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).

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).

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.

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 HonestReporting.com via Flickr (CC).

The Promise and Peril of Generative AI

Source:  Shutterstock

Generative AI has the potential to drive a once-in-a-generation step-change in business performance and productivity, but a recent, first-of-its-kind scientific experiment demonstrates that generative AI can also be a double-edged sword.

When used correctly for appropriate tasks, it can be a powerful enabler of competitive advantage. However, when used in the wrong ways or for the wrong kinds of tasks, generative AI will diminish, rather than boost, performance.

This Thursday, November 30th, will mark the one-year anniversary of OpenAI's public release of ChatGPT, the generative AI application based on the company's GPT large language model. For the past year, generative AI has been the hottest topic in marketing and one of the most widely discussed developments in the business world.

Several surveys conducted this year have consistently shown that most marketers are using - or at least experimenting with - generative AI. For example, in the latest B2B content marketing survey by the Content Marketing Institute and MarketingProfs, 72% of the respondents said they use generative AI tools.

The capabilities of large language models have been evolving at a breakneck pace, and it now seems clear that generative AI will have a profound impact on all aspects of business, including marketing. Some business leaders and financial market participants argue that generative AI is the most significant development for business since the internet.

Given this importance, it's not surprising that generative AI is becoming the focus of scholarly research. One of the most fascinating studies I've seen was conducted by the Boston Consulting Group (BCG) and a group of scholars from the Harvard Business School, the MIT Sloan School of Management, the Wharton School at the University of Pennsylvania, and the University of Warwick.

Study Overview

This study consisted of two related experiments designed to capture the impact of generative AI on the performance of highly skilled professional workers when doing complex knowledge work.

More than 750 BCG strategy consultants took part in the study, with approximately half participating in each experiment. The generative AI tool used in the experiments was based on OpenAI's GPT-4 language model.

In both experiments, participants performed a set of tasks relating to a type of project BCG consultants frequently encounter. In one experiment, the tasks were designed to be within the capabilities of GPT-4. The tasks in the second experiment were designed to be difficult for generative AI to perform correctly without extensive human guidance.

In both experiments, participants were placed into one of three groups. One group performed the assigned tasks without using generative AI, and one used the generative AI tool when performing the tasks. The participants in the third group also used generative AI when performing the tasks, but they were given training on the use of the AI tool.

The "Creative Product Innovation" Experiment

Participants in this experiment were instructed to assume they were working for a footwear company. Their primary task was to generate ideas for a new shoe that would be aimed at an underserved market segment. Participants were also required to develop a list of the steps needed to launch the product, create a marketing slogan for each market segment, and write a marketing press release for the product.

The participants who completed these tasks using generative AI outperformed those who didn't use the AI tool by 40%. The results also showed that participants who accepted and used the output from the generative AI tool outperformed those who modified the generative AI output.

The "Business Problem Solving" Experiment

In this experiment, participants were instructed to assume they were working for the CEO of a fictitious company that has three brands. The CEO wants to better understand the performance of the company's brands and which of the brands offers the greatest growth potential.

The researchers provided participants a spreadsheet containing financial performance data for each of the brands and transcripts of interviews with company insiders.

The primary task of the participants was to identify which brand the company should focus on and invest in to optimize revenue growth. Participants were also required to provide the rationale for their views and support their views with data and/or quotations from the insider interviews.

Importantly, the researchers intentionally designed this experiment to have a "right" answer, and participants' performance was measured by the "correctness" of their recommendations.

Given the design of this experiment, it should not be surprising that the participants who used generative AI to perform the assigned tasks underperformed those who did not by 23%. The results also showed that those participants who performed poorly when using generative AI tended to (in the words of the researchers) "blindly adopt its output and interrogate it less."

The results of this experiment also raise questions about whether training can alleviate this type of underperformance. As I noted earlier, some of the participants in this experiment were given training on how to best use generative AI for the tasks they were about to perform.

These participants were also told about the pitfalls of using generative AI for problem-solving tasks, and they were cautioned against relying on generative AI for such tasks. Yet, participants who received this training performed worse than those who did not receive the training.

The Takeaway

The most important takeaway from this study is that generative AI (as it existed in the first half of 2023) can be a double-edged sword. One key to reaping the benefits of generative AI, while also avoiding its potential downsides, is knowing when to use it.

Unfortunately, it's not always easy to determine what kinds of tasks are a fit for generative AI . . . and what kinds aren't. In the words of the researchers:

"The advantages of AI, while substantial, are similarly unclear to users. It performs well at some jobs and fails in other circumstances in ways that are difficult to predict in advance . . . This creates a 'jagged Frontier' where tasks that appear to be of similar difficulty may either be performed better or worse by humans using AI."

Under these circumstances, business and marketing leaders should exercise a significant amount of caution when using generative AI, especially for tasks that will have a major impact on their organization.

(Note:  This post has provided a brief and necessarily incomplete description of the study and its findings. Boston Consulting Group has published an article describing the study in greater detail. In addition, the study leaders have written an unpublished academic "working paper" that provides an even more detailed and technical discussion of the study. I encourage you to read both of these resources.)

[Book Review] A Thought-Provoking Guide to Creating a Successful Content Marketing Strategy

 "Your content will never provide competitive advantage. But your content strategy just might."

Robert Rose, Content Marketing Strategy

Source:  Kogan Page

Content marketing has become a core ingredient of the B2B marketing mix over the past two decades. Today, virtually all B2B companies use content marketing in some form.

But despite this widespread use, many B2B marketers aren't satisfied with the performance of their content marketing programs. In the 2022 edition of the content marketing survey by the Content Marketing Institute and MarketingProfs, only 29% of the B2B respondents said their organization was extremely or very successful with content marketing. 

One key to effective content marketing is having a well-designed content marketing strategy. In the 2022 CMI/MarketingProfs survey, 64% of the "most successful" respondents reported having a documented content marketing strategy. Only 19% of the "least successful" respondents said they had a documented strategy.*

Because having a sound strategy is so critical to content marketing success, Robert Rose's new book is a must-read for marketers. Content Marketing Strategy:  Harness the Power of Your Brand's Voice (Kogan Page, 2023) provides an authoritative guide to the formulation of an effective content marketing strategy.

Robert Rose is the Chief Strategy Advisor of the Content Marketing Institute and the CEO and Chief Strategy Officer of The Content Advisory, a content marketing consulting firm. He has been working in marketing and content strategy for nearly 30 years.

What's In the Book

As its title suggests, Content Marketing Strategy is about the strategic management of content marketing. More specifically, the book describes a process that marketing leaders can use to manage content marketing as a core business function that requires a full-fledged business strategy.

Robert Rose clearly spells out his perspective on the topic of content marketing strategy in the quotation shown above and in the Introduction of the book where he writes that marketing needs to operate as a media company and that the primary function of marketing is to ". . . create valuable experiential media-driven products for audiences that can be monetized in several ways . . ." (Emphasis in original)

In Chapter 1 of the book, Rose echoes Michael Porter's thinking on strategy when he defines content marketing strategy as ". . . a marketing discipline that is the sum of all the activities required to enable a business to consistently communicate in a way that creates tangible value for target audiences. It is what enables a brand to have not only a voice but also something to say that is worth listening to."

Rose uses Chapter 2 to introduce the fundamental elements of a successful content marketing strategy. He argues that an effective strategy has three pillars - Communication, Experiences, and Operations. Then, he goes on to write that these three pillars encompass five core categories of activities, which he labels purpose, model, frame, value, and audience.

In Chapters 3-8 of the book, Rose discusses each of these five categories of activities in detail. For example, he covers purpose in Chapter 3 ("Designing a Strategic Purpose"), model in Chapter 4 ("The Content Marketing Operating Model"), and audience in Chapter 5 ("Understanding Audiences").

In Chapter 9, Rose describes how marketing leaders and their teams can formulate a content marketing strategy that incorporates the principles and frameworks he discussed earlier in the book. Rose called this process "story mapping," and it includes four steps.

1. Identify all the conditions that must exist for your content marketing effort to be successful.
2. Identify all the obstacles that could prevent the Step 1 conditions from existing.
3. Determine which of the Step 1 conditions are absolutely essential and which of the Step 2 obstacles are "showstoppers."
4. Specify when the Step 1 conditions will be accomplished.

My Take

The widespread popularity of content marketing has spawned an impressive volume of literature. Yesterday, I conducted a search at Amazon using the term "content marketing strategy." I found 51 books having that term in the title or subtitle, and I stopped counting after only four pages of search results.

Many of these books probably contain useful information and insights. However, if you want to better understand how to manage content marketing as a strategic business function - and why that approach is critical for successful content marketing - you should put Content Marketing Strategy near the top of your reading list.

Robert Rose can speak authoritatively about content marketing. In his position with the Content Marketing Institute and as a consultant, Rose has had a front-row seat to observe the evolution of content marketing for more than a decade. He's seen what does and doesn't work, and he describes several of these experiences in his book.

Content Marketing Strategy is well-organized and clearly written. The book isn't exactly "light reading," but Rose's writing style makes the content approachable and easy to understand. He also includes several illustrations in the book, and these illustrations make it easier for readers to comprehend some of Rose's most important concepts.

B2B marketers can easily find books, white papers, ebooks, and other resources about content marketing. Robert Rose's book is one of the most thoughtful and thought-provoking books I've encountered on this vitally important topic. I strongly recommend it.

* The "most successful" respondents were those who said their organization was extremely or very successful with content marketing. The "least successful" respondents were those who characterized their organization's content marketing efforts as minimally or not at all successful.

[Research Round-Up] B2B Highlights From the Fall 2023 Edition of "The CMO Survey"

Source:  "The CMO Survey" (Christine Moorman, 2023)

(This month's Research Round-Up is devoted entirely to the Fall 2023 edition of "The CMO Survey." This research has been conducted semi-annually since 2008 and consistently provides a wealth of valuable information about marketing trends, spending, and practices.)

The findings of the Fall 2023 edition of "The CMO Survey" were released in late September. "The CMO Survey" is directed by Dr. Christine Moorman and is sponsored by Deloitte LLP, Duke University's Fuqua School of Business, and the American Marketing Association.

The Fall 2023 survey results are based on responses from 316 senior marketing leaders at for-profit companies based in the United States. Over two-thirds of the respondents (67.7%) were affiliated with B2B companies, and 95.6% were VP-level or above. The survey was in the field July 26 - August 17, 2023.

Dr. Moorman and her colleagues typically produce three reports for each U.S. edition of the survey.

• "Highlights and Insights Report" - This is a relatively brief and graphically rich report that provides mostly overall survey results and analyzes those results and major marketing trends.

• "Topline Report" - This report provides response data at the aggregate level for all survey questions.

• "Firm and Industry Breakout Report" - This report provides response data by four economic sectors (B2B product companies, B2B services companies, B2C product companies, and B2C services companies), 15 industry verticals, company size, and percentage of online sales. This report is lengthy but it provides the most detailed view of the survey data.

In this post, I'll be discussing the responses of B2B marketers exclusively, unless otherwise indicated. The percentages and other numerical values in this post are the mean of applicable survey responses, also unless otherwise indicated.

Marketers Are More Optimistic About the Economy

For the past several years, "The CMO Survey" has asked participants for their views on economic conditions, and the Fall 2023 edition of the survey was no exception. It asked participants to rate their level of optimism regarding the overall U.S. economy on a 100-point scale, with "0" being the least optimistic, and "100" being the most optimistic. 

The following chart shows how B2B marketers rated their optimism in the six surveys conducted over the past three years.

As this chart shows, B2B marketer optimism is at its highest level since the February 2022 survey, and B2B marketers are significantly more optimistic now than they were in the two preceding surveys (Spring 2023 and September 2022).

The Fall 2023 survey also asked participants if they were more or less optimistic about the U.S. economy compared to the previous quarter. The following table shows how B2B marketers responded.

The results in this table also indicate that B2B marketers have become more optimistic since last spring. In the Fall 2023 survey, 46.4% of respondents with B2B product companies and 47.1% of respondents with B2B services companies said they were more optimistic compared to the previous quarter. In the Spring 2023 survey, only 32.0% of the respondents with B2B product companies, and 24.7% with B2B services companies reported being more optimistic. 

Anemic Growth in Marketing Spending

The increased optimism regarding economic conditions has not produced a substantial increase in marketing spending . . . at least not yet. In fact, the survey shows that the growth of marketing spending has been anemic for more than a year.

For the past several years, the survey has asked participants by what percent their marketing spending changed in the preceding 12 months. The following chart shows how B2B survey respondents answered these questions in the six surveys conducted over the past three years.

B2B marketers are relatively optimistic about the growth of marketing spending over the coming year. In the Fall 2023 survey, respondents with B2B product companies said they expect overall marketing spending to increase 6.8% over the 12 months following the survey, and those with B2B services companies expect a 6.6% increase over the same period.

Unfortunately, spending growth predictions by respondents to "The CMO Survey" have not been particularly accurate in the past. For example, in the September 2022 survey, respondents (B2B and B2C) predicted that marketing spending would increase by 8.8% over the following 12 months. In the Fall 2023 survey, respondents reported that their marketing spending had increased by only 2.6% over the preceding 12 months.

*****

The Fall 2023 edition of "The CMO Survey" includes data regarding several other topics, and, like earlier editions, it provides a wealth of valuable insights for B2B marketers. I encourage you to read the full survey report.

Why B2B Marketers Need to be Careful With Purpose Marketing

Many marketing pundits argue that companies should make environmental and social "purpose" an integral part of marketing communications. Read on to learn why you should approach purpose marketing cautiously.

Purpose marketing can be defined as the use of messaging in external communications that expresses a company or brand's core mission and values. It includes messaging that highlights how a company or brand is positively impacting the lives of employees and customers and/or society as a whole. The term also refers to communications that spell out where the company or brand stands on important social issues.

Numerous research studies have purported to prove that consumers and business buyers now place great importance on the social responsibility track record of the companies or brands they do business with. Many of these studies also indicate that potential buyers now expect companies and brands to "take a stand" on important social issues.

As a result, many marketers have become enamored with purpose marketing. Industry media outlets such as Advertising Age, Adweek, Marketing Week, and The Drum have frequently published articles describing the purpose marketing campaigns and other social responsibility efforts of well-known brands such as Dove, Nike, Gillette, and Patagonia.

In reality, however, the case for purpose marketing isn't nearly as clear-cut as the hype would suggest. Several recent research studies have painted a more nuanced picture of purpose marketing. These studies suggest that marketers should approach purpose marketing cautiously and thoroughly evaluate potential benefits and risks before they launch a significant purpose marketing program.

Here are a few of the highlights from two surveys conducted earlier this year.

The Bentley University-Gallup Survey

The 2023 Bentley-Gallup Business in Society study was based on a survey of 5,458 U.S. adults (ages 18 and older). The sample for the survey was weighted to be demographically representative of the U.S. adult population. The maximum margin of sampling error for results based on the entire survey sample was + or - 1.8 percentage points at the 95% confidence level for response percentages around 50%. The survey was conducted May 8-15, 2023.

Less than half of the survey respondents (41%) said that businesses should take a public stance on current events. This was a decline of seven percentage points from the 2022 edition of the survey.

The main driver of this decline was waning support from respondents who identified as Democrats. In the 2022 survey, 75% of Democratic respondents said businesses should take a public stance on social issues. That percentage dropped to 62% in the 2023 survey.

The researchers asked survey participants about 11 categories of issues (e.g. racial issues, gun issues, LGBTQ+ issues, etc.). Of these 11 issue categories, climate change (at 55%) and mental health (at 52%) were the only two that a majority of survey respondents said businesses should take public positions on.

Perhaps not surprisingly, younger respondents, Asian, black, and Hispanic respondents, and respondents identifying as Democrats were more likely to say that businesses should take a public stance on social issues.

The Ipsos Survey

The Ipsos study was a survey of 1,096 U.S. adults (ages 21 and older). The survey was conducted February 8-9, 2023, and the findings were described in a paper titled, What the Future:  Purpose.

The findings of this research revealed that consumer attitudes regarding brand purpose are more nuanced than generally believed. For example:

• 85% of the survey respondents said global or national brands should play a role in solving global problems, but 51% said companies should remain neutral on social issues.

• Two-thirds of the respondents agreed that purchasing sustainable products made a difference for the environment, but only 52% said they were willing to pay more for products that are manufactured sustainably.

One of the most striking findings in the study related to the importance of brand purpose in purchase decisions. Ipsos asked survey participants which of 12 factors were most important when they were deciding which brands or products to purchase. The following table shows that the factors relating to brand purpose (shown in red) were near the bottom of the list in terms of importance.

Does Purpose Marketing Work?

Other recent research has suggested that many purpose marketing programs have failed to make a meaningful impression on potential buyers.

In a 2022 online survey of more than 2,000 U.S. adults by GfK, over half of the respondents could not name (unaided) a single brand that is "taking care of the environment and fighting climate change," "promoting diversity and inclusion," or "giving back to the community."

The authors of the survey report drew this conclusion:  "Despite all the billions of dollars spent on purpose-driven campaigns, brands have not achieved top-of-mind awareness for this crucial work. In some cases, purpose marketing has become a kind of 'green noise' - a constant hum about virtuous brand behavior in which few messages or actions stand out . . ."

The Bottom Line

These recent studies provide a more balanced view of buyer attitudes regarding the appropriateness and value of purpose marketing. The findings show that while values matter to potential buyers, there is little consensus regarding whether companies and brands should take public stances on social issues.

That's why marketers should approach purpose marketing with a great deal of caution.

If you'd like to learn more about the benefits and risks of purpose marketing, take a look at this "deep dive" article that I published in January of last year.

Top image courtesy of Paul Mison via Flickr (CC).

The Power of Context in B2B Buying, and What That Means for Marketers

The context in which people consider buying something has a significant impact on how the buying decision is made and on what is (or isn't) ultimately bought.

Hundreds of research studies conducted by cognitive scientists over the past four-plus decades have shown that contextual factors can affect everything from how we react to marketing messages and offers, to how we perceive specific products or services, to how we make buying decisions.

More recently, neuroscientists have used functional MRI technologies to identify the specific areas of the brain that are activated under various decision-making conditions. This research has confirmed that contextual factors can impact what areas of our brain are involved in making decisions.

Understanding the "buying context" is therefore vital for effective marketing. Context obviously affects how individuals make buying decisions, and I plan to address that topic in a future post.

In this post, I'll discuss how the buying context shapes the attributes of the B2B buying process, and I'll argue that most B2B companies need marketing strategies and programs for more than one type of buying process.

The Many "Flavors" of B2B Buying

Most of the research and published literature about B2B marketing has focused on "high-consideration" purchases that typically involve multiple decision-makers, complex decision-making processes, and lengthy buying cycles.

For example, in the 2022 B2B Buyer Behavior Survey by Demand Gen Report, 59% of the survey respondents said their average buying group included four or more individuals, and 23% said their average buying group contained seven people or more.

But, high-consideration purchases with large buying groups and long buying cycles have never represented all (or even most) B2B buying. In fact, many B2B purchases are routine, with buying decisions being made fairly quickly, often by one person.

The importance of buying scenarios that don't fit the high-consideration stereotype can be seen in the expanding role of B2B e-commerce and, more specifically, in the rapid growth of online B2B marketplaces.

Online B2B marketplaces have become the fastest-growing segment of a rapidly growing B2B e-commerce market. Digital Commerce 360 has estimated that online B2B marketplaces will produce $112 billion in sales in 2023, up 100% from sales of $56 billion in 2022.

Research has also shown that marketplaces and other B2B e-commerce channels are no longer just for low-ticket purchases. In a 2021 survey by McKinsey, 85% of business buyers said they are willing to spend $50,000 or more on a single purchase made via an e-commerce channel or other remote interactions, and 35% said they are willing to spend $500,000 or more.

The reality is, many B2B companies derive significant revenue from more than one type of buying situation, and these different buying scenarios require different marketing strategies and programs to produce maximum results. Therefore, identifying the buying scenarios that are relevant for your company should be an integral part of your go-to-market planning.

The Buying Context Shapes the Buying Process

The characteristics of a B2B buying process are largely dictated by the context in which a potential purchase is considered, as the following diagram illustrates.

The box on the left side of the diagram contains several factors that describe the context in which potential purchases are considered. One common denominator across most of these factors is that they capture the level of risk associated with a prospective purchase. In this case, "risk" includes both risk for the buying organization and professional risk for the individuals participating in the purchase decision.

For example, buyers will likely perceive a high level of risk if they aren't familiar with a product or service, or if the product or service has a high level of strategic importance for their company.

The box on the right side of the diagram describes the major attributes of the buying process. These include the size and composition of the buying group, the length of the buying cycle, the volume and nature of the activities performed in the buying process, and the use of formal procurement processes.

As the perceived risk associated with a proposed purchase increases, buyers will take steps to mitigate that risk, and these steps will largely dictate the attributes of the buying process that's used.

As a result, the buying process used for a high-risk purchase will usually involve more people, include more research activities, and require more time to finish than the process used for a low-risk purchase.

Not all contextual factors are directly linked to perceived risk. For example, the explicit functional goals and the implicit psychological and emotional goals of the individuals involved in making the purchase decision will also affect the attributes of the buying process. I'll have more to say about this topic in my next post on context effects.

The bottom line is that marketers need to understand the "buying contexts" that are relevant for their company and develop marketing programs that will fit each of these buying scenarios.

Top image courtesy of Lukas Koster via Flickr (CC).

[Book Review] A Must-Read Explanation of the Science Behind Why People Buy

Source:  John Wiley & Sons

The most basic goal of marketing is to influence customer buying behaviors, so understanding why customers buy is essential for successful marketing. A new edition of Decoded:  The Science Behind Why We Buy, 2nd Edition (John Wiley & Sons, 2022) by Phil Barden provides a wealth of science-based insights on this critical aspect of human behavior.

Phil Barden is the Managing Director UK of DECODE Marketing, a consultancy that combines hands-on brand management experience with cutting-edge capabilities in cognitive and social psychology, neuroscience, and behavioral economics. Barden has over 25 years of marketing experience, having held senior positions at companies such as Unilever, Diageo, and T-Mobile.

In January of this year, I wrote that marketing success in 2023 and beyond would depend on marketers' ability to leverage the capabilities of technology and data science and effectively apply behavioral science principles that describe how people make decisions. Decoded is one of several books that address the vital psychological aspects of marketing.

What's In the Book

The main theme of Decoded is that advances over the past several years in the decision sciences have significantly increased our understanding of human decision-making and behavior, and thus enabled a more science-based approach to marketing.

Phil Barden clearly states his objective for the book in the preface, where he writes:

"The goal of this book is to share what I have learned on my journey about bringing decision science to life for marketing . . . We now have a framework, a language, and a growing body of knowledge to enable marketers to address the real drivers of brand choice . . . I want to empower the reader to harness this valuable knowledge and apply it to everyday marketing work."

Barden uses the first two chapters of Decoded to introduce the core cognitive mechanisms that drive customer buying behaviors and discuss some of the implications of those mechanisms for marketing.

In Chapter 1, Barden describes Daniel Kahneman's model of human decision-making, which holds that people use two types of cognitive processes to make decisions.

• System 1 is fast, intuitive thinking that operates automatically, quickly, and with little or no conscious effort.

• System 2 is slow thinking that consists of processes that are reflective, controlled, deliberative, and analytical.

Barden embraces the Kahneman framework and uses it throughout Decoded. He refers to System 1 as an autopilot and calls System 2 a pilot. Barden describes several attributes of the autopilot that are particularly relevant for marketers, including how it processes information and the role it plays in framing our buying decisions.

In Chapter 2, Barden focuses on the "neuro-logic" of individual purchase decisions. Neuroscientists have shown that when we encounter a product or service we perceive to be valuable, an area of our brain known as the "reward center" is activated, which causes us to "want" the product or service. When we see or hear the price of a product or service, a different part of our brain is activated, the area that "fires" when we experience pain.

Therefore, whenever we face a potential purchase decision, our brain performs a type of cost-benefit analysis that weighs the potential reward (value) and the price. Barden writes, "Our brain calculates a kind of 'net value' and if this is high enough, if the difference between reward and pain is great enough, then we buy."

In the remaining chapters of Decoded, Barden covers several other attributes of customer buying behaviors that have important implications for marketers. He also explains how marketers can adapt their approach to marketing to take advantage of these buying behavior attributes. For example:

• How human perception works, and how marketers can use established rules of human perception to optimize marketing activities. (Chapter 3)

• How the architecture of the "decision interface" influences purchase decisions. (Chapter 4)

• The critical role of goals in customer buying decisions. (Chapter 5)

• How to effectively implement a marketing strategy based on decision science principles. (Chapter 6)

My Take

Back in February, I published a post that included brief descriptions of four books that I called "required reading for marketers who want to leverage behavioral science principles in their marketing efforts."

When I published that post, I hadn't yet read Decoded. If  I had, I would have included it in my required reading list.

Decoded is packed with valuable insights from beginning to end, which makes it a must-read for marketers. The book is particularly compelling because Phil Barden does an excellent job of connecting the sometimes arcane world of behavior science to pragmatic marketing issues and practices. Many of the examples he provides in the book involve real-world marketing situations.

Barden's writing is clear and engaging, but Decoded isn't a light read. The reality is, human decision-making is a complex, multifaceted phenomenon, and as Albert Einstein once said, "Things should be as simple as possible, but not simpler."

By now, most marketers are at least somewhat familiar with psychological concepts like "loss aversion" and "social proof," and many have heard or read about the power of defaults and other "nudges" to influence customer decisions.

The most important message of Decoded is that marketers have many opportunities to influence customer decision-making and buying behaviors, but success will require marketers to advance their understanding of human psychology and keep up-to-date on developments in neuroscience.

[Research Round-Up] Where AI In Marketing Stands In Mid-2023

(This month's Research Round-Up discusses two recent surveys that examine how marketers are using artificial intelligence in mid-2023. These surveys explore the extent of AI adoption in the marketing industry, the use cases and expected benefits of AI, and marketers' concerns and uncertainties about AI.)

Source:  Marketing AI Institute/Drift

2023 State of Marketing AI Report by the Marketing AI Institute and Drift 

• 918 survey respondents, 61% of whom were director-level or above
• 53% of the respondents were affiliated with B2B companies - another 35% said their company is both B2B and B2C
• Respondents represented over 20 industries - 41% worked in professional services or software
• 57% of respondents worked in companies with $10 million or less in revenue
• Survey conducted between April 26 and July 12, 2023

As expected, this survey found that the adoption of AI in marketing is still in its early stages. When asked what "stage of AI transformation" best described their marketing team, most respondents (58%) selected understanding - learning how AI works and exploring its applications and potential value.

Almost two-thirds of the respondents (64%) said that AI will be very important or critically important to the success of their marketing over the next 12 months. That was up from 51% of respondents in the 2022 edition of the survey.

Nearly all of the respondents (98%) said they personally use AI tools in some way.

When asked what their organization is interested in achieving with AI, the top four outcomes selected by respondents were:

• Reduce time spent on repetitive, data-driven tasks - 77%
• Unlock greater value from marketing technologies - 62%
• Generate greater ROI on campaigns - 61%
• Accelerate revenue growth - 60%

When asked about the barriers they faced when it came to the adoption of AI in marketing, the four most frequently selected barriers were:

• Lack of education and training - 64%
• Lack of awareness or understanding - 56%
• Lack of strategy - 44%
• Lack of talent with the right skill sets - 38%

It's important to note that this survey does not claim to be based on a representative sample of marketers. The author(s) of the report included the following statement in the description of the survey methodology.

"The survey was primarily promoted via the Marketing AI Institute website, newsletter, podcast, and webinars, so it is possible that respondents, who have shown a predisposition to AI content and information, may have higher awareness and adoption levels of AI than the broader industry."

Source:  The Conference Board

AI in Marketing & Communications:  Boosting Productivity - and Creativity, Too? by The Conference Board in collaboration with Ragan Communications 

• An online survey of marketing and communications professionals
• 287 respondents
• 36% of the respondents were vice president-level or above
• Survey conducted from June 1 to June 23, 2023

As noted above, this survey included both marketers and communications professionals, and the survey report provides separate response data for those two cohorts in some instances. The survey report also provides separate response data for "senior" respondents (VP-level and above) and "mid-level/junior" respondents (all others).

The survey found that most marketers (68%) are using AI in their daily work. Forty-eight percent of the marketer respondents reported using AI in their daily work sometimes, while another 20% said often or all the time.

As might be expected, mid-level and junior marketers were more likely to be using AI than senior marketers. Seventy-two percent of mid-level and junior marketers reported using AI in their daily work, while the percentage for senior marketers was 64%.

Most of the current uses of AI by marketers related to improving productivity, although content personalization was also popular. The five uses of AI most frequently selected by marketer respondents were:

• Summarize content - 44%
• Do the legwork/inspire thinking - 41%
• Personalize customer/user content - 33%
• Produce content faster - 30%
• Content research - 30%

When asked about their biggest challenges and/or concerns related to the use of AI, the four challenges/concerns most frequently selected by marketer respondents were:

• Lack of accuracy/misinformation - 68%
• Legal uncertainties - 62%
• Data security and privacy - 57%
• Reputational risk/erosion of trust - 49%

Lastly, the survey found that informal self-education is the dominant way that marketers learn about AI. Marketer respondents said they have learned about how to use AI by:

• Reading articles and/or watching videos - 81%
• Exploring it on their own time - 76%
• Talking with colleagues, friends, or others with AI knowledge - 73%
• Exploring it during work time - 65%

Where to Find Revenue Growth Opportunities

For the past several years, I've written a few posts each fall that address some aspect of marketing planning. With the fourth quarter of 2023 beginning today, many marketers will have started (or soon will be starting) their planning for 2024.

Last week's post discussed how marketers can use the jobs-to-be-done framework to define their market and determine how their products or services create value for customers. This framework helps marketers pinpoint what will motivate their customers to buy.

The following post describes a framework marketers can use to identify what sources of revenue growth are (or can be) available to them. Identifying sources of potential revenue growth is an essential part of a sound planning process.

I published this post in 2019, but the content of the post is as relevant today as it was four years ago. What follows is a lightly edited version of the original post.

The Original Post

Driving consistent, profitable revenue growth is one of the greatest challenges that business and marketing leaders face. The key word in that sentence is "consistent." Many companies can produce substantial revenue growth sporadically or over a short period of time, but it's exceptionally difficult to consistently generate above-average growth over the long term.

Business and marketing leaders must perform two distinct but related tasks to maximize revenue growth:

1. They must identify what growth opportunities are (or can be) available to them and determine which of those growth opportunities are most attractive.
2. They must find the right balance between short-term and long-term growth opportunities.

In this post, I'll focus on how business and marketing leaders can identify growth opportunities.

Structural Sources of Growth

The first step in identifying potential growth opportunities is to understand the dynamics of revenue growth - how it happens or, more accurately, where it originates. There are, in fact, several distinct sources of growth. These structural sources of growth are not dependent on how a company is organized or on the types of products or services it sells. Instead, they are based on the business and marketing strategies that a company uses to tap into each source.

This topic has been discussed in management and marketing literature for a long time. In a 1957 article for the Harvard Business Review, Igor Ansoff identified four structural sources of growth and four related types of growth strategies:

1. Sales of existing products in existing markets (market penetration strategy)
2. Sales of existing products in new markets (market development strategy)
3. Sales of new products in existing markets (product development strategy)
4. Sales of new products in new markets (diversification strategy)

In a 2004 article in the Harvard Business Review, Michael Treacy and Jim Sims identified five structural sources of growth:

1. Continuing sales to existing customers (base retention)
2. Sales won from the competition (market share gain)
3. New sales in an expanding market (market positioning)
4. Sales from expanding into related markets (adjacent market expansion)
5. Sales from expanding into new, unrelated lines of business (diversification)

I've used both of these models when working with clients to frame our discussions about how to grow. But over the years, I've expanded on these models to create a more detailed framework of the alternative ways to generate growth. The current version of my framework is shown in the following diagram.

This framework is a good tool for stimulating your thinking about how to grow your business and for identifying the growth opportunities that are (or can be) available to your business. When using this framework, it's important to keep several things in mind.

First, the good news is that these structural sources of growth are always present, at least to some degree. Their existence isn't dependent on the market conditions a company is facing at a particular moment in time. However, the volume of revenue that a company can obtain from each source is greatly influenced by the market and competitive environment. 

So the framework identifies potential sources of revenue growth, but it doesn't tell you about the relative attractiveness of those sources. You'll need to use traditional market and competitive analysis tools and techniques to perform that evaluation.

Second, no single source of growth is likely to provide all the revenue you need to reach your growth objective.

And third, each source of growth has distinctive attributes and dynamics. So you'll need a specific strategy and game plan for each source of growth you choose to pursue.

*****

Top image courtesy of ccPixs.com (CC).

When Planning for 2024, Focus On the Jobs Your Customers Need to Get Done

Understanding what will motivate a potential customer to buy your products or services is a critical prerequisite to developing an effective marketing strategy and creating compelling marketing communications. As thousands of marketers will attest, this isn't a simple task.

As marketers, we develop customer value propositions and we create content we believe will resonate with our potential buyers. But too often, our marketing programs don't produce the results we expect.

This lackluster performance frequently stems from the methods marketers typically use to define their market(s) and to determine and describe how their products or services will create value for customers.

Most B2B marketers define their market(s) based on a combination of product/service characteristics and the attributes of their potential customers (company size, industry vertical, etc.). 

So, for example, a marketer might define his or her market in these terms:  "We sell manufacturing execution system software to large enterprises that are engaged in both discrete and process manufacturing."

Then, marketers use these definitions to guide the development of their customer value propositions.

The problem is, these conventional approaches to defining markets and identifying how products or services create value don't help marketers pinpoint what actually motivates people to buy. Fortunately, there's a proven way to solve this problem.

Understand What Customers Need to Get Done

The starting point for understanding what will motivate your potential customers to buy is to recognize that people don't buy a product or service because they want the product or service itself. In most cases, what they really want is what the product or service will enable them to accomplish. 

For example, most small 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 things because they see them as effective tools for increasing sales.

Theodore Levitt, the legendary professor of marketing at the Harvard Business School, memorably expressed this idea when he often told his students, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole."

In their 2003 book, The Innovator's Solution, Clayton Christensen and co-author Michael Raynor built on Professor Levitt's thinking to describe what is now widely known as the jobs-to-be-done framework (the "JTBD framework"). In 2005, Christensen and co-authors Scott Cook and Taddy Hall further described the importance and value of the JTBD framework in a landmark article published in the Harvard Business Review.

The basic idea of the JTBD framework is that when people identify a "job" they need or want to get done, they look for a product or service they can "hire" to perform the job.

Christensen and his co-authors argued that this is how customers "experience life." Their thought process begins with an awareness that they need or want to get something done, and they seek to hire something or someone to do the job for them.

So, the presence and recognition of a job that needs to get done are what trigger and energize a potential customer's motivation to buy. This makes the job - not product/service features or customer demographics/firmographics - the primary unit of analysis for marketers who hope to develop and execute high-performing marketing strategies and programs.

In the HBR article, Christensen and his co-authors put it this way:

"The marketer's task is therefore to understand what jobs periodically arise in customers' lives for which they might hire products the company could make. If the marketer can understand the job, design a product and associated experiences in purchase and use to do that job, and deliver it in a way that reinforces its intended use, then when customers find themselves needing to get that job done, they will hire that product."

I've previously written about how the JTBD framework can be used to guide the development of marketing content. The point of this post is that the framework can also be a powerful tool for thinking about market definition, market segmentation, and value proposition development during your marketing planning process.

So, as you begin planning for 2024, take enough time to identify the jobs your potential customers are facing that your products or services can perform. This is the real key to understanding what will motivate your potential customers to buy.

Image courtesy of Got Credit (www.gotcredit.com) via Flickr (CC)