Sunday, April 25, 2021

Use a "Barbell" Strategy for Better B2B Marketing

Many professional investors use a "barbell" strategy when constructing their portfolios. The barbell strategy was popularized in the early 2000's by Nassim Nicholas Taleb. Taleb has been a derivatives trader and a hedge fund manager, but he is best known as the author of The Black Swan and several other books regarding randomness, probability, and uncertainty.

The essence of the barbell strategy is investing simultaneously in extremely low-risk assets (such as U.S. Treasury bills) and extremely high-risk assets (like stock options or IPO's), while avoiding middle-of-the-road choices. The assets at the ends of the barbell have very different characteristics, and the investments are made with very different objectives in mind. Proponents argue that over time, a barbell strategy increases the odds of achieving superior overall returns.

The Barbell Strategy for B2B Marketing

A barbell is also an apt visual metaphor for B2B marketing. As the following diagram shows, the two components of the B2B marketing barbell are brand marketing and demand generation marketing. We now have persuasive evidence that companies must excel at both to produce superior marketing results.

The barbell metaphor is appropriate because brand marketing and demand generation differ in several major ways. Most importantly, they have fundamentally different objectives.

The objective of most brand marketing programs is to evoke changes in the minds of potential buyers. For example, such programs are often designed to:

  • Make potential buyers aware of the brand (company or product)
  • Cause potential buyers to remember or think of the brand when a need or buying situation arises
  • Cultivate favorable perceptions of the brand in the minds of potential buyers 
In contrast, the objective of demand generation programs is to elicit a behavioral response from potential buyers who are engaged in - or are at least ready to begin - an active buying process.
These dissimilar objectives call for different marketing tactics and messaging, and the following table highlights some of the important differences. For example, because brand marketing is primarily intended to influence the feelings and perceptions of potential buyers, the messaging usually needs to have a more emotional appeal. Demand generation messaging, on the other hand, usually works better when it is more rational.

Many companies have traditionally used separate teams for brand marketing and demand generation. This approach enables them to develop the specialized knowledge and skills needed to perform both marketing disciplines more effectively. Unfortunately, this approach often leads to the development of organizational silos that result in a disconnect between the company's brand marketing and demand generation efforts.
In a recent article, four McKinsey & Company consultants argued that this disconnect can have important negative implications. They wrote:  "For many companies, this split is inhibiting growth aspirations. Budget and impact conversations often become contentious:  performance marketers tout their ability to drive clicks while brand builders argue for longer-term investments . . ."
Some marketing thought leaders have argued that the solution to this problem is to integrate brand marketing and demand generation to create a single, so-called "full funnel" marketing discipline. The risk with this approach is that the specialized knowledge and skills required to excel at each discipline will be diluted.
The better solution is to improve the coordination of brand marketing and demand generation programs by improving the relationship between the two teams. Once again, a barbell provides a useful visual metaphor. Every barbell has a bar, and the following diagram depicts the major components of the bar that connects brand marketing and demand generation.

As the diagram shows, there are four keys to elevating the relationship between brand marketing and demand generation teams.
Recognized Interdependence - Brand marketers and demand gen marketers must recognize that the two functions are deeply interdependent, that they need each other, and that coordinated efforts are essential for success.
Shared Understanding - Marketers in both disciplines need to have a shared understanding of the fundamental factors that make up the marketing environment. This includes the brand purpose, the positioning of the brand (i.e. core value propositions), and the structure of the market (size, competitive landscape, customer buying processes, etc.).
Ongoing, Self-Directed Collaboration - Brand marketers and demand gen marketers need to work collaboratively on an ongoing basis, and this collaboration needs to occur naturally and spontaneously, at all levels of both functions, whenever and wherever it's needed.
Linked KPI's - Because of the significant differences between brand marketing and demand generation, it's not feasible for the two functions to use the same exact set of performance metrics. However, the two functions should share some KPI's, and it's particularly important to measure the impact of brand marketing on the performance of demand generation programs.

Top Image Courtesy of Lance Goyke via Flickr (CC).

Sunday, April 18, 2021

Four Essential Attributes of Outstanding B2B Customer Experience

 Merkle B2B and two of its constituent firms, B2B International and gyro recently published the results of research that focused on what is required to consistently deliver world-class customer experiences, and where most companies have work to do to meet those requirements.

The research report is based on an analysis of 5,000 previous studies relating to customer experience and on over 3,000 interviews with B2B buyers and key decision-making influencers in North America, Europe, and Asia-Pacific. The interviews examined over 5,000 brand experiences involving the purchase and use of financial services, manufactured goods, professional services, and technology solutions.

The report begins with a rather sobering assessment of the overall quality of B2B customer experiences. The authors observed that over 35% of the interviewees with large companies (1,000 or more employees) said that buying from B2B suppliers is often a difficult process. So it's not surprising that the resulting customer experience is often mediocre. An analysis of Net Promoter Scores found that two-thirds of B2B customers have a passive or negative customer experience.

Merkle's report summarized the state of B2B customer experience in stark terms:  "We have established that the process of identifying, researching, choosing, and using a B2B supplier is rarely impressive, often ordinary, and frequently suboptimal."

The Four "Brand Superpowers"

Merkle identified four factors that collectively produce world-class customer experiences - Reliability, Understanding, Enrichment, and Preeminence. The report refers to these factors as "brand superpowers," and it places each superpower into one of two groups based on the type of value delivered.

Reliability and Understanding are superpowers that deliver "business" value directly to the customer organization, while Enrichment and Preeminence provide "personal" value to individual buyers, influencers, and users. Here's a brief overview of the attributes of each superpower.

Reliability - Merkle uses the term Reliability to describe company and product/service attributes that address basic business requirements. So this superpower includes good product quality, dependable customer service, and appropriate product/service pricing. If we think in terms of a hierarchy of needs, Reliability would be at the base.

Understanding - In Merkle's framework, Understanding refers to the quality of the relationship between a company and the business organizations it serves. Merkle says that Understanding includes attributes such as tailoring, adaptability, service, and aligned business cultures and philosophies. The report puts it this way:  "Where Reliability speaks to performance, Understanding is concerned with experience - the whole business-to-business customer journey must work in a seamless and integrated way."

Enrichment - Enrichment refers to a company's ability to make work life easier or better for the individuals in the customer organization who use or otherwise interact with the company or its product or service. So Enrichment provides personal value because the benefits are experienced by individuals, rather than by the customer organization. Enrichment also includes enhancing the professional knowledge and skills of individuals through educational resources and events.

Preeminence - In Merkle's model, Preeminence is the superpower that enables a company to enhance the professional status of the people in the customer organization who made the decision to do business with the company. A company that succeeds with this superpower is usually a recognized innovator and thought leader in its field, and if it also excels at Reliability, Understanding, and Enrichment, the people who made or influenced the decision to do business with the company will see their status enhanced in the eyes of their colleagues.

The B2B decision makers interviewed for the Merkle study generally gave companies good marks for delivering on the Reliability superpower, but they rated performance on the Understanding superpower as no more than satisfactory. The interviewees rated performance on almost every aspect of the Enrichment and Preeminence superpowers as unsatisfactory.

The idea that companies must provide both "business" and "personal" value isn't new. For example, a 2013 study by CEB (now part of Gartner) and Google also demonstrated that providing "personal" value is critical. This study tested the impact of more than seventy brand benefits on a range of "commercial outcomes," including familiarity, consideration, preference, purchase, repeat purchase, premium payment, internal advocacy, and external advocacy.

The researchers divided the benefits into two categories - business value benefits (those that flowed to the customer organization), and personal value benefits (those that flowed to individual "buyers"). The study found that personal value benefits had twice as much impact (lift) on commercial outcomes as business value benefits.

The Merkle research highlights the importance of the personal dimensions of B2B customer experience, and it provides a helpful framework for marketing, sales, and CX professionals to use when evaluating the quality of the experiences they are providing.

Image courtesy of frontriver via Flickr CC.

Sunday, April 11, 2021

How Brand Marketing Improves B2B Financial Performance

Persuasive evidence shows that most B2B companies will maximize growth by balancing the use of long-term brand marketing and short-term demand generation marketing. Yet few companies have adopted this approach. This post explains why the disconnect exists, and what to do about it.

Earlier this year, I wrote about the "Cold War" between B2B marketers (and agencies, consultants, and technology providers) who focus on the various forms of demand generation marketing, and those who advocate the importance of brand marketing.

It's clear that the proponents of demand generation marketing have been winning the war. For the past several years, the primary focus of most B2B marketers has been on using data and technology to improve the performance of their demand generation programs. Meanwhile, only a relatively small cadre of marketing thought leaders have continued to make the case for B2B brand marketing.

The preference for demand generation marketing is due to several factors.

Demand for Short-Term Results - Most B2B marketing leaders are under intense pressure to prove the value of marketing programs, and more specifically, to execute programs that will produce results quickly. Many marketing leaders emphasize demand generation programs because they usually produce measurable results faster than brand marketing programs.

Ease of Measurement - The performance of demand generation programs is relatively easy to measure. Such programs are usually designed to elicit a behavioral response from potential buyers, and those behaviors are easy to track. And because demand generation programs produce results quickly, the measurement timeframe is short. In contrast, the objective of most brand marketing programs is to evoke a change in the minds of potential buyers. For example, they are often designed to raise brand awareness and increase brand salience. These objectives are vital for growth, but they are difficult to measure because they don't involve observable behaviors.

Research Focus - Most of the research regarding the benefits of brand marketing is focused on B2C brands, while there is an abundance of research about the benefits of improving the effectiveness of B2B demand generation programs. This imbalance of evidence makes it easier for B2B CMOs to persuade their CEO to invest in demand generation.

Traditional Perceptions - The traditional view is that B2B buying decisions are primarily rational, and that personal selling is the primary driver of revenue generation. These perceptions cause many B2B company leaders to undervalue the contribution of brand building to revenue growth.

How Brand Marketing Creates Value

In order to convince CEOs and other senior company leaders to make appropriate investments in building the brand, B2B marketing leaders must be able to explain how brand marketing will drive important business outcomes. The chart below illustrates how effective brand marketing contributes to revenue growth, increased profitability and cash flow, and ultimately to increased company value.

The model depicted in the chart was inspired by the brand valuation model developed by the Marketing Accountability Standards Board (MASB), an organization composed of marketing industry professionals and marketing academics. The mission of the MASB is to develop evidence-based standards for measuring marketing performance and linking that performance to business financial outcomes. The chart specifically relates to the role of brand marketing in a B2B company.

This chart illustrates three major points about B2B brand marketing.

Customer Preference - Cultivating customer preference is the linchpin goal of all B2B brand marketing, and in fact, it's the primary goal of all forms of marketing. Customer preference is what ultimately drives sales, and in B2B, customer preference is formed from a combination of rational and non-rational factors.

Brand Marketing Operates Directly and Indirectly - Effective brand marketing operates directly to increase buyer awareness and familiarity and to cultivate customer preference. But it also works indirectly by improving the performance of demand generation programs, as research has shown.

Impact on Revenue/Profit - By  cultivating increased customer preference, effective brand marketing impacts four key measures of revenue and profit growth. More specifically, an effective brand marketing program will contribute to increases in:

  • The number of sales
  • The velocity of sales (shortened sales cycles)
  • The average gross margin earned on sales (by reducing price sensitivity)
  • Market share
Parting Thought

Brand marketing is an integral part of a complete marketing strategy in a B2B company, but its importance and value are often not appreciated. The model discussed above can help B2B CMOs have meaningful conversations with their CEO and other senior company leaders about the need to make sufficient investments in building the brand. 

Top image courtesy of EdgeThreeSixty via Flickr (CC).

Sunday, April 4, 2021

2021 Looks To Be a Rebound Year for Marketing and Advertising

The COVID-19 pandemic upended marketing and advertising at many companies last year. Confronted by a historically high level of business and economic uncertainty, many marketers were forced to dramatically change their marketing plans, and in some cases at least, to substantially reduce marketing and advertising spending.

Today, the outlook for marketing and advertising is considerably brighter. As I wrote last month, many economists now believe the U.S. economy will grow (measured by real GDP) between 4% and 7% in 2021, a rate of growth we haven't seen in decades. As a result, many marketing industry forecasters are predicting that marketing and advertising spending will also grow substantially in 2021. 

The Ad Agency Forecasts

Three global advertising agencies - IPG's Magna, Publicis' Zenith, and WPP's GroupM - recently published their estimates of advertising spending for 2020 and 2021. The following table shows the agency forecasts for total advertising spending in the United States. As might be expected, these agencies estimate that overall advertising spending declined in 2020, but they expect the advertising market to grow significantly in 2021.

The strength of digital advertising is clearly reflected in the agency estimates. The table below shows the estimates of year-over-year growth of spending on digital advertising in the U.S. for 2020 and 2021. All three agencies estimate that despite the COVID-19 pandemic - or perhaps because of the pandemic - digital advertising spending actually increased in 2020, and they expect the growth to continue this year.

All three agencies also estimate that spending on digital advertising will represent more than half of total advertising spending in the U.S. in both 2020 and 2021.

I should note that these estimates were published in December of last year. Therefore, they don't reflect the current level of optimism about the growth of the U.S. economy. I suspect these agencies will soon be increasing their estimates of U.S. advertising spending for 2021.

The Winterberry Group Forecast

Winterberry Group, a specialized management consultancy focused on the advertising, marketing, data, technology, and commerce sectors, issued a new forecast for advertising and marketing spending in January of this year. Winterberry divided its forecast into two major categories - offline media and online media. 

The following table contains Winterberry's estimates for U.S. offline media spending for 2020 and 2021. As the table shows, Winterberry is estimating that spending fell in 2020 in every offline media category except addressable TV. The firm predicts that six of the nine offline media categories will return to growth in 2021, with the laggards being linear TV, newspapers, and magazines.

The Winterberry forecast also reflects the resilience and continuing growth of marketing and advertising via digital channels. The table below shows Winterberry's estimates for U.S. online media spending for 2020 and 2021. Winterberry is estimating that spending in five of the eight online media categories actually grew in 2020, and the firm predicts that spending in all eight categories will grow substantially this year.

What Marketers Are Saying

The latest edition of The CMO Survey provides strong evidence that U.S. marketers are also expecting a rebound in marketing and advertising this year. The February 2021 edition of the survey generated 356 responses from senior marketing leaders in the United States. Almost two-thirds (64.6%) of the respondents were affiliated with B2B companies, and 94.5% were at VP level or above. The survey was fielded January 6-26, 2021.

The survey asked participants how their level of marketing spending had changed in the twelve months preceding the survey (essentially 2020), and how they expected spending to change in the twelve months following the survey (essentially 2021).

The survey respondents reported that their marketing spending declined by 3.9% (mean of all responses) over the twelve months preceding the survey, but they expect spending to increase 10.1% over the twelve months following the survey. More specifically, the respondents expect digital advertising spending to grow 14.3% over the following twelve months, while traditional advertising spending will be essentially flat (-0.2%).

The Takeaway

If history is a guide, it's likely that these forecasts and marketer expectations won't prove to be completely accurate on the specifics, but they are likely to capture the larger trends. Rapidly improving economic and business conditions will drive increase spending on marketing and advertising this year, and the popularity of digital methods and channels will continue to grow.

Top image courtesy of (CC)