey pool rather than a decline in research use, and I tend to agree with his view.

The survey also found that users of original research for marketing are generally satisfied with its performance. Sixty-one percent of the respondents who had conducted research reported that it had met or exceeded their expectations, and 88% said they plan to conduct additional research in the next 12 months.

So overall, this study indicates that a substantial number of companies have made original research an integral part of their marketing efforts.

The use of original research in marketing is not a new phenomenon. However, I would argue that for most large and mid-size B2B companies, and for many smaller B2B firms, original research has now become essential for effective marketing. Here's why.

Effective B2B Marketing Requires Real Thought Leadership Content

For most B2B companies, effective marketing now requires the development of compelling thought leadership content. Numerous research studies have confirmed that business buyers highly value thought leadership content, and that it impacts B2B purchase decisions at every stage of the buying process.

For example, in a 2018 survey of 1,201 business decision makers by Edelman and LinkedIn:

  • 58% of respondents said they spend one hour or more per week consuming thought leadership content
  • 55% said thought leadership content is a important way to vet potential suppliers
  • 58% said good thought leadership content caused them to award business to a company
  • 61% of C-level respondents said good thought leadership content made them more willing to pay a premium to work with a company
Real Thought Leadership Content Must Be Novel and Authoritative
The explosive proliferation of content over the past several years had made it difficult for marketers to create content that will cut through the noise. Thought leadership content can do just that, but only if the constitutes "real" thought leadership. There are two attributes that define real thought leadership and distinguish it from other types of marketing content.
Real thought leadership is novel - Real thought leadership content provides information and insights that are genuinely novel. Merriam-Webster defines novel as "new and not resembling something formerly known or used." Therefore, to qualify as real thought leadership, content must provide information or insight that adds something new and meaningful to the body of knowledge about a topic.
Real thought leadership is authoritative - It's important for all types of marketing content to be credible, but thought leadership content must meet a higher standard. Because thought leadership content advocates new and novel ideas, it's essential for content developers to support those ideas with sound and persuasive evidence.
Real Thought Leadership Content Requires Original Research
The only way to consistently develop novel and authoritative content is by conducting original research. Original research actually plays two central roles in the development of real thought leadership content. First, original research is required to capture the new information and develop the new insights that make thought leadership content novel. And second, original research is critical for thought leadership content because it provides the evidence that makes the content authoritative.

So the bottom line is, effective B2B marketing requires compelling thought leadership content, and original research is the only viable source for such content.

Image courtesy of Vall d'Hebron Institut de Recerca VHIR via Flickr CC.

Sunday, August 18, 2019

Expert Advice on How to Communicate Marketing's Value


In the February 2019 edition of The CMO Survey, senior marketing leaders were asked what marketing leadership activities they find most challenging. The top challenge identified - by a wide margin - was demonstrating the impact of marketing activities on financial outcomes to other senior company leaders.

Measuring the performance and financial impact of marketing has been a persistent challenge for marketing leaders. In the 2019 Marketing Measurement & Attribution Benchmark Survey by Demand Gen Report, 58% of surveyed marketers said their ability to measure and analyze marketing performance and impact needs improvement or is poor/inadequate. The comparable percentage was 54% in the 2018 edition of the survey, and 49% in the 2017 survey.

Last month, an article published at the Harvard Business Review website described concrete steps that marketing leaders can take to improve their ability to demonstrate the value of marketing. "8 Ways Marketers Can Show Their Work's Financial Results" was written by Paul Magill, Christine Moorman, and Nikita Avdiushko.

Paul Magill is a Managing Director with Deloitte Consulting and the former CMO for Abbott. Dr. Moorman is the T. Austin Finch, Sr. Professor of Business Administration at Duke University's Fuqua School of Business and the Director of The CMO Survey. Nikita Avdiushko is a recent MBA graduate from Duke.

Eight Steps for Demonstrating Value

This article provides valuable advice for marketing leaders, and I would like to see the authors address this vital topic in a longer, more in-depth version of the article. In the meantime, here's a very abbreviated version of the eight steps described in the already brief article.

1.  Start with business value - "Marketing leaders should frame their impact broadly, to include all the ways marketing benefits the organization."

2.  Understand what business value means to each function - "Marketing leaders should translate the definitions of their value creation for the different [business] functions they interact with."

3.  Know your own metrics - Most marketing leaders have a set of KPIs they use to demonstrate impact on financial outcomes, and it's critical to be thoroughly knowledgeable about them."

4.  Explain the inherent uncertainties of marketing measurements - "Deep knowledge of the metrics can build your credibility when you're discussing them with other executives, but it helps to explain marketing's inherent uncertainties."

5.  Emphasize validity over precision - "CMOs should emphasize that their metrics are valid when evaluating whether marketing activities are working as expected, and that the inherent imprecision in measuring marketing's financial outcomes does not undermine their validity."

6.  Have a budget strategy - "Provide visibility on total spend, show how spend is aligned with business strategies and key priorities, and demonstrate how working spend has been optimized and non-working spend streamlined."

7.  Have a marketing transformation story - "Further credibility can come from demonstrating ongoing improvements in marketing effectiveness and efficiency."

8.  Meet one-on-one - "Marketing leaders usually attend monthly meetings of the senior management team . . . Our observations suggest these are often poor environments for demonstrating the impact of marketing on the bottom line . . . That work should happen one-on-one, with the CMO investing considerable time in educating their functional counterparts about these points above."

First Among Equals

All eight of these steps are important, but I suggest that Steps 4 and 5 stand out as "firsts among equals."

Over the past two-plus decades, various technologies have significantly enhanced our ability to track and measure some aspects of marketing performance. Today, for example, most forms of digital marketing are highly "trackable." We can know who has opened our emails and who has viewed our content. We can even know how much time was spent with our content.

In addition, technology is now enabling marketers to develop and use more comprehensive revenue attribution models that leverage the strengths of both marketing mix modeling and multi-touch attribution.

But as the authors of the HBR article observed, marketing involves "unknown, unpredictable, and uncontrollable factors confounding precise measurement." Unfortunately, much of the hype surrounding marketing performance measurement makes the job seem to be easier and capable of more precision than is actually the case.

So it's important for marketing leaders to have open and frank discussions with other C-suite executives about what aspects of marketing performance can be measured precisely, and what aspects inherently require the use of assumptions, correlations, and probabilities. Such discussions will help set reasonable expectations regarding marketing performance measurement and ultimately enhance the credibility of marketing leaders in the C-suite.

Illustration courtesy of GotCredit via Flickr CC.

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