IT IS easy to measure costs. Whether it is producing and placing a print advert or staging a live event, the costs appear on the invoices from your suppliers, you merely have to add them up. It is far harder to forge a direct link between those costs and the results they bring.
It may be easy to allocate costs to vague notions such as brand awareness, thought leadership and customer engagement, but doing that is not good enough.
This would be the sort of smoke-and-mirrors approach to return on investment that undermines respect for marketing. This approach also makes it a lot harder to get the budget you need to increase revenue and profits.
Incredibly, "revenue-driven marketing" and "profit-driven marketing" are relatively new phrases in the world of business-to-business (B2B) marketing. The trademarked term "revenue marketing", coined by The Pedowitz Group in 2010, describes today’s B2B marketer as having "some type of accountability for revenue". Hm, just some type?
Only recently, in May 2014, Google started a high-profile commentary on the "new" world of "profit-driven marketing" on its Think with Google platform.
Can it be that marketers are only now realising that they are in the business of generating sales and protecting margins?
Perhaps one reason for this is that many marketers see the task of creating profitable sales as being somehow beneath them.
Maybe marketers don’t want to get their hands dirty in what they regard as the grubby business of selling and dealing with customers.
Details
- TITLE: Business-to-Business Marketing: A Step-By-Step Guide
- AUTHOR: Mark Eardley and Charlie Stewart
- PUBLISHER: Penguin Random House
IT IS hardly surprising, then, that marketers often seem to have a lousy reputation.
But let us get back to the positive point about measuring bang for bucks. The key is how to integrate the ability to measure from the outset.
Every part of your marketing needs a built-in system of measurement that links it to profitable sales.
Once you have put such a system in place, you can start allocating costs to results. You can then establish where the bucks are spent most profitably.
If you accept that attracting and retaining profitable customers is marketing’s purpose, you must set related targets:
• Numbers — revenue and profit figures for specific products and services within specific market sectors;
• Time frames — when the targets need to be reached;
• Budget — how much you can spend to hit the targets; and
• Authority — removing barriers to achieving your targets.
Authority is critically important. So, some things may have to change: there may need to be a serious overhaul of how the business delivers on the big five buying motivators.
In fact, you will need to measure with muscle.
Businessmen go down with their businesses because they like the old way so well, they cannot bring themselves to change.
What happens if the results from measuring your marketing performance demonstrate shortcomings within products, services and processes? Who is responsible for change?
How will shortcomings be tackled and remeasured to assess the effects of improvements? This might be CEO territory.
Instigating and monitoring the necessary changes and presenting performance measurements can be a tricky task. And those with operational responsibilities may skate over findings:
• "Quality control letting us down? No way!"
• "They accuse us of uncompetitive lead times? They think it’s easy making this stuff?"
• "Changes to the website? Whatever for? Nobody visits!"
• "Our prices are not even in the ballpark — customers always say that!"
Top-level support to act on your measurements is clearly essential. Securing that support becomes a lot easier if you can demonstrate a few of the benefits derived from measurement.
There will be an improved understanding of customers’ current and future needs — and how to meet them — and higher returns on correctly focused marketing spend. The company will be able to anticipate future demand and scheduling responses; and to forecast revenue and profitability, thus sidelining the competition.
THE biggest benefit is the ability to increase sales and reinforce margins by motivating your markets to buy — from you.
The rise of digital has, paradoxically, compounded and eased the measurement dilemma.
It has eased it by giving us access to a treasure trove of data that can be accessed in real time to give immediate insights into buying behaviour. But it has compounded the dilemma, because there are so many data that can be measured that it is hard to avoid analysis paralysis.
Defining which data should be interpreted and what technique should be used to carry out the analysis is a job in its own right.
Digital measurement has spawned two more buzz phrases for marketing’s jargon glossary: "metrics" and "analytics". Surely, these must be good, because now it sounds as if we are measuring scientifically? It sounds as if we can automate the measurement process and provide accurate insights into marketing’s performance. So, we focus on what is easy to measure digitally and automatically.
We can track and record the digital activities of prospects. We measure web traffic by page views, and time-on-site. We can monitor conversations on social media and online user groups.
We can capture who is downloading content from our websites, e-mails and newsletters.
We can initiate and encourage dialogue with digital calls to action. But page views and downloads, social sentiment and landing-page performance don’t give you much insight unless you tie these data to a sales outcome.
There is a danger of falling into the digital metrics trap.
Unless you measure marketing performance against the benchmarks of sales and margins, you are not only measuring for the sake of measuring, you are measuring the wrong things. And then it really doesn’t matter what the answers are.
TO AVOID this trap, we looked at ways of avoiding the myopia that often accompanies big data and offered guidance on determining which tactics deliver the best return on investment: digital, digital, digital.
Understanding market share will help you in one critical respect: it tells you how big the pie is.
That is relevant because you can’t bite 50-million bucks out of a 40-million buck pie.
A note of caution regarding the use of market share as a performance benchmark: shares can rise and fall, but these ups and downs don’t necessarily negatively affect benchmarks of revenue and profits. That is because not all customers are profitable customers.
In fact, you may well want to lose some: the bad payers, the ones who refuse to learn how to use your products and are constantly calling for support, and the ones who make demands on response, service, time, quality and price that nobody, anywhere, could ever meet.
In fact, you may want to offer these customers to your competitors as the proverbial Trojan Horse.
As for your profitable customers, you want as many of these as you can handle. You want a big share of them.
This comes down to listing the criteria that define such customers. All in all, quite reassuringly, if you look after sales and margins, market share tends to look after itself.
• This is an edited extract of Business-to-Business Marketing
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