Focus on "High-Yield Behaviors" to Drive Revenue Growth

In my previous two posts, I've discussed the expanding role of marketing in driving business growth. Recent research shows that many marketing leaders now believe they are primarily responsible for leading growth efforts in their organization, and that CEOs and other senior executives share this belief.

The recent research also shows, however that leading growth is more of an aspirational goal than a current reality for most marketers. Overall, the studies suggest that most marketing leaders are still relying primarily on conventional marketing communication tactics and tools to drive growth.

Against this backdrop, a book published last fall by the American Marketing Association describes an interesting and arguably novel approach to identifying and exploiting growth opportunities. The Organic Growth Playbook by Bernard J. Jaworski and Robert S. Lurie is the first in a series of seven books to be published by the AMA that will address complex, challenging, and difficult-to-solve marketing problems.

The basic premise of The Organic Growth Playbook is that the conventional approach to marketing - which is based largely on attempting to differentiate a product or service in the minds of potential buyers - isn't a reliable way to drive consistent organic revenue growth for most companies. The authors contend that in addition to product positioning and differentiation, marketers should focus on identifying the specific behaviors of potential buyers that have a disproportionate impact on the ultimate purchase decision, and then work to persuade prospects to engage in those behaviors.

The first step in the process described in The Organic Growth Playbook is to map the buying process waterfall. This step provides the essential foundation for the rest of the process, and in addition, the insights produced by mapping the buying process waterfall constitute one of the main components of the market expertise that I discussed in my last post.

Mapping the buying process waterfall is a two-step process. The first step is to identify all of the activities that are performed by any of the potential buyers in a given market from the time they become aware of a need they may need to address until a solution is purchased (or not purchased). These activities are arranged sequentially, with the earliest activities at the top of the map, and later activities - including the ultimate purchase decision - at the bottom. Activities that potential buyers use for a similar purpose, and that happen at about the same time - are grouped by their position or stage in the buying process.

The second step is to identify the frequency with which each activity in the buying process occurs. This step is critical because it enables the marketing team to measure the flow of potential buyers through the buying process and identify what paths different types of buyers tend to take.

The book's authors argue that in most buying processes across most industries, there are one or two critical buyer behaviors that have a decisive impact on the final purchase decision. The authors call these activities "high-yield behaviors," and they become the focal point of marketing and sales efforts.

The following diagram presents a greatly oversimplified version of a buying process waterfall map:

In this diagram a high-yield behavior (Target Behavior X) is shown at the top, and the ultimate purchase decisions are shown at the bottom. The diagram also shows the percentages of buyers who made each purchase decision segmented by whether or not they engaged in Target Behavior X. As the diagram shows:

• Potential buyers who engage in Target Behavior X are twice as likely to purchase the company's product (60% vs. 30%); and
• Potential buyers who engage in Target Behavior X are only half as likely to exit the buying process without making a purchase (20% vs. 40%).

In this example, Target Behavior X has a significant impact on the company's ability to earn more sales and generate revenue growth. Therefore, a focal point of the company's marketing and sales efforts should be to persuade more potential buyers to engage in the desired behavior. And because this type of analysis considers all of the potential buyers in a given market, it can enable marketing and sales leaders to uncover growth opportunities they had not previously considered.

Top illustration courtesy of Bernard Goldbach via Flickr CC.

Both Market and Customer Expertise are Needed to Drive Growth

Marketing has always been associated with revenue generation and growth, but a rising number of marketing leaders now contend that business growth is the raison d'etre of the marketing function. Recent research shows that many marketing leaders believe they have become primarily responsible for driving growth in their organization, and that this belief is shared by CEOs and other senior executives.

Despite this view, however, the recent research also suggests that most marketers have not moved beyond conventional marketing tactics in their efforts to drive growth. For example, in a recent survey of CMOs and other senior marketing leaders by the CMO Council and Deloitte, more than 40% of the respondents said they were working on brand shaping and campaign execution activities, but only 6% said they were actively involved in growing revenue across all business activities.

If both senior marketing leaders and other C-suite executives see the need for marketing to play broader role in growth, why have so few CMOs taken up the challenge? Many CMOs want to be growth leaders, but haven't been given the formal authority to play that role. In these circumstances, they key is to build credibility with the CEO and other members of the senior leadership team and thereby earn the right to exert influence over company-wide growth initiatives.

Some industry commentators have argued that the most effective way to expand the impact of marketing on growth is to focus on customer insights. A recent article in the Deloitte Review urged CMOs to "relentlessly pursue customer expertise" and use that expertise to gain influence with other business functions. The authors contend that marketing leaders should develop expertise about the entire customer journey (including those parts owned by other business functions) and then leverage that expertise to build partnerships with other company leaders to improve customer experiences.

Both Customer and Market Expertise are Necessary

Developing expertise about the customer journey is obviously a critical part of marketing's job, but it's not the whole job. In order to identify and effectively exploit all growth opportunities, marketing leaders need to develop market expertise as well as customer expertise.

Market expertise includes customer insights, but it's broader in several ways. As the term implies, the primary objective of market expertise is to understand the economic and competitive characteristics of the market in which the company operates. Developing market expertise requires marketing leaders to perform an analysis of several factors, some of which are:

• What is the size of the market?
• How fast is the overall market growing? Are some segments of the market growing significantly faster than others?
• Who are the major competitors in the market? Is the market fragmented, or is it dominated by a few large competitors?
• How profitable is the overall market? Are some market or customer segments significantly more profitable than others?
• Is the market composed of a large number of small customers or a relatively small number of larger customers?
• How easy or difficult is it for new competitors to enter the market?
• Is the market vulnerable to substitute products and/or services?

This list is far from complete, but it provides an indication of the kinds of issues that marketing leaders should be analyzing on a regular basis.

Focus on Critical Buyer Behaviors

Market expertise also requires a clear understanding of the behaviors of potential buyers. The recent emphasis on delivering outstanding customer experiences has elevated the importance of understanding how and where customers and prospects interact with the business and what they are trying to accomplish during those interactions. Customer insights like these can be used to improve customer experiences, which will contribute to growth.

These insights are important, but growth-oriented marketers also need to understand the behaviors of potential buyers who do not become customers. More specifically, marketers need to identify whether potential buyers who become customers engage in different behaviors (or certain behaviors more frequently) than potential buyers who do not become customers. In many cases, these behavioral differences will reveal where marketers can have a major impact on business growth.

In my next post, I'll discuss how identifying and quantifying the behaviors of potential buyers can help marketers identify untapped growth opportunities.

Illustration courtesy of OTA Photos (tradingacademy.com) via Flickr CC.

Have Marketers Fully Embraced the Growth Challenge?

The role of marketing was a major topic of conversation last year, and there is a widespread belief that marketing's scope of responsibility has expanded. In the August 2018 edition of The CMO Survey, eight out of ten (79.6%) of the survey respondents said that the role of marketing in their organization had broadened over the past five years.

Marketing's responsibility for orchestrating customer experiences has been widely discussed for several years. More recently, industry commentators and practicing marketers have become focused on the role of marketing in driving business growth.

In a recent survey of over 200 CMOs and senior VPs of marketing by the CMO Council and Deloitte, 27% of respondents said that the CMO is primarily responsible for the growth strategies and revenue generation for their organization. The CEO came in second at 22%.

Marketing leaders also believe that other senior business leaders expect them to play a leading role in growth. When participants in the CMO Council/Deloitte survey were asked what level of expectation there is among senior executives and board members for marketing to be a growth driver, 35% of respondents put the expectation level at high, and 33% said senior company leaders think growth is the primary mandate of marketing.

Some will argue, of course, that this is nothing new. After all, it's fair to say that growth has always been the "prime directive" of marketing. What's new is that marketing and other business leaders now believe that marketing needs to expand the tools it uses to drive revenue growth.

So as we begin a new year, it's appropriate to ask two basic questions about the expanded role of marketing. First, to what extent have marketing leaders embraced the growth challenge and adjusted their activities to play a larger role in growth? And second, what should be the role of marketing in driving growth, and what do marketing leaders need to do to fulfill that role?

Where Do We Stand Today?

The recent research indicates that leading business growth is more of an aspirational goal than a current reality for most marketers. Overall, the studies show that most marketing leaders are still relying on conventional marketing communications tools to drive growth, and they remain much less involved in other business activities that have a significant impact on growth.

For example, in the latest edition of The CMO Survey, senior marketing leaders from B2B and B2C companies were asked to identify the activities or functions that marketing is primarily responsible for in their company. The top four activities identified by survey respondents were:

• Brand (91.4% of respondents)
• Digital marketing (82.7%)
• Social media (82.7%)
• Advertising (79.6%)

Other activities identified by more than 50% of survey respondents included promotion (71.6%), positioning (71.6%), public relations (69.1%), and marketing analytics (68.5%)

In contrast, only 40.1% of respondents indicated that marketing is primarily responsible for revenue growth, and even fewer respondents indicated that marketing has primary responsibility for market entry strategy (38.9%), new products (34.0%), and market selection (26.8%).

The CMO Council/Deloitte survey referenced earlier paints a similar picture. That research found that many marketing leaders have identified some steps they need to take in order to drive growth, which include developing strategies and plans to improve revenue and gain market share. The research also found, however, that most marketers are falling back into their "brand comfort zone." The survey report states:

When asked what the role of marketing is specific to growth, only 6 percent of respondents say they are driving routes to revenue across all facets of the business globally, only 4 percent are providing sales intelligence and key account insight support, and only 13 percent are working to retain and grow customer relationships through improved customer experiences. Instead, many marketers are defining and shaping the brand (44 percent) and executing campaigns to attract customers and predispose prospects (42 percent). . . Overall, despite the clear intention to drive revenue, brand and campaign win out in action. . ."

These survey findings suggest that most marketing leaders have not moved significantly beyond "conventional" marketing tools and tactics in their efforts to drive business growth. So what is the "right" role of marketing in business growth, and what steps should marketing leaders take first to fulfill that role? I'll address this question in my next post.

Top image courtesy of ccpixs.com (Creative Commons License).