This article was first published on LinkedIn.
How much of your marketing is wasted? After asking this question to other business executives and sales leaders, I bet your answer is, “I don’t know.” This response is typically due to one of three reasons: (1) you’re not measuring your marketing’s performance, (2) you’re not investing in marketing or (3) you never have asked this question because you just “do marketing” with a budget and assume it’s working.
I find this situation most evident among small to mid-size B2B companies where traditional processes focus on sales with marketing only supporting the sales process through collateral development and trade show coordination. Unfortunately, it is also within these B2B companies where either sales are slowing, the sales effort required to maintain growth is exponentially higher than before, sales cycles are lengthening or competitors are taking more market share regardless of sale’s efforts to discount prices or extend better terms.
The time for modernizing B2B marketing efforts is here. It’s evident within the situations B2B companies face in today’s more competitive and global markets. And part of modernizing B2B marketing is understanding how it must transition from an expense generator to a value contributor driving growth and sustainability for the company.
When I ran B2B marketing for a 7-straight year Inc 5000 company (it was acquired in the seventh year), the marketing team owned 35% of the revenue plan and supported sales for the other 65%. So when I hired marketing managers, they had to take on the direct responsibility of revenue-generation. I had interviewed many marketers for these roles and was often disappointed in the interviewing outcomes.
During the interviews, I asked marketing candidates to answer two questions:
(1) Tell me a time when you designed a marketing plan and allocated your marketing budget to execute it – how did you know whether you plan was successful or not?
(2) Tell me how your efforts delivered value (generated revenue) that contributed to the the growth and sustainability of the organization?
The standard responses to these questions centered around a knack for spending money but not so much for generating measurable value from the money spent. These were good marketers that had demonstrated a level of competency, at least as stated on their resumes. They had filtered through our recruiter and into the initial phone screening interview so they had experiences and skills worth evaluating further. So the issue wasn’t necessarily the individual’s skills but more around how their current employers were measuring their performance and what expectations were set for their results. These companies were viewing marketing more as a cost center than a revenue one. They were allocating a marketing budget which was spent with good intentions to support sales and grow revenue. But no measures existed to track whether the marketing expense was generating real value. In addition, no integration existed between sales and marketing, whether utilizing CRM or marketing automation, to determine whether the cost for creating demand equaled revenue earned.
From Generating Expense to Delivering Value
Marketing is a value-generating function and in today’s digitally connected environment, B2B companies must measure marketing efforts and investments to deliver value. From this perspective, value ranges from website visitors to email subscribers to qualified sales leads and through into new and repeat customers. The weight of the value increases the further back into the funnel it is created. So an email subscriber creates less value than a repeat customer. However, the point is that marketing must be tasked with generating value from every dollar spent. This critical balance between expense and value is missing among most B2B companies.
As a side note, I wish not to undermine the importance of brand. Although difficult to measure, it absolutely creates value. Beyond brand identity and visuals, brand messaging (e.g. message platform including value propositions, core messaging, points of difference, personas) is extremely important. The value gained from the expenses allocated in this area are earned through relevant, timely and high value connections with your target audience across the buyer’s journey. In other words, the value generated by brand messaging comes through in measureable ways from how your marketing content and channels perform in generating value. You must get the brand messaging right in order for your marketing to earn the highest value.
A Simple Example of Balancing Expense and Value
A tactical example of the critical balance between expense and value is evident within digital advertising, specifically paid per click marketing through Google AdWords. In a recent conversation with a prospective client, he expressed concerns with using AdWords to deliver qualified sales leads. The company had a negative experience with an agency “blowing through” a large portion of the company’s marketing budget with little value to show afterwards. In a situation like this, the agency has the expense/value balance out of whack. They are serving the client on only the expense side with good intentions that the value side will take care of itself or the client will handle it. This is seldom true certainly among small and mid-size B2B companies.
For any paid campaign, someone (ideally the service provider or consultant) must manage both sides of the expense/value equation.
On one side, the campaign has to be setup and managed to leverage the expense in order to gain the right level of performance. In the case of Google AdWords, you must be willing to spend a higher maximum cost per click (CPC) and allocate a reasonable daily budget to drive performance. If your performance is strong enough, then you’ll actually pay a lower cost per click and achieve a higher ad position. But generating a click only really serves Google’s revenue interests. You paid for the click to generate a visitor. Only until you convert the visitor to something of value do you start to build a return on the click cost.
On the other side of the equation, value is where your business starts to build a return. This is where marketing really earns its position as a revenue center. Converting the visitor to an email subscriber, whether through a “join the newsletter” or better, through a high value content offer, builds value. Likewise, as you’re building value from the visitor, you must also be equally building value for the visitor as he or she moves along their buying process.
Demonstrating an Expense and Value Balance
Back to my interview example above, the right answer I was hoping to hear from the marketers I was interviewing would extend beyond building awareness and into “converting visitors to business value.” I was looking for marketers who managed from awareness through to revenue either directly or through an aligned and collaborative working relationship with the sales team. I would have fallen out of my chair had I heard a marketer say, “I had an $A budget, which I allocated across B, C, and D marketing channels and generated a D% return on advertising spend with a customer acquisition cost of $YYY and a lifetime value of $YXZ!” Even if they provided ballpark or fake numbers, the fact that they thought this way would have been incredible. This sentence represents a properly balanced marketer serving the expense and value sides of the equation!
The Expense and Value Equation
The expense and value equation is an important concept to understand whether for hiring a marketer, executing a marketing campaign or outsourcing service work to a third party. For example, when you spend money to produce content, it’s a cost until the content attracts a prospect and that prospect converts to either download more content or he or she completes a contact us form to reach sales. Unfortunately there are plenty of great writers providing content marketing services. But if the content isn’t moving a customer further down their buying journey then is the content really working to create business value?
As a business leader, you have to ask yourself…
- Who is responsible for the expense and the value sides of the equation?
- What measures are in place for expense and value generation?
- What value do I want to generate from the expense?
What’s the takeaway? All of the “typical” marketing activities that spend money are important. However, marketing’s role should not end in allocating budget and driving awareness. Marketing should be responsible for building business value. Marketing should collaborate with sales to convert visitors into subscribers, generate sales leads and assist all of the way through to winning customers.
Further, marketing should be measured on revenue generation. By aligning marketing and sales around a common metric (e.g. revenue) it keeps marketing engaged throughout the buyer’s journey and creates a natural feedback loop between the two teams. If you ask a marketer how well their campaign did with generating customers, you should expect a clear answer beyond how the money was spent – it should include the business value created.
Looking to get more customers? Kevin Gold, of Next Leap Strategy, helps business owners, marketers and sales leaders develop and execute effective marketing growth strategies to generate more sales leads and customers. Marketing for revenue growth. He is also co-founder of FindYourNextCustomers.com, a Customer Acquisition Accelerator Bootcamp which guides B2B businesses on how to adapt to the changing B2B buying process to grow faster. Get started by contacting Kevin at 513.601.8893 or visit www.NextLeapStrategy.com.