Sunday, December 31, 2023

Three Posts From 2023 That Are Worth Reading in 2024

A few days ago, I published a list of my ten most frequently read posts of 2023. I ranked posts based on cumulative total reads, which means that posts published later in the year were at a major disadvantage compared to those published earlier in the year. In the 2023 list, only one of my top ten posts was published after April 1st.

Several posts that I published later in the year have attracted a significant number of readers, but not enough to crack the top ten list. In a way, these posts are like the ugly duckling in the much-loved fairy tale by Hans Christian Andersen. They just need more time for their popularity to become evident.

Before we close the books on 2023, I wanted to highlight a few of these ugly duckling posts that, with time, may become beautiful swans.

The list I'm providing here is very subjective. I've selected posts that I believe will have continuing relevance for marketers in 2024. So, in case you missed any of them, here are three posts from this year that are worth reading as you start the new year.

"What B2B Marketers Can Learn From Missing Bullet Holes"

Source:  Wikipedia

This post focuses on the importance of avoiding selection bias when making decisions based on data. Selection bias can occur when the data used in an analysis (the "sample") is not representative of the relevant "population" in some important respect.

It's easy for marketers to fall prey to selection bias. As I wrote in the post:

"Selection bias is a troublesome issue because, like all humans, we marketers tend to base our decisions on the evidence that's readily available or easily obtainable, and we tend to ignore the issue of what evidence may be missing. In many cases, unfortunately, the evidence we can easily access isn't broad enough to give us valid answers to the issues we are seeking to address."

"How to Judge the Strength of Your Value Propositions"

By now, many of you will have completed most or all of your strategic planning for 2024. As part of that planning, you've probably identified the value propositions you will use with your customers and prospects.

Compelling value propositions are obviously essential for successful marketing, and it's important to periodically monitor the effectiveness of your value propositions. The best way to determine the strength of your value propositions is to test them with real customers and/or prospects, but that approach isn't always practical for some B2B companies. This post describes a framework that you can use internally to judge the effectiveness of your value propositions.

"How to Take the "Vanity" Out of Marketing Metrics"

Source:  ESO via Flickr (CC)

Marketers are usually advised to avoid using "vanity metrics" to measure marketing performance. The primary criticism of vanity metrics is that they don't have a measurable relationship with strategic business outcomes.

The real problem with vanity metrics is not with the metrics themselves, but rather with the failure of marketers to place those metrics in the appropriate context.

This post provides a detailed explanation of how to link marketing activities to specific marketing objectives and how to link those objectives to strategic business outcomes. Making those linkages visible is what converts vanity metrics into meaningful marketing performance measures.

Top image courtesy of Carol VanHook via Flickr (CC).

Sunday, December 17, 2023

Our Most Popular Posts of 2023

This will be my last post of 2023, and I want to thank everyone who has spent some of his or her valuable time reading this blog. My goal here has always been to provide content that readers will find informative, thought-provoking, and useful, and I've been immensely gratified by the attention and engagement this blog has received.

For several years, I've used my last post of the year to share which posts have been most widely read. For this list, I'm only considering posts that were published in 2023. I've ranked the posts based on cumulative total reads. Therefore, those published early in the year have an advantage.

So, in case you missed any of them, here are our ten most popular posts of 2023. 

  1. How Marketers Should Navigate Economic Uncertainty in 2023
  2. [Research Round-Up] The Continuing Importance of B2B Thought Leadership
  3. The Yin and Yang of High-Performance Marketing
  4. [Book Review] A Must-Read Guide To Igniting Account-Based Growth
  5. [Research Round-Up] The State of Artificial Intelligence in Marketing
  6. What Is the 95:5 Rule? Does It Apply To Your Company?
  7. The Essential Behavioral Science Reading List for Marketers
  8. [Book Review] A Valuable Introduction To the Complex World of Marketing Technology
  9. [Book Review] An Insightful (and Timely) Guide To Marketing Metrics
  10. What the 95:5 Rule Means for B2B Marketing

Happy holidays to everyone, and best wishes for a great 2024!

Image courtesy of Republic of Korea via Flickr (CC).

Sunday, December 10, 2023

How to Set Realistic Revenue Growth Goals for 2024

Source:  Shutterstock

Establishing objectives is an integral part of any business planning process, and some of those goals inevitably relate to revenue growth. Revenue growth objectives must be realistic for company leaders to formulate sound business and marketing strategies. The first step in setting realistic revenue growth goals is to identify where your current revenue is coming from.

As the fourth quarter of 2023 draws to a close, many business and marketing leaders will be finalizing their revenue growth objectives for 2024. Growth is the prime directive for many companies, and revenue growth is often the primary measure of business success. Therefore, business and marketing leaders need to set realistic revenue growth goals as part of their strategic planning process.

Having realistic revenue growth objectives is particularly important for marketing leaders since they are usually tasked to develop and implement the programs that will enable their company to achieve those objectives.

To set realistic revenue growth objectives for 2024, business and marketing leaders must have a clearly articulated, evidenced-based revenue growth strategy. One important - but often overlooked - step in developing a sound revenue growth strategy is identifying where growth will come from.

Specifically, business leaders need to answer three basic questions during their planning process.

  1. What are the structural sources of revenue growth in our business?
  2. How much revenue growth is each of these sources currently producing?
  3. How much revenue growth can we realistically expect to generate from each of these sources in 2024?
I discussed the structural sources of revenue growth in a post published a few weeks ago, so I won't repeat that discussion here. The following diagram shows the major structural sources of revenue growth that exist in all companies:

In this post, I'll discuss the process I use when working with clients to determine how much of their current growth each source is providing and to analyze how much growth each source can potentially provide in the next year.

How Much Growth Is Each Source Currently Producing?

Suppose your company had total sales of $110 million for the 12 months ending November 30, 2023. I'll call these 12 months "2023." You had total sales of $100 million for the 12 months ending November 30, 2022. I'll refer to this period as "2022." So, your company grew sales by $10 million during 2023.

For this example, let's suppose your company did not acquire another business or introduce any new types of products in 2023, but you did begin selling in a new geographic market during the year. Under these circumstances, your primary potential sources of revenue growth in 2023 were base retention, sales to existing customers, sales to new customers in existing markets, and sales to new customers in new markets.

To quantify how much revenue growth each of these sources produced in 2023, you would use sales by customer data from your ERP/accounting system.

Base retention (revenue churn) - To measure the impact of base retention (a/k/a revenue churn), identify the customers who bought from you in 2022. but did not buy from you in 2023. The total sales made to those customers in 2022 is the amount of revenue that was "lost" in 2023 due to revenue churn. For this example, let's say the amount of lost revenue was $1 million.

Sales to existing customers - Identify the customers who bought from you in both 2022 and 2023, and compare the 2023 total to the 2022 total. For this example, let's say that sales to existing customers increased $3 million in 2023.

Sales to new customers in existing markets - Identify the customers who bought from you in 2023, but did not buy from you in 2022. Then, eliminate those customers located in the geographic market you first entered in 2023. The sales made to the remaining customers are sales to new customers in existing markets. Let's say this source accounted for $5 million of the 2023 revenue growth.

Sales to new customers in new markets - This is the total sales made to customers in the geographic market that you first entered in 2023. Let's say this amount was $3 million.

The table below summarizes the results of this analysis and shows where your 2023 revenue growth came from.

How Much Growth Can We Generate from Each Source in 2024?

Once you know where your current growth came from, you can use these insights to set more realistic and achievable growth objectives for the coming year. The critical step is to analyze why the current growth happened.

In our example, sales to new customers in existing markets produced $5 million, or 50% of the total growth in 2023. One possible explanation for this growth is simply that demand for the types of products or services offered by your company expanded in 2023. In other words, the growth may have resulted from "being in the right market at the right time." It's also possible that this growth occurred because your company took customers away from competitors and increased its market share.

Whatever the specific reason, the important question is:  How much future growth can the existing markets provide? If they still have substantial growth potential, you may want to focus a substantial portion of your marketing efforts on acquiring more new customers in these existing markets.

On the other hand, if your existing markets do not have significant future growth potential, you'll need a different strategy to drive growth. You may, for example, want to focus more of your marketing efforts on acquiring new customers in the geographic market you first entered in 2023, or you may need to consider expanding into additional new market areas.

This type of analysis should be done for each structural source of revenue that contributed to your current growth and for any new sources that are expected to contribute to growth next year. Once this analysis is completed, you should set 2024 revenue targets for each source of revenue that is relevant to your company. And, once these revenue targets have been established, you can design marketing programs to achieve those objectives.

Sunday, December 3, 2023

Why You Need to Choose and Use Performance Metrics Carefully and Beware of . . .

Most marketers are now deep into their planning for 2024, and a critical part of that planning is determining how marketing performance will be measured. Performance metrics are essential for effective marketing, but they can also have unintended consequences.

Surrogation can be a particularly pernicious source of such unintended consequences. Read on to learn what surrogation is, why it happens, and how to avoid it.

Measuring performance has been a prominent feature of the business landscape since double-entry accounting appeared in the 14th or 15th century. "You can't manage what you can't measure" is one of the most often-repeated maxims in the business world, and it's been an article of faith for generations of business leaders.

Performance measurement permeates virtually all business functions, including marketing. For the past several years, marketers have been increasingly focused on measuring the performance of their activities and programs, and many marketing leaders now use performance data to allocate budgets and make marketing mix decisions.

Overall, this has been a positive development. Using performance data to guide the choice of marketing tactics and investments should lead to more rational, evidence-based decisions.

However, performance metrics must be selected thoughtfully and used carefully because they are powerful tools that can produce unintended consequences as well as desirable results.

Surrogation is a frequent cause of unintended consequences in performance management systems. It can happen even when the selection and use of performance metrics are well-intentioned.

What Is Surrogation?

Surrogation refers to the human tendency to lose sight of the real objective and focus only (or almost entirely) on the metric that is designed to measure performance against the real objective. In other words, we have a tendency to decide (often subconsciously) that scoring well on the metric is the real objective.

For example, suppose that one of your company's important objectives is to provide outstanding customer experiences, and you decide to measure your performance against that objective using customer surveys. The survey results are shared with customer-facing employees, and they are frequently discussed at team meetings.

Under these circumstances, some of your employees can begin to think that the objective is to gain high customer survey scores rather than deliver great customer experiences. This becomes a significant problem if those employees begin to entice customers to give high scores on the surveys even if they aren't completely happy with their experiences.

Why Surrogation Happens

Surrogation can occur because of the inherent power of performance metrics to shape human behavior. After all, that's one of the main reasons they're used. When marketing leaders institute performance metrics, they expect their teams to use those metrics to guide their activities.

Dan Ariely, the noted behavioral economist and author of Predictably Irrational, described the power of performance metrics in a column in the Harvard Business Review. He wrote:

"Human beings adjust behavior based on the metrics they're held against. Anything you measure will impel a person to optimize his score based on that metric. What you measure is what you'll get. Period."

Eli Goldratt, the developer of the theory of constraints, made the same point in his book The Haystack Syndrome where he wrote:

"Tell me how you will measure me and I will tell you how I will behave."

Reducing the Odds of Surrogation

Surrogation can happen wherever performance metrics are used, and there's no ironclad way to completely prevent it. However, marketing leaders can take steps to lower the odds that surrogation will occur.

One effective way to reduce surrogation is to use multiple metrics when measuring the performance of significant programs or initiatives. This approach is most effective when the metrics used require managers and other team members to balance several competing dimensions of performance.

So, for example, if you are measuring the effectiveness of your demand generation program, you will obviously track the number of leads generated. But you should also track other aspects of performance such as the number of leads who actually become customers (the conversion rate), pipeline velocity, and customer acquisition cost.

This combination of metrics - or something similar - will lead your demand generation team to consider quantity, quality, and cost when evaluating the effectiveness of their activities.

Image courtesy of CC BY-SA via Flickr (CC).