Don't Rely Too Much on Marketing Best Practices

More than two decades ago, Michael Porter warned about the dangers of relying on benchmarking and "best practices" to produce business success. In a landmark article in the Harvard Business Review, Porter drew a sharp distinction between operational effectiveness - which often involves identifying and implementing best practices - and real business strategy.

Porter argued that competing primarily on the basis of operational effectiveness is usually a recipe for disaster. He wrote:  "The more benchmarking companies do, the more they look alike . . . As rivals imitate one another's improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win."

Four years after Porter's article, Philipp Nattermann made a similar argument in an article for the McKinsey Quarterly. In this article, Nattermann contended that benchmarking and the use of best practices are important ways to improve operational efficiency, but they are not tools for strategic decision making. He wrote that business leaders rely too much on benchmarking and best practices because:

". . . they don't understand that benchmarking is simply an operational tool. Instead, they all want to occupy the point on the strategic landscape they their most successful competitor has staked out. Soon other competitors can be seen herding, lemminglike, around that best practice company's product, pricing, and channel strategies. Products and services become increasingly commoditized and margins tumble as more and more incumbents compete for smaller and smaller segments of customers and industry resources."

Despite the risks associated with best practices, business leaders continue to regard the identification and implementation of best practices as one of the most powerful management tools at their disposal. And it's not difficult to understand why the use of best practices remains so popular. It seems immanently reasonable to identify the practices of successful, high-performing companies and then emulate those practices.

The Allure of Marketing Best Practices

Marketers can become particularly enamored with best practices. After all, marketing success is difficult to achieve and even harder to sustain because the marketing landscape is always changing, and because it's incredibly hard to predict what marketing methods, channels, and message formats will appeal to potential customers. In these circumstances, it shouldn't be surprising that marketers are attracted to "proven" best practices.

Marketing best practices are often portrayed as effective and reliable tools for achieving marketing success, but the reality is more nuanced. Marketing best practices can be helpful when they are understood correctly and used appropriately, but it's easy for marketers to become enthralled with the promised benefits of best practices, and forget their limitations.

Widespread Use Decreases Effectiveness

One of the most paradoxical characteristics of marketing best practices is that the more widely they are used, the less effective they tend to become. A marketing best practice can derive its effectiveness from several sources. It can be effective because it's based on sound business principles, or because it resonates with how potential customers make decisions, or because it effectively leverages the capabilities of a particular medium of communication.

But marketing best practices are also highly effective - at least for a while -  because they are distinctive. When a best practice is new, it tends to be used by a relatively small number of companies. Therefore, the practice stands out in the marketplace and captures the attention of potential customers. But as more and more companies implement the practice, it loses some of the distinctiveness that made it highly effective. Content marketing is a good example of a marketing best practice that is now more challenging because it is so widely used.

The bottom line is, identifying and implementing marketing best practices may lead to a temporary improvement in marketing results, but it won't deliver superior marketing performance over the long term. Superior long-term marketing performance requires an effective marketing strategy and the use of marketing methods and tactics that will make your company distinctive in the marketplace.

Image courtesy of Paul Mison via Flickr CC.

ABM Supports (But Doesn't Create) Better Sales-Marketing Alignment

Some pundits contend that account-based marketing will create better alignment between marketing and sales. In reality, ABM can be a catalyst for improving sales-marketing alignment, but it won't cause such improved alignment to magically materialize. The adoption of ABM will quickly uncover weaknesses in the relationship between your marketing and sales teams, and that's a good thing. Here's why.

One of the key requirements for successful account-based marketing is coordinated efforts by business functions that have historically operated more or less independently. The need for teamwork routinely involves marketing, business development, and sales, and when ABM is used to expand relationships with existing customers, it will also extend to the customer success/customer service functions.

To reap the maximum benefits from ABM, marketing, business development, and sales must jointly develop an engagement plan for each target account. This account plan will usually span several weeks to several months, and will likely include activities by all three functions that must be closely coordinated. In addition, these business functions must be ready to make on-the-fly adjustments to the account plan based on actual buyer responses and changing business conditions at each account.

Therefore, successful ABM requires multiple business functions to work collaboratively on an ongoing basis. This level of coordination is challenging for many companies because it represents a major change in how they have traditionally engaged and managed sales leads.

In many B2B companies, the demand generation process involves a series of "hand-offs" from one business function to another. In essence, the process assumes that marketing, business development, and sales will engage potential buyers sequentially. The metaphor often used is a relay race in which each member of the relay team runs for a specified distance, and then passes the baton to the next runner.

The relay race approach has never been the best way to manage demand generation, and it is particularly problematic when used with ABM. The adoption of ABM has an effect that is similar to reducing the work-in-process inventories in a manufacturing process.

ABM "Lowers the Water Level"

In the discipline of lean manufacturing, inventory is one of the seven primary sources of waste, and most lean practitioners are always looking for ways to reduce inventory levels. To explain one role that inventories play, lean experts use a "rocks in the river" analogy.

In this analogy, inventory is like the water level in a river. As long as the water level is high enough, boats on the river will easily float over any rocks in the stream bed. The high water level makes the rocks invisible and also eliminates the danger they would otherwise pose for boats navigating the river. But if the water level is lowered, the rocks become visible, and the danger they pose becomes clear.

Lean experts say that inventory in a manufacturing system often conceals problems in the manufacturing process. High inventory levels also alleviate the immediate pain caused by the problems, but at a high cost. When inventory levels are lowered, the real problems become visible, and the ramifications of those problems become apparent. So in lean manufacturing, reducing inventories ("lowering the water level") not only eliminates waste, it also points company managers to the real problems that need to be solved.

The adoption of account-based marketing works in a similar way. Because successful ABM demands an unprecedented level of collaboration and coordination across multiple business functions, any lack of collaboration or coordination will quickly become visible. And this will enable company leaders to address the specific problems that are holding back the success of their ABM program.

The bottom line is, ABM can be a catalyst for improving the relationship between marketing, sales, and other business functions because it will make weaknesses in those relationships visible and addressable.

Image courtesy of monikomad via Flickr CC.

Marketers Are Embracing Advanced Marketing Measurement

Demand Gen Report's 2018 Marketing Measurement & Attribution Benchmark Survey makes one point abundantly clear:  Measuring marketing performance is both a top priority and a major challenge for most B2B marketers.

Eighty-seven percent of the survey respondents said that measuring marketing performance is a growing priority for their company, but more than half (54%) also said their ability to measure and analyze marketing performance needs improvement or is poor/inadequate.

The widespread interest in measuring marketing performance indicates that the demand for performance measurement software is poised to grow substantially. In a September 2018 report, Forrester Research said that marketers spent about $1.09 billion on marketing measurement solutions in 2017, and the firm estimates that spending on such solutions will reach $2.1 billion by 2023.

The Demand Gen research also revealed what is motivating marketers to improve their measurement capabilities. When survey participants were asked what is increasing their need for deeper metrics, the top two drivers identified were:

• The desire to show marketing's impact on pipeline and revenue (70% of respondents)
• The push to show ROI from all marketing investments (60%)

As these results show, the key motivations for improving marketing measurement capabilities are to demonstrate the economic value that marketing creates for the business and to optimize the mix of marketing programs based on economic performance.

Both of these objectives require the use of financial metrics, and this makes marketing measurement more challenging. The heart of the challenge is attribution, which is the process of assigning revenue and costs to marketing programs. 

There are three robust methods for attributing revenue to, and measuring the financial impact of, advertising and marketing programs. Two of these methods - marketing mix modeling (MMM) and multi-touch attribution (MTA) - have been in use for several years. The newest and most sophisticated method is unified marketing measurement (UMM).

Marketing Mix Modeling

Marketing mix modeling involves the use of advanced statistical techniques to estimate the impact of advertising and marketing activities on incremental sales and/or other desired outcomes. Marketing mix models are usually based on many months of historical information about sales and marketing/advertising spending across both digital and offline channels. MMM also incorporates factors such as weather, competitive activity, seasonality, and overall economic conditions.

MMM is a top-down approach that estimates the impact of distinct marketing programs and channels on incremental revenue. These models do not evaluate the actions of individual prospects or customers. Because MMM is backward-looking and doesn't consider the actions and responses of individual people, it doesn't provide the timeliness or level of detailed information that are required to support tactical marketing decisions.

Multi-Touch Attribution

Unlike MMM, multi-touch attribution is a bottom-up approach that analyzes information about the actions and behaviors of individual prospects and customers. Ideally, this data will include every exposure that an individual has had to a marketer's messages and his or her responses (or lack thereof) to those messages.

Most MTA solutions focus exclusively or primarily on estimating the financial impact of digital marketing activities, and their ability to capture the impact of offline marketing activities is limited. Therefore, MTA solutions can overstate the amount of revenue attributable to digital marketing programs. MTA solutions can also be inaccurate because they don't usually account for a baseline of revenue that would exist without any marketing efforts.

Most robust MTA solutions use advanced statistical techniques and computer algorithms to assign revenue to marketing activities, rather than relying on simplistic pre-set "rules" (such as first-touch, last-touch, etc.) that often produce wildly inaccurate results.

Unified Marketing Measurement

Given the inherent limitations of MMM and MTA, a growing number of companies have begun using a method known as unified marketing measurement that leverages the strengths and eliminates the weaknesses of MMM and MTA. UMM solutions are capable of measuring the impact of both digital and offline marketing activities, and they combine a top-down and bottom-up approach. In its report, Forrester estimated that UMM solutions now account for 28% of the measurement solution market. 

What About Cost?

These advanced marketing measurement solutions aren't exactly cheap. In a report published last year, Gartner estimated that companies pay from $100,000 to $250,000 on average for a one year MMM or MTA solution. And the cost can be much higher. 

Notwithstanding the cost, advanced marketing measurement solutions can be a smart investment for many companies. In its report, Forrester noted that these solutions often enable a 15% improvement in marketing ROI, and that overall spending on marketing measurement represents only 0.2% of total marketing spending.

Illustration courtesy of Kari Bluff via Flickr CC.

Salesforce Study Identifies Major Marketing Trends

Salesforce recently published the fifth edition of its State of Marketing report. The new report is based on a survey that was fielded between August 13th and September 23rd of last year, and produced 4,101 responses from marketing leaders (manager or higher). Survey respondents were from North America, Latin America, Asia-Pacific, and Europe.

The authors of the report observed that today's marketers are facing far different challenges from their predecessors. These new challenges are driven by high customer expectations for overall experiences that match their expectations for product quality. This observation isn't particularly surprising, given that the importance of customer experience has been widely discussed for several years.

The Salesforce survey identified four major trends in marketing.

Marketing Becomes the Orchestrator of Customer Experiences
Providing exceptional end-to-end customer experiences is inherently cross-functional, but marketing is well positioned to function as the hub of customer experience efforts. Nearly half (45%) of the survey respondents said that marketing is leading customer experience initiatives across the business at their company.

This finding is nearly identical with the August 2018 edition of The CMO Survey, in which 45.7% of respondents reported that marketing leads customer experience efforts.The Salesforce survey also found that marketers are forging connections with sales, commerce, and service teams in order to deliver better end-to-end customer experiences.

New Realities Elevate the Importance of Data Unification
It's not news that the effective use of data is critical for marketing success. The Salesforce research found that marketers are using more sources of data to gain a deeper understanding of customer needs, preferences, and behaviors.

According to the survey, the median number of data sources used by marketing organizations will increase from 12 in 2018 to 15 this year. However, more work is needed to unify those data sources. Only 47% of survey respondents said they have a completely unified view of customer data sources.

Marketers Remain Committed to Personalization
The Salesforce survey revealed that marketers' belief in the power of personalization remains strong. More than eight out of ten of the survey respondents said that personalization produces major or moderate improvements in brand building, lead generation, customer retention, customer acquisition, and customer advocacy.

The survey also found that the use of artificial intelligence to power personalization is growing. Twenty-nine percent of respondents in the latest survey reported using AI, up from 20% in 2017. Marketers also appear to be focused on trust and privacy issues. Fifty-one percent of respondents said they are more mindful about balancing personalization and privacy than they were two years ago.

Marketers Strive for Real Time Engagement
Lastly, the Salesforce research found that engaging customers in real time has become marketers' top priority and their biggest challenge. Fifty-two percent of survey respondents said they now engage customers in real time across one or more marketing channels. It also appears that marketers are making their engagements more responsive and dynamic. Fifty-two percent of the survey respondents said they adapt marketing strategy and tactics based on customer interactions.

The annual State of Marketing survey by Salesforce provides an important snapshot of the attitudes and practices of global marketers. I suspect that the new Digital Trends Survey by Econsultancy will address some of the same issues, and it will be interesting to compare the findings of these two studies.

Image source:  Salesforce

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

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

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

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

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

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

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

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

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

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

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

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

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

Top illustration courtesy of Bernard Goldbach via Flickr CC.

Both Market and Customer Expertise are Needed to Drive Growth

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

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

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

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

Both Customer and Market Expertise are Necessary

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

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

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

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

Focus on Critical Buyer Behaviors

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

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

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

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

Have Marketers Fully Embraced the Growth Challenge?

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

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

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

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

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

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

Where Do We Stand Today?

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

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

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

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

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

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

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

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

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