Tuesday, August 3, 2010

Increased Profits, Not Higher Sales, Determine Marketing ROI

Return on marketing investment has become a hot topic as marketers seek to prove the value of their activities and programs and strive to bolster their credibility in the C-suite.  Today, marketers are using ROI for everything from justifying marketing budgets to measuring the performance of individual campaigns.

Given its increased use and popularity, you would think that the process for calculating marketing ROI is now well understood.  Unfortunately, I still see far too many examples of marketing ROI that has been calculated incorrectly - in many cases by people who should know better.

One of the most common errors is the use of increased revenues (sales) rather than increased profits when calculating marketing ROI.  To illustrate this error, take a look at the following table.  I based this table on an example ROI calculation that appears on the Website of a well-known national provider of direct mail services.  I won't name the company because they are only one of many companies that use this methodology.

In this example, Return On Investment (ROI) was calculated by dividing Total revenue ($1,250) by Total cost of the mailing ($550), resulting in an ROI for the mailing of 227%.

That ROI number looks fantastic, but the problem is, it's flat out wrong.  Way wrong.

The basic formula for calculating ROI is:

ROI = (Gain from Investment-Cost of Investment) / Cost of Investment

For ROI purposes, Gain from Investment is the incremental gross profit (gross sales/revenues less cost of goods sold) produced by a marketing campaign or program.  Using incremental sales or revenues in the ROI calculation distorts ROI because most marketing campaigns are designed to increase sales volume.  And increases in sales volume are not free - there are always costs associated with producing and delivering the additional products or services.  Therefore, incremental gross profit is the real meaure of the "gain" produced by most marketing investments.

So, the first problem with the methodology used in the example is that it bases ROI on incremental revenues rather than on incremental gross profits.  If the cost of goods sold of the products covered by the example is 50% of the products' selling price, the incremental gross profit produced by the direct mail program would be $625 (total revenue of $1,250 X 50%).  Using incremental gross profit causes the ROI to drop from 227% to just under 114% ($625 / $550).  That's a more accurate ROI calculation than the one used in the original example, and it's still an impressive number, but it's also still wrong.

To calculate marketing ROI correctly, you must subtract the cost of the marketing investment from the incremental gross profit produced by the investment and then divide by the cost of the investment.

So, the real ROI produced by the example direct mail project would be calculated as follows:

ROI = (Incremental Gross Profit-Total Cost of the Mailing) / Total Cost of the Mailing
ROI = ($625 - $550) / $550
ROI = $75 / $550
ROI = 14%

It should be clear from this discussion that inaccurate calculations of marketing ROI can lead to unprofitable marketing decisions and can also undermine marketers' credibility with senior company leaders.  Would you want to tell your CEO that a marketing campaign has an ROI of 227% when the real ROI is 14%?  The moral of the story:  If you're going to calculate ROI, it's wise to calculate it correctly.

Have you seen instances where inaccurate calculations of marketing ROI have led to flawed marketing decisions?

Wednesday, July 28, 2010

How MSP's Can Take Advantage of B2B Marketing Automation - Part 1

The use of marketing automation technologies by B2B companies is growing rapidly, and the growth is likely to continue for the foreseeable future.  Marketing service providers who serve B2B companies need to be aware of this trend because it changes the way B2B companies approach marketing and the kinds of marketing services they will require - and be willing to pay for.  To fully realize the benefits of marketing automation, B2B companies will need to define marketing and sales processes more precisely, and they will need to implement new marketing techniques. Marketing service providers who can help B2B companies make these changes stand to win new clients and boost revenues.

The best way to identify the kinds of marketing services that are likely to see increased demand is to identify the tasks that B2B companies must perform in order to take full advantage of marketing automation systems. There are eight major tasks that are essential to implementing and successfully using marketing automation technologies. Most of these tasks provide the foundation for new marketing techniques that many B2B companies have not previously used. Therefore, many B2B firms – especially small and mid-size companies – will need assistance to perform some or all of these tasks, and that’s what creates the opportunity for savvy marketing service providers. I’ll describe two of these major tasks in this post, and I’ll cover the others in my next few posts.

Creating an Ideal Customer Profile – This task is right out of Marketing 101, and it should be a core component of every company’s marketing process, whether or not marketing automation is involved. An ideal customer profile is simply a description of the kinds of companies that make the best customers and, by extension, the most attractive prospects. The ideal customer is usually described in terms of “firmographics” such as industry classification, company size, and geographic location. The ideal customer profile is used to shape lead generation programs, and it is one major component of the lead scoring system that will be set up as part of the marketing automation implementation.

Obviously, a marketing service provider cannot decide what a client’s ideal customer profile should be. The role of the MSP is to lead the client through a process that is designed to ensure that all the right questions are asked and that all the appropriate factors are considered.

Developing Buyer Personas – Most B2B buying decisions are made (or significantly influenced) by a group of people rather than by one individual. This is true even in relatively small companies. Research firm MarketingSherpa says that in companies having between 100 and 500 employees, the average number of people involved in buying decisions is 6.8. This buying group is usually composed of individuals who have different points of view regarding a proposed purchase. For example, a “user buyer” will usually have different priorities than a “technical buyer” or an “economic buyer.” To market to these buyers effectively, a company must develop marketing content that addresses the specific needs of each type of buyer in the buying group. The basis for developing such content is buyer personas.

A buyer persona is a biographical sketch of a typical buyer. It is more than a job title. Buyer personas are written in narrative form, and they are written as if the archetypical buyer is a real human being. A company needs to create a persona for each type of buyer who significantly influences the purchase decision. Marketing automation systems enable companies to create and execute marketing programs that are customized for each type of buyer, but the starting point for leveraging this functionality is the creation of buyer personas.

To develop a complete buyer persona, marketers must answer several questions about each type of buyer. Here are some examples:

•What are the buyer’s major business objectives and job responsibilities?
•What strategies and tactics does the buyer use to achieve his objectives and fulfill his responsibilities?
•What measures are used to evaluate the buyer’s job performance?
•What issues and problems keep the buyer awake a night?
•How old is the typical buyer? [Age range is OK]
•Is the buyer typically male or female?
•What is the typical buyer’s educational background?
•What sources does the buyer turn to for information?
•How would the buyer describe the issues he or she is facing?

As with the ideal customer profile, an MSP cannot build buyer personas “for” a client, but the MSP can lead the client through the process of developing buyer personas that will drive relevant and effective marketing.

In my next post, I’ll cover two more tasks relating to marketing automation that MSP’s can help B2B marketers perform.

Wednesday, June 23, 2010

For More Accurate Marketing ROI, Think Incrementally

Return on investment (ROI) is a financial measure that managers use to guide major investment decisions.  For example, suppose that you are considering a business expansion opportunity that will require the purchase of new machinery and certain other investments.  To evaluate this potential expansion, you would discount all of the future profits and expenses related to the expansion and calculate a net present value for the expansion opportunity.  Then, you would use those net present values to compare the gain from the expansion investment with the cost of the expansion investment and calculate the projected ROI of the expansion project.

When we use ROI to evaluate prospective marketing investments, we need to adapt the traditional ROI analysis process a little, primarily because unlike most major capital investments, marketing investments can often be made in relatively small increments.  In other words, marketing investments are often not simple "go-no go" decisions.  In many cases, the more difficult questions relate to the size and scope of a potential marketing campaign or program.  How long should the campaign run?  How many prospects should be targeted, and how many times should they be contacted?

For example, suppose that you are considering a direct mail campaign to generate new sales leads for your B2B company.  You have identified three mailing lists that you could use in this campaign.  Each of these lists contains 1,500 names.  The first list (List 1) is a "house" list that includes prospects that your company has had some previous contact with.  Therefore, you believe that List 1 contains the best prospects and will probably produce the most new customers.  List 2 and List 3 are both outside lists that you can purchase, and based on past experience, you believe that List 2 will be more productive than List 3.  The question is:  Should your campaign target only the prospects in List 1, or those in List 1 and List 2, or those in all three lists.

The table below shows the estimated costs and the projected results of all three alternative versions of the campaign.  The top portion of the table shows the overall ROI calculations.  The lower portion of the table shows the incremental results as you move from the first option to the second and from the second to the third.

For this example, let's assume that your company requires that all proposed marketing investments show a projected ROI of at least 15 percent.

If you look at the overall ROI calculations shown above, you would probably recommend including all three mailing lists in the direct mail campaign.  Even though the projected ROI of 57.5 percent is lower than the other two options, it still far exceeds your company's ROI threshold of 15 percent.  The three-list option also generates the highest projected total return ($15,750) and the highest projected net return ($5,750).

However, if you look at the incremental analysis, you see a different story.  Here, you see that if you include List 3 in the campaign (as opposed to only List 1 and List 2), your company will incur $2,500 of additional costs, and you will increase your net return by $250.  This means that the incremental ROI generated by including List 3 in the campaign is only 10 percent.  Since this falls below your company's ROI threshold, you would probably recommend against including List 3 in the campaign.

This example illustrates how the incremental approach to analyzing marketing ROI can lead to more profitable marketing decisions by measuring the incremental value of each incremental investment.

Tuesday, June 15, 2010

Analyzing the ROI Formula - Part 3

This post concludes my discussion of the individual components of the formula used to calculate the return on investment (ROI) of marketing activities and programs.

The basic ROI formula is:

ROI = (Gain from Investment-Cost of Investment) / Cost of Investment

In earlier posts, I've discussed the Gain from Investment and the Cost of Investment components of the ROI formula.  Although it's not explicitly included in the formula, time is the third component of the calculation.

ROI is always measured over a specified period of time.  The goal is to select a time period that will enable you to capture an accurate view of the stream of profits and expenses that are attributable to a marketing investment.  A time period that is too short will cause the ROI to be understated, and this may cause you to not go forward with proposed marketing programs (or eliminate existing programs) that produce significant value over the long term.  If the time period used is too long, the accuracy of the ROI calculation may be diminished because of the uncertainty that is inevitably involved in forecasting profits and expenses for distant time periods.

When specifying the time period to be used in an ROI calculation, marketers need to focus on several issues.
  • Over what period of time will the marketing campaign or program have an impact?  The time period used does not need to extend past the point where most (85%-90%) of the value and costs are captured.
  • How much uncertainty exists regarding future value and expenses?  If the degree of uncertainty increases substantially over time, marketers should use a time period that permits reasonably accurate forecasts.
  • What are the company's profit priorities?  Some companies rely on short-term cash flows to remain viable.  Such companies are naturally more interested in marketing programs that produce short-term results and, therefore, are more interested in short-term ROI.
To illustrate some of the issues that surround the selection of the correct time period for measuring ROI, let's look at two different situations.

Suppose that you are a retailer and you decide to send your existing customers a direct mail piece that includes a discount coupon.  Customers must present the coupon in order to receive the discount.  From past experience, you know that 95% of the coupons that are redeemed will be used within 90 days of the date of the mailing.  Therefore, it would be appropriate to measure the ROI of this marketing program over a period of 90 days.

Now suppose that you are a software company that provides warehouse management software to business customers.  You decide to market the latest version of your software to prospective customers using an integrated direct mail and e-mail campaign.  Because warehouse management software has a long sales cycle, your marketing campaign will involve several direct mail pieces and several e-mails sent over a period of several months.  Companies that buy your software pay an initial licensing fee and monthly support fees.  From experience, you know that once a company buys your software, they will remain a customer for an average of seven years.  Therefore, in order to get an accurate measure of the ROI of your marketing campaign, you would need to measure ROI over a seven-year period.

One final point about the role of time in measuring marketing ROI is that both future profits and future expenses must be converted into present values.  This is accomplished by "discounting" both future profits and future expenses.  The discount rate is typically set at the company's cost of capital, which marketers usually obtain from the company's chief financial officer.

Tuesday, June 8, 2010

Analyzing the ROI Formula - Part 2

This post continues our discussion about measuring the performance of marketing, including the use of marketing return on investment (ROI).

As I have already noted, the basic ROI formula is:

ROI = (Gain from Investment-Cost of Investment) / Cost of Investment

Therefore, marketing ROI is calculated using two factors - the gain or incremental "profit" produced by a marketing campaign or program and the cost of that campaign or program.  My last post discussed the Gain from Investment component of the ROI formula.  This post will focus on the Cost of Investment component of the formula and discuss some of the issues this component presents when ROI is used to measure marketing.

Cost of Investment is the total cost of the marketing campaign or program whose ROI is being measured.  At first glance, this can appear to be an easy determination to make, and in some cases it will be.  For example, if you outsource all of the work required to develop and execute a particular marketing campaign, the investment in that campaign will be easy to identify.

In other cases, however, the issue becomes more complex.  For example, if creative elements are developed that will be used in multiple marketing campaigns or programs, how should these creative development expenses be assigned to the multiple marketing efforts?  What if you don't know how many times a creative element will be used?  Should the labor costs of marketing department staff personnel be treated as marketing overhead or assigned to specific marketing campaigns or programs?

The most important principle to use when assigning expenses to specific marketing campaigns or programs is that cost assignments should always be based on real-world cause-and-effect relationships.  In other words, the marketing campaign or function whose ROI is being measured must be the "cause" of the cost or expense.

As noted earlier, this principle can be fairly easy to apply in some cases, such as when expenses are incurred to pay outside contractors (agencies, designers, printers, etc.) for specific work on a specific project.  Internal marketing department expenses can be more difficult to address.  For example, if you employ graphic designers, it is appropriate to assign their labor-related costs to the projects they work on.  On the other hand, it may not be possible to assign the labor costs of higher-level marketing managers who perform more general marketing activities.  Often, these costs cannot be logically assigned to specific marketing campaigns and should be treated as overhead expenses.

Assigning costs to marketing campaigns and programs can become relatively complex, and marketers may need to obtain help from financial professionals in performing these assignments.  Assigning costs accurately is essential to producing accurate ROI calculations.

Monday, May 10, 2010

Analyzing the ROI Formula - Part 1

This is the third in a series of articles about measuring the performance of marketing, including the use of marketing return on investment (ROI).  In my last post, I described the basic concept of ROI and discussed how ROI has been used to measure many types of business performance.  Beginning with this post, I'll discuss each component of the basic ROI formula and explore some the the issues that each component presents when ROI is used to measure marketing.

The basic ROI formula is:

ROI = (Gain from Investment-Cost of Investment) / Cost of Investment

So, the ROI formula contains three components:
  • Gain from Investment
  • Cost of Investment
  • Time - Although the formula doesn't expressly contain a "time" value, ROI is always measured for a defined period of time.
This post will focus on the Gain from Investment component of the formula, and this component presents two basic issues.  First, how should Gain from Investment be defined?  And second, how should ROI be calculated when the Gain from Investment is produced by more than one marketing campaign or program?

For ROI purposes, the best definition of Gain from Investment is the incremental contribution margin produced by the marketing function or by a marketing campaign or program.  One of the biggest mistakes that I still see some marketers make is to use incremental sales (revenues) to calculate marketing ROI.

To understand why this mistake distorts ROI, remember that most marketing programs are designed to increase sales volume either by acquiring new customers or by increasing sales to existing customers.  But increases in sales volume are not free - there is always an associated cost of producing and delivering the additional products or services.  Therefore, if incremental sales are used to measure ROI, the ROI will be overstated.

Using contribution margin solves this problem by taking costs into account.  Contribution margin is defined as sales minus variable costs.  Variable costs are costs that the company will not incur if the additional sales are not made.  Therefore, incremental contribution margin is a measure of the "net new revenues" produced by a marketing program.

The second major issue presented by the Gain from Investment component of the ROI formula is how to address situations where the Gain may have been produced by more than one marketing campaign or program.  This situation is not at all uncommon in B2B companies where each prospect may be "touched" by several marketing programs over the course of his/her buying cycle. 

Some companies deal with issue by assigning all of the incremental contribution margin earned from a prospect to the marketing program that generated the first "inquiry" from that prospect.  Others assign all of the incremental margin to the program that "touched" the prospect last (just before the purchase).  It should be obvious that this first touch/last touch approach will often produce a distorted picture of marketing ROI if a prospect has had several interactions with your company.

Some companies attempt to eliminate this distortion by allocating the Gain to all of the marketing programs that "touched" the prospect.  But what percentage of the Gain do you assign to each program?  Allocating the Gain equally to all of the marketing programs may not reflect which of the programs were truly influential in the purchase decision and which ones weren't.  Unless you have some way of knowing how much influence each program actually had in driving the purchase decision, the allocations are arbitrary, and the resulting ROI measurement is likely to be inaccurate.

This allocation issue presents one of the most serious challenges in measuring marketing ROI accurately, especially when we attempt to measure marketing ROI at a very grandular level.  The difficulty of using ROI in this way suggests that there may be a better approach, and I'll have more to say about that in a later post.

Monday, May 3, 2010

The Basic Idea of Return on Investment

As I wrote earlier, return on investment has become the "gold standard" for measuring the performance of marketing.  Return on investment is now used to measure both the performance of the overall marketing function and the performance of individual marketing activities and programs.

In addition to measuring past performance, marketers are using ROI estimates and forecasts to make decisions about future marketing programs and to allocate marketing budgets.  Therefore, ROI is playing a significant role in determining how marketing wll be done.

The basic idea of ROI is easy to understand.  Investopedia.com defines return on investment as:  "A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of investments.  To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the return is expressed as a percentage or a ratio."

The basic ROI formula is:

ROI = (Gain from Investment-Cost of Investment) / Cost of Investment

For example, suppose that you purchase 100 shares of stock for $10 per share.  One year later, you sell the stock for $11 per share.  Your annual ROI for this investment would be 10%, calculated as follows:

ROI = ($1,100 - $1,000) / $1,000
           $100 / $1,000

ROI has been used to measure the performance of companies and business units for over eighty years.  ROI estimates have also been used to evaluate major capital investments for decades.  More recently, ROI has been used to measure the benefits provided by everything from process improvement projects to employee training programs.  All things considered, ROI (or one of the variations of ROI) has become the most prevalent measure of financial performance used in business today.

It's only natural, therefore, to use ROI to evaluate the performance of marketing activities and programs.  CEO's and CFO's are rightfully demanding proof that their "investments" in marketing are producing real financial benefits, and they view ROI as a proven method for measuring those benefits.

So, if you're a marketer today, you need to be ready to measure and/or estimate the ROI of your activities and programs, or you need to be prepared to show why a different metric should be used in lieu of ROI.

In my next post, I'll take a closer look at the "return" component of the ROI formula and explore some of the issues that arise when ROI is used to measure marketing.

Monday, April 26, 2010

Measuring Marketing Takes More Than ROI

Over the next several days, I'll be posting articles here about measuring the performance of marketing, including the use of marketing return on investment, or MROI.

This may not be one of the sexiest marketing topics out there, but it has become an extremely important one.  For the past several years, CEO's and CFO's have been demanding greater financial accountability from the marketing function, and they are now pressing marketers to prove the value of marketing activities and programs.  Many years ago, John Wanamaker is reported to have said, "Half the money I spend on advertising is wasted; the problem is, I don't know which half."  CEO's and CFO's expect better from marketers today.

I'm also writing about this topic because, even though there is a large volume of literature about how to measure the performance of marketing, there are many misconceptions floating around, even about some of the most basic principles.  For example, you can find many marketing campaign "ROI calculators" in use today that calculate ROI based on revenues or sales instead of profits (in one of its various forms).  If a marketer presents one of these kinds of "ROI calculations" to a CFO, his/her credibility can be undermined.

Another issue is that in recent years, MROI has become the "gold standard" for measuring not only the overall performance of the marketing function, but also the performance of individual marketing activities.  Some experts argue that this approach is both possible and essential.  But, like any metric, MROI has limitations, and we need to understand those limitations in order to use the metric in the right ways, for the right purposes.

In my next few posts, I'll start by explaining the basic idea of ROI, and I'll describe how ROI has been used to measure business performance.  Then, I'll look at the components of the ROI formula and describe how each of the components should be defined and calculated and what issues that may present.

And finally, I'll argue that, while MROI is an important metric, we need a more holistic approach to get a comprehensive view of marketing performance, especially in B2B companies with complex marketing/sales processes and longer revenue cycles.

Monday, April 19, 2010

Four Ways to Jumpstart Content Development

Successful B2B marketing depends largely on the quality of marketing content.  To break through the marketing clutter that fills the environment and create real engagement with potential buyers, you need relevant and compelling content that helps buyers address important business challenges.

Although this "new" approach to marketing is quickly becoming a competitive necessity, it's not an easy transition for many companies to make.  The volume of content needed can seem to be overwhelming.

For example, suppose that you sell to only one type of company.  Your buying group typically contains three individuals so you have three buyer personas to address.  Your buyers usually move through a four-stage buying process, and you believe you will need to interact with each buyer at least three times during each stage of the buying process.  This means you'll need at least 36 "pieces" of marketing content to fuel your marketing effort (3 personas X 4 buying stages X 3 interactions per buying stage).

The good news is that getting started with content marketing is usually the most difficult step.  Once your initial base of content is created, the job becomes more manageable.  So, is there any way to make getting started easier?  These four tactics will enable you to jumpstart your content development.

Narrow Your Focus

If you sell to more than one type of business, pick your largest, most profitable, or most attractive customer segment and start by developing a full set of content materials for that segment.  You can add content for other types of customers later.  When it comes to content marketing, you are better off having the content you need to take some of your prospects all the way through the buying cycle than having content that will take all of your prospects only part of the way through the buying cycle.

Use Existing Marketing Materials

OK, I'll admit that most of your existing marketing materials probably aren't suitable for the kind of customer-focused marketing you need to be doing today.  I include this tactic for two reasons.  First, at the right time in the buying cycle, your potential buyers will want and need to learn about your company and your products, and your existing marketing materials should be able to perform this function.  Second, even if your existing materials aren't suitable in their current form, you may be able to make some of them suitable by making relatively minor changes.  At least you won't be starting from scratch.

Follow the "Rule of Five"

The rule of five says that whenever you develop a significant content asset, you should try to create at least four "smaller" content pieces from the original asset.  For example, say you write a white paper.  You then use the content in the white paper to create one or two short articles and two or three blog posts.

Outsource the First Wave

Even if you follow the first three suggestions, you may still find that you don't have the time or internal resources to create the content you need as fast as you need it.  If that's the case, you should consider outsourcing some or all of the content development work.  Once the initial wave of content is developed, you may find that you can build on that foundation to create the additional content you need.

Monday, April 12, 2010

The "Other" Jobs of B2B Marketers

A lively discussion is underway in the Marketing Communications group at LinkedIn.  The question that started the discussion was: "In one sentence, what is marketing?"  In less than a month, this question has produced 145 comments.  As you might expect, the comments have included a wide range of definitions, but I think it's fair to say that most have focused, in one way or another, on the "persuasion" aspect of marketing.

Because of my work, I read almost everything I can find about B2B marketing.  For example, I regularly follow over three dozen B2B marketing blogs, and the list keeps growing.  There are some wonderful B2B bloggers sharing insights and ideas - Seth Godin, Ardath Albee, Steve Woods, and Jon Miller, just to name a few.

The hot topics today in the B2B marketing blogosphere include the use of social networks, inbound marketing, content marketing, lead management (lead scoring, lead nurturing, etc.), and marketing automation.  All of these topics also relate to how we communicate with and persuade potential buyers.

It's understandable why we devote so much attention to marketing communications.  Most B2B marketers spend most of their time developing and executing marketing communications programs of various kinds.  Marketing communications are extremely important, but they are only part of the "promotion" component of marketing.  And promotion is only one of the "four P's" of marketing.

Peter Drucker once said, "Because the purpose of business is to create a customer, the business enterprise has two - and only two - basic functions:  marketing and innovation."  I might not go quite that far, but I do believe that B2B marketers can and should play a broader role that just managing marketing communications.

Let's consider just two examples.  First, marketers should have a strong voice in the development of new products and services.  Marketers (in collaboration with salespeople) are best suited to be the "eyes and ears" of the company in the marketplace.  Gathering information about the changing needs and challenges of customers and prospects should be an ongoing priority for marketers, and you should create a systematic process for collecting and evaluating this information.  This kind of market intelligence can be vital for developing new products or services that will win in the marketplace.

Marketers should also play a significant role in making decisions about pricing.  I realize that pricing is a sensitive subject in many companies and is often the source of contention among marketers, salespeople, and financial/accounting professionals.  Research has shown that pricing is the single most powerful profit lever that managers can use on a daily basis.  It's up to marketers to understand the real economics of pricing decisions so that they can bridge the gap between those who view pricing as a tool for closing a sale and those who believe that your company's costs should dictate its prices.

Managing the marketing communications effort is important, but B2B marketers also have other critical jobs to perform. 

Thursday, April 8, 2010

B2B Value Propositions That Resonate With Buyers

One of my favorite definitions of value proposition comes from Jill Konrath, author of Selling to Big Companies.  She says that a value proposition is, "a clear statement of the tangible results a customer gets from using your products or services."

Value propositions are a core element of your marketing strategy.  They describe how you create value for customers and, therefore, they are the ultimate source for your marketing content.  In fact, you can't create compelling marketing content until you really understand how you create value for customers.

Despite their undeniable importance, most companies don't do a good job of formulating and communicating compelling value propositions.  A recent survey of decision makers in B2B companies conducted by the Marketing Leadership Council of the Corporate Executive Board found that 86 percent of the "unique benefits" touted by sellers were not seen by potential buyers as having enough impact to create a preference for a particular seller.

In their 2007 book, Value Merchants, James C. Anderson, Nirmalya Kumar, and James A. Narus identified three basic types of B2B value propositions.

All Benefits - Essentially, a list of all the benefits that managers believe their solutions might deliver to target customers.  This type of value proposition requires the least knowledge about specific customers or competitors, but it has one major drawback.  This approach can lead managers to claim advantages for solution features that actually provide little real benefits to target customers.

Favorable Points of Difference - When managers use this type of value proposition, they attempt to differentiate their solution by identifying favorable points of differrence between their solution and the customer's next-best alternative.  While better than an All Benefits vallue proposition, this type of value proposition still has a major drawback.  It can lead managers to assume that all favorable points of difference will be valuable to a prospect, while the reality may be that many points of difference contribute little value to a particular prospect.

Resonating Focus - The third type of value proposition is called Resonating Focus.  Anderson, et. al. say that in a world where potential buyers are extremely busy, sellers must use value propositions that are both compelling and simple.  The basic idea behind a Resonating Focus value proposition is to identify the one or two points of difference (between your solution and your competitor's) that deliver the greatest value to the target customers.

Resonating Focus value propositions dovetail nicely with content marketing.  To begin with, companies that use Resonating Focus value propositions develop customized value propositions for various customer segments.  This is necessary because the elements of value that matter most are likely to vary based on the type of customer involved.

It's also possible to extend the Resonating Focus value proposition concept from customers (organizations) to individual buyers or buyer personas.  And when you develop Resonating Focus value propositions for each of your buyer personas, you will have taken a large step toward identifying the marketing content you need.

Sunday, April 4, 2010

The Limits of Marketing ROI

For the past several years, B2B marketers have faced growing pressure to prove the value of their activities and programs.  CEO's and CFO's are increasingly demanding that marketers monitor and measure the results of their activities and calculate the return on investment (ROI) produced by those activities.

ROI is now seen as the "gold standard" for measuring the performance of marketing programs.  ROI has been used for decades to evaluate all kinds of investments, and it's widely accepted by financial professionals.  Some marketers believe that calculating the ROI of marketing activities will enhance their credibility in the C-suite.

Marketing ROI is certainly an important metric, but like any tool, it must be used in the right way for the right job.  There is no single "magic metric" that can fully capture the effectiveness of marketing.  So, it's important for marketers (as well as CEO's and CFO's) to understand the limitations of ROI for measuring marketing performance. I'll talk about some of the limitations and complexities here, but there are many others.

The basic ROI formula is extremely simple:

ROI = Return / Investment

The basic formula for marketing ROI (MROI) is almost as simple:

MROI = (Return - Marketing Investment) / Marketing Investment

Unfortunately, however, this simple formula hides a number of complexities.  For example, what does the term "Return" mean?  Total gross revenues or incremental gross revenues?  Total gross margin or incremental gross margin?  Total contribution margin or incremental contribution margin?  The best answer is incremental contribution margin, although incremental gross margin is also widely used.

But now I've introduced a new term - incremental contribution margin - that requires a definition.  Contribution margin is easy to define.  It's total revenues less variable costs.  The incremental part of the term is more complex.  Marketing ROI experts tell us that, ideally, a marketing ROI calculation will measure the incremental (new) returns produced by incremental (new) marketing investments.  So, supposedly, we can use marketing ROI to calculate the return on investment of an expanded TV advertising program, or a new direct mail program, or a new social media program.

Or can we?  How can we really know which marketing program actually produced the incremental (new) contribution dollars, especially when we are running several marketing programs simultaneously.  This won't always be a huge issue.  For example, if we run a direct mail campaign that incorporates a discount coupon, we can count the number of coupons that are actually redeemed.  But even this may not provide a completely accurate answer.  What if a new customer had already been predisposed to buy because of an earlier marketing program?  Should the discount coupon campaign get all of the "credit" for the new contribution margin associated with this new customer?

I am not suggesting that calculating marketing ROI is the equivalent of putting on a blindfold and throwing darts at a target.  There are, in fact, well-accepted methods for dealing with the kinds of issues I've just described.  I am trying to make the point that most marketing ROI "models" are based on numerous assumptions and judgment calls about the definition and the "allocation" of both returns and costs.  This does not mean that marketing ROI has no value.  It does mean that MROI often appears to be more precise than it actually is.

Thursday, April 1, 2010

Use an Importance - Performance Matrix to Get Marketing and Sales Talking

In my last post, I discussed the importance of building a collaborative relationship between marketing and sales.  The first step toward achieving this objective is to establish where your marketing/sales relationship is today, and one useful tool for describing the "current state" of the relationship is an Importance - Performance Matrix like the one shown below.

This matrix is used to capture the opinions of individual marketers and sales personnel about specific marketing and sales activities.  Each activity is evaluated along two dimensions - the importance of the activity and how well the company (marketing and/or sales) is performing the activity.

The vertical axis of the matrix is used to describe the importance of the activity.  Less important activities are placed in the lower portion of the matrix, while more important activities are placed in the upper portion.  The horizontal axis of the matrix is used to describe how well the company is performing the activity.  Activities that the company performs poorly are placed in the left side of the matrix, while activities that the company excels at performing are placed in the right side.

An Importance - Performance Matrix will often reveal wide gaps in the views of marketing and sales personnel and point to the issues you need to focus on in order to improve the marketing/sales relationship.

To illustrate the kind of information that an Importance - Performance Matrix can reveal, I'll use a highly simplified example.  Suppose that we want to capture the opinions of marketing and sales personnel regarding the quality of leads provided by marketing to sales.  Also suppose that our company has four marketers and ten salespeople.  All fourteen people would complete a matrix, and then we would combine the responses in a single matrix.  Individual responses are not personally identified, but we do identify which responses come from sales and which come from marketing.

The results of this hypothetical example are shown below.  As you can see, both marketing and sales personnel view generating quality leads as important, but they differ significantly about how well marketing is performing this activity.

An Importance - Performance Matrix won't tell you how to resolve conflicts between marketing and sales, but it can identify the issues you need to address.

Monday, March 29, 2010

Beyond Alignment to Collaboration

One of the hot topics today in B2B marketing is the need to create better alignment between marketing and sales.  There is a growing recognition that marketing and sales are out of sync in many B2B companies.  They often have widely different views about such fundamental issues as what kinds of companies make the best prospects and what constitutes a sales-ready lead.  One major objective of improving the alignment between marketing and sales is to develop a common view regarding these basic issues.

Creating better alignment between marketing and sales is certainly important, but "alignment" doesn't adequately describe the kind of relationship that's really needed between marketing and sales.  Today, a growing number of B2B companies realize that both marketing and sales activities are components of a single demand generation process.  And to create and sustain a demand generation process that produces significant revenue growth, what's really needed is an active and close collaboration between marketers and salespeople.

Not that long ago, such active and close collaboration wasn't absolutely essential.  In most B2B companies, the roles and responsibilities of marketing and sales were fairly distinct and independent.  Marketing ran campaigns to raise brand awareness and generate sales leads, produced marketing collateral materials, and coordinated the participation in trade shows.  Leads generated by marketing were passed along to sales and were rarely seen by marketing again.  Salespeople had two basic jobs - to generate leads (prospect) and to take those leads (plus those supplied by marketing) and close sales.

This siloed approach to marketing and sales is simply not effective in today's business environment.  Companies are encountering potential buyers long before they are ready to meet with a salesperson.  So, marketing must play a larger role in nurturing prospects until they are ready to have a meaningful conversation with sales.  And when a prospect does talk with a salesperson, he or she expects the sales rep to build on the existing relationship, not start over from scratch.

A collaborative relationship can help make the transition from marketing to sales nearly seamless, but the benefits of collaboration don't stop there.  Salespeople are talking with prospects and customers every day, and they can provide marketers with real-time input about the issues that prospects are actively thinking about.  Marketers can then use this information to develop new marketing content or modify existing content.  On the flip side, marketers can provide salespeople with information about strategic developments and trends that are affecting potential buyers.

The bottom line is that B2B companies need an effective demand generation process in order to drive consistent revenue growth, and an effective demand generation process requires that marketers and salespeople work as a cohesive team.

Thursday, March 25, 2010

Getting Specific About Value

We now know that providing relevant content to potential buyers is essential for effective B2B marketing.  One key to increasing the relevancy of marketing content is to make it more specific.  Consider the following two statements:
  • "Our new ProWidget can enable you to reduce equipment downtime and improve manufacturing efficiency."
  • "Customers using our new ProWidget have reduced the cost of equipment downtime by an average of $100,000 per year."
Which of these statements is more compelling?  I think it's clear that the second statement is more powerful because it's more specific.

To make marketing content more specific, you need to have a thorough understanding of how your products and services produce value for customers.  In an earlier post, I explained how to build a customer value matrix that will provide detailed insights about this critical issue.

Now for a confession.  You may need more than one customer value matrix to get a complete picture of how your products and services produce value for customers.  This is likely to be true if you sell to more than one industry or type of business.

To understand why, we need to review a few principles about value.  All products and services have features and attributes that enable certain jobs to get done.  By providing ways to get things done, features and attributes produce benefits for the people and companies that use the product or service.  The value of any product or service depends on the value of the benefits the product or service produces.

The catch is that the value of any particular benefit can vary significantly from customer to customer depending on the nature of each customer's business. 

To capture these differences, you need to create a separate customer value matrix for each industry or major type of business you serve.  After you've created your initial "catch-all" matrix, think about one of the industries of major types of business your serve.  Go back through your catch-all matrix and create a separate version that is targeted to that industry or type of business.  What you are likely to find is that some benefits or sources of value become much more important when you're focused on one particular type of business.  This insight will enable you to develop content that is more specific, and therefore more relevant, to that industry.

Monday, March 22, 2010

Marketing Effectiveness vs. Marketing Efficiency

Today's B2B marketers are facing growing pressure from the C-suite to improve the value provided by the marketing function.  The value created by marketing depends on both the effectiveness and the efficiency of marketing activities.  Marketing effectiveness and marketing efficiency are not conflicting objectives, but they are different.  And both are necessary for marketing to create value.

The essence of marketing effectiveness is producing the required results.  Are your lead generation programs producing enough new inquiries?  Is your lead nurturing program converting enough inquiries into sales-ready leads?  The measures of marketing effectiveness tend to be absolute numbers:  number of inquiries, number of marketing-qualified leads, number of sales-ready leads, etc.

Marketing efficiency is all about delivering effective marketing programs at the lowest possible cost.  Measures of marketing efficiency are typically expressed in dollars and are usually ratios:  cost per inquiry, cost per sales-ready lead, etc.

Many of today's "best practices" in B2B marketing can improve both marketing effectiveness and marketing efficiency.  For example, profiling your ideal customer, developing buyer personas for the people who make up your buying group, and creating content for each buyer persona can improve the effectiveness of your lead generation programs by increasing response rates.  These same activities can also improve marketing efficiency by enabling you to target lead generation campaigns more narrowly.

So far, most efforts to improve marketing efficiency have focused on individual campaigns and programs.  But recently, marketers have begun to focus on improving the efficiency of marketing operations.  Marketing operations is the term for all of the activities required to perform the marketing function.  Therefore, marketing operations would include coordinating the work of external marketing services firms, performing marketing research, and managing the procurement, production, and distribution of marketing collateral materials.

Marketers have started to realize that improving the efficiency of marketing operations can be a great way to conserve marketing dollars and stretch marketing budgets.

The bottom line - marketers must improve both marketing effectiveness and marketing efficiency to increase the value that marketing provides.

Thursday, March 18, 2010

To Gate, or Not to Gate, Marketing Content?

An ongoing debate in the B2B marketing community is whether a person should be required to register in order to gain access to marketing content.  Requiring registration is usually called putting the content behind a "gate."

The arguments for and against registration are fairly easy to summarize.  Proponents of requiring registration argue that for most B2B companies, the purpose of offering content is to generate leads, and you don't have a lead until a person identifies himself/herself.  Without registration, content offers simply can't generate actionable leads.

Proponents of making content available without registration argue that this approach will cause your content to spread much further and thus make many more potential customers aware of your company.  David Meerman Scott is an advocate of this view, and he shared an example to make his point in this blog post.

My view this that a significant amount of content should be made available without any registration requirement.  Ungated content is becoming a critical component of B2B marketing because the way business buyers make purchasing decisions has changed dramatically.

We now know that B2B buyers are researching potential purchases long before they are ready to talk with a salesperson.  Most of this research is conducted online and, increasingly, through the use of social media.  We also know that B2B buyers are performing a lot of research anonymously.  A recent survey by DemandGen Report and Genius found that:
  • 70% of buyers began their research by using online search or by visiting a vendor Website
  • 78% of buyers started their purchasing process with informal information gathering
  • 44% or buyers conducted anonymous online research
The reality today is that many early-stage buyers are out there actively looking for useful information, but they aren't ready to "raise their hand" and identify themselves.  Yet, many of these buyers will be prepared to engage with potential sellers later in the buying process.  If you make valuable, high-quality content freely available to these early-stage buyers, you can create a favorable "first impression" and provide these buyers a powerful reason to engage with your company when the time is right.

Monday, March 15, 2010

Personalization Alone Doesn't Create Relevance

Today's B2B marketers have more ways to reach out to customers and prospects than ever before.  Digital technologies have created new marketing channels and enabled marketing techniques that would have been impractical, if not completely impossible, only a few years ago.

But despite the new marketing channels and technology tools, most B2B marketers are finding it more difficult to capture the attention of potential buyers and create the kind of engagement that leads to new business.  Easy access to information makes B2B buyers less dependent on sellers than in the past, and our environment is filled with advertising and marketing clutter.

As I've written before, the real solution to overcoming these hurdles is to use marketing messages that are relevant to the problems and issues B2B buyers are facing.

The good news is that B2B marketers now have an array of tools to improve the relevance of marketing communications.  Personalization technologies can enable marketers to create marketing messages that are customized for individual prospects.  For example, marketers can use variable data printing to create direct mail pieces that are customized for each recipient.  Other personalization technologies make it possible to create customized e-mail messages and Web pages.

The capabilities of personalization technologies are impressive, but it's important to remember that personalization alone does not necessarily create relevance.  For some time, marketers have been personalizing marketing messages by including specific facts about the recipient - her name, job title, or company affiliation, for example - in the message.  I call this explicit personalization, and the reality is that explicit personalization alone won't make an irrelevant message relevant.

Effective marketing can be defined as getting the right offer in front of a potential buyer at the right time.  Information about a potential buyer - particularly the buyer's behavior - can be a powerful tool for determining what the right offer should be and when that offer should be presented.  When personal information is used this way, the result is a personalized, customized, and relevant marketing message.  What makes this kind of message different from one based only on explicit personalization is that the personalization is embodied in what the offer is and how it is presented, rather than in a collection of "facts" about the recipient.

All relevant marketing messages are in a very real sense personalized, but not all personalized messages are relevant.

Friday, March 12, 2010

For Effective Content Marketing, "Form Follows Function"

When marketers decide to implement a content marketing program, there is a tendency to think first about content in terms of format.  You might, for example, hear a marketer say something like, "We're going to need a few articles, two or three white papers, at least four customer case studies, and a Webinar."

This approach misses the mark.  When you start planning the development of marketing content, the first thing to think about is the purpose or function of the content.  As a whole, your marketing content has to perform three basic functions.  I call these functions educate, demonstrate, and reassure.

Educate - This type of content is designed to help potential buyers understand the problem or issue they're facing and how the problem or issue can be addressed.  Educational content is factual and mostly non-promotional.  It focuses on your prospects' challenges and not on your company or your products or services.  Educational content includes content that:
  • Explains the root cause of the problem/issue
  • Describes the ramifications of the problem/issue
  • Explains why it's important to address the problem/issue now
  • Describes how other companies have successfully addressed the problem/issue
  • Explains how to evaluate potential solutions
Demonstrate - Those of us who advocate content marketing stress the importance of providing content that is not self-promotional and not focused primarily on your company or your products or services.  But prospective buyers who reach a certain point in the buying cycle will want and need to learn about a prospective vendor's solutions.  So, you still need marketing content that "demonstrates" how your solution works and what specific benefits it provides.  This includes marketing content that:
  • Describes the features/functionality of your solution
  • Describes the unique or differentiated benefits that your solution provides
  • Describes your company (history, values, etc.)
  • Demonstrates the value of your solution
Reassure - This type of content is designed to alleviate the fear that always surrounds a major purchase decision.  In its groundbreaking BuyerSphere research project, Enquiro found that B2B buying decisions are usually driven by fear.  More specifically, B2B buying is all about minimizing fear by reducing or eliminating risk.  "Reassurance" content is content that helps buyers feel comfortable about purchasing your solution.  The best kind of reassurance content is content that involves third parties - customers, industry experts, industry analysts, etc.  Some examples are:
  • Customer success stories that prove the value of your solution
  • Customer success stories that validate ease of implementation and use
  • Analyst reports that show the financial stability of your company
In general, educational content is most relevant for buyers who are in the early stages of the buying cycle, demonstration-oriented content becomes important for those in the middle stages of the buying cycle, and reassurance content takes center stage in the later stages of the buying cycle.

Once you're sure that your content plan includes content that performs all three of these functions, then you can focus on specific formats.

Monday, March 8, 2010

Content Marketing Basics: Create Content for All Buying Stages

To create engagement with today's B2B buyers, marketers must develop and use relevant and compelling marketing communications and marketing content.  There is simply no substitute for relevancy when it comes to establishing and maintaining meaningful relationships with potential buyers.

In an earlier post, I described how to develop buyer personas.  Personas enable us to create relevant marketing content because the process of creating personas forces us to develop a deeper understanding of the individual buyers we work with.  Personas enable us to identify the issues and problems that our buyers are facing, and this allows us to develop marketing messages and marketing content that speaks directly to those concerns.

Developing content for each buyer persona is essential, but it's also critical to have content that speaks to where the buyer is in the buying process.  That's because the kind of information that is most relevant to a buyer changes as he or she moves through the buying cycle.

The key to developing content for each stage of the buying cycle is to put yourself in the buyer's shoes and identify the questions that he or she is likely to have at each stage.  Then, you create content that answers those questions.

There are many ways to describe the B2B buying cycle.  Ardath Albee, author of eMarketing Strategies for the Complex Sale and the Marketing Interactions blog, uses a seven-step framework:  Status Quo - Priority Shift - Research - Options - Step Backs - Validation - Choice.

Using Albee's framework, we can identify some of the questions that a buyer is likely to have at each stage of the process.

Status Quo - Why do I need to change?  What are the ramifications of not changing?  Has something happened in my industry that makes change necessary?

Priority Shift - Can the issue/problem be solved?  What are the benefits of addressing the issue/problem?  How have my peers and/or competitors dealt with the issue/problem?

Research - What are the alternative ways to address the issue/problem?  What are the risks and benefits of the alternative approaches?

Options - What specific solutions should I consider?  Which potential solution providers should I include in my short list?  What are the features and functionality of each possible solution?

Step Backs - What happens if I don't have the resources to implement the proposed solution?  What if I don't have real buy-in from my end users?  What if the solution doesn't produce the promised results?

Validation - Why should I trust your company?  What is my ROI if I purchase your solution?  How can I be sure that the estimated ROI will actually be realized?

As you develop your questions, be as specific as possible, and keep in mind that you will need a separate set of questions for each buyer persona you've identified.  This approach will enable you to develop rich and compelling content that will resonate with your buyers.

Thursday, March 4, 2010

Yes, You Still Need "Promotional" Content

In two recent articles, MarketingSherpa described the results of research into how technology buyers view e-mail offer content.  The research was conducted by Bob Johnson with IDG Connect in partnership with MarketingSherpa, and it involved two surveys.  One survey was directed to technology buyers.  The second survey presented the same questions to B2B marketers.  The marketers were asked to answer the survey questions based on what they believed motivated buyers.

One of the survey questions was, "Do each of the following offer types increase the likelihood a prospective buyer will click on a link to additional information and insight?"

Here are the top five types of content offers identified by buyers - based on the percentage of surveyed buyers who answered "yes" to the above question:
  • News and Articles - 84%
  • Competitive Comparisons and Buying Guides - 73%
  • Promotional Content - 70%
  • Educational Content - 65%
  • Free Research Reports - 64%
Here are the top five types of content offers identified by marketers:
  • Educational Content - 92%
  • Free Research Reports - 86%
  • Peer Best Practices - 79%
  • Competitive Comparisons and Buying Guides - 77%
  • Interactive Peer Comparison Tool - 74%
Only 42% of marketers said that an offer of promotional content would motivate buyers to act.  Seems like we marketers may not know buyers as well as we would like to think.

Those of us who advocate content marketing stress the importance of using buyer-centric informational and educational content, and we argue that most marketing content should not be self-promotional (focused on my company or the features and attributes of my product or service).  This is the right approach, but the key word in the previous sentence is most.

Prospective buyers who reach a certain point in the buying cycle will want and need to learn about a prospective vendor's products or services.  Therefore, every company needs "promotional" marketing content that provides that information.  The problem with promotional content comes when you use it with prospects who aren't ready for it.

In my next post, I'll explain the importance of mapping content to all stages of the buying cycle.

Tuesday, March 2, 2010

Content Marketing Basics: Developing Buyer Personas

Effective content marketing requires a thorough understanding of your prospective buyers.  Let's face it.  It's awfully hard to really connect with someone you don't understand.  That's why buyer personas must be a core component of your content marketing effort.

According to Adele Revella, author of the Buyer Persona blog, a buyer persona is, "a detailed profile of an example buyer that represents the real audience - an archetype of the target buyer."  In her book, eMarketing Strategies for the Complex Sale, Ardath Albee defines a buyer persona as, "a composite sketch representative of a type of customer you serve."

Just to be clear, a buyer persona is a biograhpical sketch of a typical buyer.  It is more than a job description.  Buyer personas are written in narrative form, and they are written as if the archetypical buyer is a real human being.  Buyer personas enable you to create more relevant and personalized communications, which is why they are so important for effective content marketing.

You will need to create a persona for each type of buyer who makes or significantly influences the decision to purchase your product or service.  Most sales methodologies use categories to indentify buying roles.  So, for example, you may have economic buyers, technical buyers, user buyers, and so on.  I prefer to describe buyer types by job title or job function in additon to these buying role categories.

It's also important to identify the type of business the buyer works for.  Buyers performing the same job function in different industries can have different issues, problems, or concerns.  Therefore, you may need to create "industry specific" personas.

The next step in developing a buyer persona is to answer a series of questions about the buyer.  Here are some examples:
  • What are the buyer's major business objectives and job responsibilities?
  • What strategies and tactics does the buyer use to achieve his objectives and fulfill his responsibilities?
  • What meaures are used to evaluate the buyer's job performance?
  • What issues and problems keep the buyer awake at night?
  • How old is the typical buyer? [Age range is OK]
  • Is the buyer typically male or female?
  • What is the buyer's educational background?
  • What sources does the buyer turn to for information?
  • How would the buyer describe the issues he or she is facing?
In my earlier post about developing a customer value matrix, I recommended using a cross-functional team that includes both marketing and sales personnel.  That approach also works well for developing buyer personas.

Friday, February 26, 2010

More Proof That Relevant Marketing Content is Essential

Earlier this week, I attended a Webinar titled Inside the Mind of the B2B Buyer - New Data on the Path to Purchase.  This Webinar discussed the results of a recent survey that was conducted by DemandGen Report and sponsored by Genius.com.  The survey targeted B2B buyers who had made a recent purchase.

The lead finding in the survey is that more than 80% of buyers said they initiated contact with potential solution providers.  Fewer than 10% of recent buyers said that they were contacted "cold" by the solution provider.  This finding is similar to the results of other recent research, and it reinforces the proposition that, today, buyers find sellers much more often than sellers find buyers.

The DemandGen Report survey also provides important insights into the behavious of today's B2B buyers.
  • 70% of buyers began their research using online search
  • 70% of buyers started their research by visiting a vendor Website
  • 78% of buyers started their purchasing process with informal information gathering
  • 59% of buyers engaged with peers during the buying process
  • 48% of buyers followed industry conversations online
  • 44% of buyers conducted anonymous online research
These results clearly demonstrate why marketing content is so critical to B2B marketing success.  Potential buyers are forming opinions about your company and your products and services based on the content you provide - often long before you even know who the potential buyers are.

This survey also confirms that compelling marketing content has a major impact on winning business in today's business environment.  Ninety-five percent of recent purchasers said that the solution provider they ultimately chose provided them with ample content to help them navigate through each stage of the buying process.

So, the jury is in and the verdict is clear.  Relevant and compelling content is essential for effective B2B marketing.

You can access a recorded verison of the Webinar here.

Monday, February 22, 2010

Content Marketing Basics: First Understand How You Create Value

The first step in creating an effective content marketing program is to identify and describe all of the significant ways that your products or services create value for customers.  Creating buyer personas, describing the stages of your customers' buying process, and developing content for each buyer persona and for all stages of the buying cycle are all essential steps in building an effective content marketing program.  But I contend that it's critical to start with a thorough understanding of how your products or services create value for customers.

Knowing how your products or services create value tells you what issues and problems you can help customers solve and what benefits customers can gain by using your products or services.  When you combine this knowledge with good buyer personas and then apply good content marketing principles, you can create exceptional marketing content.

To develop a complete picture of how your products or services create value, you should assemble a cross-functional team and construct a customer value matrix for each of your product or service offerings.  The team should include both marketing and sales personnel and could also include customer service and other support personnel.

The first step in building a customer value matrix is to identify all of the reasons that people might have for purchasing a product or service like yours.  These reason-to-buy statements should describe a basic need, issue, or pain point and the logical explanation for the need, issue, or pain.  The best format for reason-to-buy statements is I or We want or need to do something because of some reason.  Be sure to include reason-to-buy statements for all of the people (or groups of people) in the customer organization who would be significantly affected by your product or service.  This broad-brush approach will help you identify the people who will make or influence the decision to purchase your product or service and the buyer personas you will need to create.

Once you have listed all the reasons to buy, add the following information for each reason.

Affected Parties - Who is affected by the need, issue or problem described in the reason to buy?  Who has the most to gain if the need, issue or problem is resolved, and who has the most to lose if it isn't?  Use job titles or job functions to describe the affected parties.

Desired Outcome - The specific results that the affected parties want to achieve with respect to the reason to buy.  The desired outcome will resolve the need, issue, or problem described in the reason to buy.

Solution Component - The specific features or functions of your solution that will resolve the issue described in the reason to buy and enable the desired outcome.  This can be an attribute or feature of the product or service, a characteristic of how you produce or deliver the product or service, or a particular capability that your company possesses.

Value Measure - The specific way that your product or service creates value with respect to the reason to buy.  Your solution can create measurable value by enabling the customer to reduce existing costs, avoid future costs, or increase revenues.  Your task here is to identify the specific kinds of costs that will be reduced or avoided or the kinds of revenues that will be increased.

Building a complete customer value matrix takes time and effort, but when it's done right, the matrix will provide a comprehensive picture of how a product or service creates value.  And understanding how a product or service creates value provides the foundation for an effective content marketing effort.

Friday, February 19, 2010

Content Makes Marketing and Sales a Value-Adding Process

The forces that are reshaping the B2B marketing landscape have given rise to a new marketing discipline - content marketing. There's little doubt that content marketing will be a driving force in B2B marketing in 2010. According to a recent survey by Junta42, 59 percent of marketers plan to increase spending on content initiatives in 2010, up from 56 percent in 2009, and 42 percent in 2008. A study by the Custom Publishing Council found that branded content accounted for 32 percent of the average overall marketing, advertising, and communications budgets in 2009. The CPC said that this is the greatest ever proportion of total marketing/communications funds dedicated to branded content. It's not insignificant that just this week, the Custom Publishing Council changed its name to Custom Content Council.

What is content marketing? Joe Pulizzi, co-author of Get Content. Get Customers. says that, "Content marketing is a marketing technique of creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience - with the objective of driving profitable customer action."

Content marketing has become a critical discipline because B2B buyers are increasingly researching buying decisions online, and they are delaying conversations with salespeople until much later in the buying cycle. So, marketing content must carry a heavier load in the overall demand generation process. Adam Needles at the Propelling Brands blog puts it this way: "What is interesting is that this type of interaction is what you might have once thought of as a dialogue with the sales person - except in this context it is dialogue being managed by a marketer . . ."

Content marketing is a tested and proven technique, and we can identify several "best practices" for creating great content. I'll describe those best practices in future posts. But content marketing is still a relatively new discipline, and it requires a different way of thinking. I believe it helps to place content marketing into a larger context.

To put content marketing in the proper perspective, think of your marketing and sales activities and programs as being part of a process that must in itself create value for customers. In other words, treat the marketing and sales process as if it is another service that you offer to customers. You wouldn't expect a company to purchase your products or services if they don't provide value to that company. If your marketing and sales process doesn't provide value to potential buyers, your shouldn't expect them to engage with you in that process.

And how do marketing and sales create value for potential buyers? By providing information and tools that help them make better purchasing decisions. More specifically, marketing and sales activities create value for potential buyers by helping them understand:
  • The full ramifications of an important business issue, challenge, or problem
  • How the issue, challenge, or problem can be addressed
  • How they should evaluate potential solutions
  • Why your solution is the right one for their organization
Content marketing is the vehicle for providing this kind of information to potential buyers.  Therefore, once you start treating marketing and sales as a process that must provide real value for prospective customers, the logic behind content marketing becomes clear and compelling.

Friday, February 12, 2010

Why B2B Marketing is Like Curling

The 2010 Winter Olympics begin tonight in Vancouver, and I'm sure that I will watch at least a few minutes of the curling competition at this year's Games. I'm not really sure why I'll watch because curling is definitely not an exciting sport. If you're not familiar with curling, it's a little like shuffleboard (true curling fans, please forgive me). The big difference is that curling is played on a rectangular sheet of ice and involves sliding a large, polished granite stone weighing about 40 lbs toward a target painted on the ice. The playing surface is prepared by spraying water droplets (called "pebble") onto the ice. Because of friction between the stone and the pebble, the moving stone will turn or "curl" to one side or the other.

After one team member "throws" the stone toward the target, two other team members accompany the stone as it moves down the ice and guide it toward the desired position on the target. The catch is, these players are not allowed to actually touch the moving stone. Instead, they use long-handle brooms to sweep the ice in front of the stone. Sweeping temporarily melts the top of the ice and thus reduces the friction between the stone and the ice. By reducing the friction, sweeping changes both the speed and the direction of the stone. Knowing when and how much to sweep is a critical skill in curling.

In some ways, curling provides a good metaphor for describing the job faced by today's B2B marketers and salespeople, particularly those involved in selling complex products or services (such as, for example, marketing services). As I've written before, B2B buyers are now firmly in control of the purchasing process. They determine when and how they will research purchasing decisions and when and how they will interact with potential suppliers. They also decide how quickly they will move through the buying process. In these circumstances, the most important job for the seller (whether a marketer or a salesperson) is to provide prospective buyers with the information they need when they need it.

Like the sweepers in a curling match, your main job is to reduce the friction that slows prospects down and causes them to veer off course. You would like to be able to directly lead your prospects through the buying process. That would be the equivalent in curling of touching the stone, and that's against the rules. In today's B2B buying environment, attempting to push your prospects through the buying process toward your desired objective on your schedule just doesn't work - at least not very often.

You can't dictate what buying decisions your prospects will ultimately make, and you can't completely eliminate friction from the buying process. But if you consistently provide information that is useful and valuable to your prospects and appropriate to where they are in the buying process, you can help them move more easily through the process and, even more importantly, make better buying decisions. This also means, by the way, that you're likely to win more sales.

Wednesday, February 10, 2010

Automating B2B Marketing

Three forces are shaping today's B2B marketing landscape - the growing power of B2B buyers, the need to make marketing messages and materials relevant to potential buyers, and the recent emergence of technology tools that automate many marketing tasks. I've covered buyer empowerment and the importance of relevant marketing communications in previous posts. This post will focus on marketing automation technologies.

By the way, if you want to dig deeply into the topic of B2B marketing automation, I highly recommend that you read David Raab's Customer Experience Matrix blog. This post will briefly cover the major points.

B2B marketing automation systems - also called demand generation systems - are software tools that are designed to help marketers acquire, nurture, qualify, and distribute leads to sales. Demand generation systems automate four types of B2B marketing tasks.

Lead Generation - All demand generation systems enable users to create and execute lead generation e-mail campaigns. Demand generation systems can also host landing pages and the forms that are used to capture campaign responses, and they can use cookies to track visits to Web pages at a company's main Website in addition to the campaign landing page(s). Support for channels other than e-mail and Web pages is inconsistent. For example, if a lead generation campaign involves direct mail, the direct mail component must usually be managed outside the demand generation system.

Lead Nurturing - Lead nurturing is the process of communicating with prospects on a regular basis until they are ready to buy. For example, a lead nurturing program might involve sending a prospect a particular sequence of e-mails on a specified schedule. Demand generation systems automate the execution of lead nurturing programs. Automated lead nurturing is probably the most important feature of demand generation systems because nurturing programs are difficult to implement without automation.

Lead Scoring - Lead scoring is a method of qualifying prospects by assigning numerical "points" based on information provided by the prospect and on the prospect's behavior (e-mails opened, white papers downloaded, Webinars attended, etc.). All demand generation systems allow users to define scoring criteria and assign scoring values to those criteria.

Lead Distribution - When a prospect's lead score reaches a pre-determined value, the lead is deemed to be sales ready, and the demand generation system passes the lead to sales. Other events can also be used to trigger a hand-off to sales. Demand generation systems are usually configured to distribute leads to sales automatically when these triggering events occur. Most, if not all, demand generation systems offer integration with salesforce.com, and some vendors offer integration with other sales automation and CRM products. This integration makes distributing leads virtually seamless.

Forrester Research has estimated that only 2 to 5 percent of B2B companies have implemented demand generation systems. My take is that this market is on the cusp of a huge growth spurt. I believe this growth will occur for three reasons. First, demand generation systems exist for virtually all sizes of B2B companies. Monthly costs start as low as $200. Second, all of the major demand generation systems are sold as a hosted solution, which means that companies don't need extensive IT resources to implement and use them. And finally, there is a growing body of evidence from early adopters that demand generation systems can significantly improve marketing and sales performance.

If you are a corporate marketer and you haven't already invested in a demand generation system, you should start looking at these technologies now. If you are a marketing services firm, you need to be thinking about how you can help your clients leverage the capabilities of demand generation technologies.

Monday, February 8, 2010

There's No Substitute for Relevancy

In my previous post, I described some of the characteristics of today's B2B buyers, and I said that because of easy access to information, business buyers now essentially control the buying process. Buyer empowerment is one of three forces that are shaping the B2B marketing landscape. Just like moving water shapes the physical world, these three forces are redefining what effective B2B marketing is and how it's done. The third force is marketing automation technologies, and I'll cover this topic in my next post.

The second force driving fundamental change in B2B marketing is the growing need to create and use marketing communications and materials that are relevant to potential buyers. Relevance has become a necessity for two reasons. First, our environment is filled with marketing and advertising clutter, and the clutter is getting worse, not better. As marketing clutter increases, the effectiveness of generic, self-promotional marketing messages decreases. B2B buyers simply tune them out. Second, today's B2B buyers are incredibly busy. Their time is their most precious commodity, and they protect it at all costs. If a buyer doesn't see your message as relevant, he or she will ignore it.

The dictionary definition of relevant is, "having significant and demonstrable bearing on the matter at hand." Therefore, to be relevant, a marketing message must speak directly to an issue, problem, challenge, or outcome that's important, or at least interesting, to the potential buyer.

To create relevance, you have to know two things about your potential buyer. First, what role does the buyer play in his or her organization, and how will your products or services create value for this specific buyer? How do they make his life easier? What problems do they help her solve? Most B2B sales involve several "buyers" and these buyers will have different needs, issues, and problems. This means that you need to create marketing messages and materials that are customized for each type of buyer you typically encounter. In an upcoming post, I'll describe how you create buyer "personas" and then develop marketing materials for each persona.

The second thing you need to know is where the buyer is in the buying cycle. This is important because the kind of information that a potential buyer will find relevant changes as he or she moves through the buying process. For example, a prospective buyer who has just started to focus on a particular problem will likely welcome a white paper that explains the ramifications of the problem and the benefits of solving the problem. That buyer would not be as likely to welcome a product brochure at this stage of the buying process. So your marketing messages and materials must also speak to where your prospect is in the buying cycle.

The growing need to make marketing messages and materials relevant multiplies the amount of marketing content you need and, therefore, complicates the B2B marketing process. But relevance is absolutely essential to reach today's B2B buyers.

Wednesday, February 3, 2010

The Age of the Self-Directed Buyer

The starting point for understanding the new face of B2B marketing is the fundamental shift in power from B2B sellers to business buyers. Now more than ever before, prospective buyers control the buying process. They decide when and how they will access information and research purchasing decisions and when and how they will interact with potential suppliers.

A good analogy is the self-directed learning courses offered at many universities. The course requirements are spelled out, textbooks and other course materials are identified, and mileposts (required exams, papers, etc.) are established. Then students study at their own pace to complete the course. In the world of B2B marketing, we're now living in the age of the self-directed buyer.

The driving force behind the empowerment of business buyers is the Internet. The Web has put a huge volume of information about almost every conceivable product and service at the fingertips of business buyers, and they've become convinced that they can find whatever information they need, whenever they need it, on their terms. In fact, the Internet has become the primary source of information for many business buyers. According to a survey by Forbes Insights, 81 percent of business executives who are under 50 years of age use the Internet daily to gather business information.

Last fall, Adam Needles provided a detailed discussion of the changing nature of B2B buyers in an excellent post at his Propelling Brands blog. He identified four major characteristics of today's B2B buyer.

  • B2B buyers are using online sources of information (especially early in the buying cycle) to research purchasing decisions, and they are delaying conversations with vendor's sales reps until late in the cycle.
  • B2B buyers are leveraging social media to collect information and opinions about prospective vendors, products, and services.
  • B2B buyers are using several communications channels to research purchasing decisions.
  • B2B buyers are increasingly part of a "buying unit" rather than acting as a single decision-maker.

The bottom line is that easy access to information makes business buyers much less dependent on sellers than in the past, and this means that many traditional marketing and sales techniques and practices don't work as well as they once did.

What is working today? That's what we'll discuss in future posts.