Sunday, July 27, 2014

Inbound Marketing After 9 Years - From Exaggerated Expectations to Core Marketing Strategy

Inbound marketing will be ten years old in 2015. The term inbound marketing was coined in 2005 by Brian Halligan, the co-founder and CEO of HubSpot. In reality, however, some aspects of what we now call inbound marketing are much older.

It's reasonable to argue, for example, that inbound marketing began in 1886 when Reuben H. Donnely produced the first yellow pages directory featuring business names and phone numbers categorized by types of products and services. Consumers interested in a particular product or service could use the directory to find area businesses offering that product or service. The communication channels have certainly changed, but the basic objective of being "findable" by prospective customers is essentially the same.

On many occasions over the past nine years, marketing pundits have proclaimed inbound marketing to be the new paradigm of marketing. They've argued that traditional outbound marketing is fundamentally broken, and that inbound marketing is now the most effective and efficient way to create engagement with potential customers. Some pundits have contended that companies should essentially abandon traditional outbound marketing efforts and shift entirely to an inbound marketing strategy.

In my view, some of the hype surrounding inbound marketing has been overdone, and at least some marketing pundits have made unrealistic claims regarding the benefits that inbound marketing will deliver.

Like many innovations, inbound marketing is moving through a version of the Gartner hype cycle. When an innovation is first introduced, the initial enthusiasm (driven by hype) often leads to a "peak of exaggerated expectations" where users/adopters expect far more than the innovation can realistically deliver. When these unrealistic expectations aren't met, what follows is a "trough of disillusionment" where some users/adopters decide that the innovation is worthless and abandon it entirely. At this point, some users/adopters will develop a more realistic view of what benefits the innovation can deliver, and they will do the work necessary to become increasingly proficient at using the innovation to gain these benefits.

So, after nine years, what do we know about the realistic value of inbound marketing and the role it should play in a B2B company's overall marketing effort?

First, it's now clear that inbound marketing is the most effective and efficient way for most B2B companies to acquire new leads. Notice that I said the most effective and efficient way for most companies. In some cases, inbound marketing will not be the best way to generate new leads. For example, if your company sells specialized, complex, and/or expensive capital equipment, consulting services, or information technologies, the number of prospects that are qualified to buy from you is relatively small. In this situation, an effective lead generation program is most likely a combination of inbound and outbound marketing and prospecting by sales reps or business development representatives.

Second, a comprehensive marketing effort for most B2B companies will encompass more than lead acquisition, and inbound marketing is not particularly well-suited for performing some of these other important marketing functions. Therefore, even those companies that rely heavily on inbound marketing for lead acquisition will still use outbound marketing tactics and methods for several purposes. For example, lead nurturing is a critical marketing function for B2B companies that offer complex products or services and have lengthy sales cycles. E-mail is the workhorse channel for lead nurturing programs, and nurturing e-mails are an outbound marketing tactic.

The bottom line? Inbound marketing should be a critical part of the marketing efforts at most B2B companies, and it's likely to become even more important in the future as "digital natives" increasingly assume decision-making roles in business enterprises. However, inbound marketing will not constitute a complete marketing solution, at least for the foreseeable future.

Sunday, July 20, 2014

What Milkshakes Can Teach Us About Marketing

The first step to designing an effective marketing strategy and creating compelling marketing content is to understand what your potential buyers are trying to accomplish when they purchase products or services like those you provide. In most cases, people don't buy a product or service because they want that product or service itself. More often, when people become aware of a job that they need to get done, they look for a product or service that they can "hire" to perform the job. Theodore Levitt, the legendary marketing professor at the Harvard Business School, captured this concept in a memorable way when he said, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole."

Clayton Christensen and Michael Raynor also provided a memorable example of hiring a product to get a job done in The Innovator's Solution. In their example, a fast-food restaurant chain wanted to increase sales of milkshakes, and it commissioned market research to determine how to accomplish this goal. The most surprising finding of the research was that almost half of all milkshakes were purchased in the early morning. The milkshakes were usually the only item purchased, and they were rarely consumed on the premises.

Digging a little deeper, the researchers found that most of the morning milkshake customers were people on their way to work. Many of the customers faced a long commute, and they needed something to make the drive more interesting. In addition, while they weren't necessarily hungry when they bought the shake, they knew if they didn't eat something, they would be hungry by mid-morning. Most of these customers also faced similar constraints. They were in a hurry, they were usually wearing their business clothes, and they only had one free hand.

These customers sometimes "hired" other foods to fill their morning needs, but most of the alternatives had significant disadvantages. For example, bagels got crumbs on their clothes, and breakfast sandwiches made their hands and the steering wheel greasy. It wasn't so much that these customers "liked" milkshakes better than bagels or breakfast sandwiches, but milkshakes were better than these alternatives at performing the job the customers needed to get done.

It's not difficult to find examples of this idea in the business world. For example:

  • Most business owners don't really want accounting software, but many buy such software because they realize they need to generate invoices faster, know how much they owe to vendors, and understand how well their company is performing financially. Accounting software enables them to perform these jobs more efficiently than a manual accounting system.
  • Most business owners don't really want property insurance, but most will purchase insurance because they know they need to protect themselves financially in case of a fire. Insurance is the best-available tool for performing this job.
  • Most business owners don't really want a company brochure, or a direct mail campaign, or for that matter, a website, but many will invest in these marketing resources because they see them as effective tools for performing the job of increasing sales.
As marketers, it's easy for us to forget that most potential buyers aren't really interested in our products or services per se. What they are (or can become) interested in is what those products or services can help them accomplish. Our products or services are simply the means to an end, and it's critical to keep this fact in mind when planning our marketing efforts. To use Professor Levitt's analogy, our marketing strategy and our marketing content should be more about quarter-inch holes than quarter-inch drills.

To develop an effective marketing strategy and create compelling content, you have to know what jobs your prospects are trying to get done, why those jobs are important, what happens if those jobs don't get done, and what issues or problems can prevent your prospects from performing those jobs.

Sunday, July 13, 2014

For Better Marketing Decisions, Think Incrementally

Measuring marketing return on investment (MROI) has become increasingly popular, as marketers face growing pressures to demonstrate the value of their activities and programs. Marketers are calculating and using MROI for a variety of reasons, including:

  • To measure the effectiveness of individual marketing campaigns or programs
  • To demonstrate and prove the value that marketing contributes to the company
  • To justify and/or defend marketing budget levels
All of these reasons are valid, but the most important reason to use MROI is to improve the quality of marketing decisions. No single performance metric, including MROI, provides all of the information that marketers need for most significant decisions. However, because MROI is a ratio that compares economic returns with required investments, it has a unique ability to help marketers:
  • Determine whether a particular marketing program or mix of programs should be undertaken
  • Compare the projected and/or actual results of multiple and often dissimilar marketing activities or programs. This enables marketers to make sound choices when faced with alternative marketing investments.
Equally important, MROI can help marketers determine at what level a particular marketing program should be funded and executed. Unlike many investments, most marketing programs can be executed at any of several levels. For example, if your marketing database contains 10,000 contacts, you can run a direct mail campaign that is directed at all 10,000 contacts or at only a portion of the database. MROI enables you to analyze projected campaign performance at incremental levels.

To illustrate how this works, take a look at the example shown in the following table. This table contains the projected financial attributes of three alternatives for a prospective direct mail campaign. Option 1 would involve a mailing to 2,500 contacts, Option 2 would target 5,000 contacts, and Option 3 would target 10,000 contacts. For this example, we'll assume that the ROI Threshold (the minimum acceptable ROI for a marketing investment) is 25%.

Based on the projected results shown in the table, the company would not choose Option 1 because the estimated ROI is below the ROI Threshold. The projected ROI's for Option 2 and Option 3 exceed the ROI Threshold, so it might appear that either would be a reasonable choice. Even though Option 3 has a slightly lower projected ROI than Option 2 (26% vs, 28%), it would still exceed the ROI Threshold.

The real insight comes when you look at the lower portion of the above table, which shows the incremental financial performance differences between Option 1 and Option 2 and between Option 2 and Option 3.

Option 2 requires an additional investment of $30,000 (compared to Option 1), but it will produce a 41% ROI on that incremental investment. Option 3 requires an additional investment of $60,000 (compared to Option 2), but it will only produce a 23% ROI on that incremental investment. Since the incremental ROI generated by Option 3 is below the ROI Threshold, the company should typically choose Option 2 over Option 3.

In reality, the optimum "size" of this direct mail campaign falls between Option 2 and Option 3 (in other words, somewhere between 5,000 and 10,000 contacts). With additional data, that optimum size can easily be determined.

Because marketing programs can be executed at different levels, measuring MROI on an incremental basis can be a powerful tool for improving marketing decision-making and performance.

Sunday, July 6, 2014

Great Marketing Content Always Requires Trade-Offs

In a landmark article for the Harvard Business Review, Michael E. Porter wrote that the essence of business strategy is choosing to perform business activities differently - or to perform different activities - than competitors. Porter also argued that a powerful strategy always involves trade-offs. If you design and arrange your activities to excel a delivering a specific value proposition, you will be less able to effectively and efficiently deliver other types of value. Therefore, strategy is about deciding both what to do and what not to do.

A variation of Porter's principle applies to content marketing. To be highly effective, each content resource you develop must be designed to address the concerns and interests of a specific target audience. And when a content resource is truly designed for a specific target audience, that resource will inevitably be less appealing to other audiences, some of which may be important to your company. It can be tempting to design content resources that will appeal to multiple audiences, but this is usually a mistake. The title of a recent blog post by Joe Pulizzi makes the point clearly:  "If Your Content Marketing is for Everybody, It's for Nobody."

Whenever I talk with prospective clients about starting a content marketing program, one of the first questions they ask is:  "Why can't we create one content resource, say a white paper or an e-book, that tells the whole story? It could include a description of the problems we can solve and the benefits our solution can provide, and we could include a couple of customer success stories to demonstrate that we can deliver what we promise."

At this point in the conversation, the image of a Swiss army knife always flashes in my mind. As you probably know, a Swiss army knife is a tool that's about the size of a large pocket knife. In addition to regular knife blades, it has several other attachments, such as a bottle opener, a can opener, a screwdriver, and a file. So, a Swill army knife is a real multi-tasking tool and a handy thing to have on a camping trip or a hike.

Some B2B marketers believe they can create one content resource that will appeal to all of their target audiences and fill all (or most) of their content needs. In essence, they want to create the content marketing equivalent of a Swill army knife. Unfortunately, however, the Swiss army knife approach to content marketing doesn't work well. Here are two of the primary reasons.

Diluted Relevance - When you create a content resource that's designed for multiple audiences, it will inevitably include information that's not very relevant or interesting to some of those audiences. Suppose, for example, that you offer a technology product that must be sold to plant managers, IT directors, and CFO's. Each of these buyer types will have distinct concerns and priorities. If you create one content resource for all of these buyer types, you are essentially asking each potential buyer to wade through material that doesn't particularly interest him or her in order to find the information that addresses his or her primary concerns.

Excessive Length - Even if the relevance problem didn't exist, when you try to "cover all the bases" in one content resource, you are likely to end up with a very long resource. The problem with long content resources is that most potential buyers now have short attention spans. They usually prefer to consume content in small doses, especially when they are in the early stages of the buying process. Most early-stage buyers simply won't be willing to invest the time it takes to read a 50-page white paper or e-book.

The bottom line is that developing good marketing content always requires you to make trade-offs. When you develop a content resource for a specific target audience, it probably won't be appropriate of other audiences. For an effective content marketing program, you'll need distinct resources for most of your primary audiences.