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Jennifer Foster Marketing

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From the inside out: How do you truly create a market-driven company?

One of the most common goals I hear from would-be clients, is their desire to be more “market-driven.” As with most topics you can spend a lot of time and money to completely over-engineer this into a task so big and daunting that it becomes impossible to implement.

I’m sure there are complicated models you can use to prove to yourself, or your investors, that you’re successfully adopting some highly-tested principles. There are consultants who will charge you way more than I would — gotta pay for all that overthinking I guess.

I think a much more efficient approach is to find a few tricks that help good companies be great companies.

When you create good processes, your clients and customers will have good experiences, and in the end, your business will grow.

So let’s talk about a few of those things that can get you going in the right direction!

  1. Customer Service Team: Make your customer-facing employees into your best information gatherers. Whether you’re a small business with a single appointment setter or a large healthcare company with teams of dedicated customer representatives, these people interface with your customers every day. Your CSRs know what makes customers happy, and they for sure hear about what you do that drives them crazy. CSRs also know what they wish a product or service could do. Create a way for them to feed that information into the decision makers. In a small business that may just be getting the info back to you, in a larger, more complicated organization, it may require a process to synthesize and prioritize the feedback. Either way, this is FREE market research if you can harness it.
  2. Product Development: We love our products. We think they are great. We know their weaknesses. Or do we? Your product development pipeline likely includes a host of enhancements that you either can’t afford or don’t have time for. That’s the nature of product development. However, before you launch your next product enhancement, your development leaders should also be asking your marketing teams about competitive information. What are your competitors doing that you aren’t? That doesn’t mean you chase everything they do, but it may warrant some critical understanding of your longer term priorities.
  3. Finances. Everyone’s Market-driven- When you create good processes, your clients and customers will have good experiences, and in the end your business will grow.favorite topic: the money. Being a market-driven company, your finance leaders should understand the value, cost, COGS and markup on your products. One of my recent clients is currently running over budget on their print costs. Makes sense that their money guys and gals are all up in their potato chips about over-spending, right? The reality is they are over budget because the company has far exceeded their membership numbers. They’re sending more enrollment kits than they ever planned to, but that’s because they’re killing it on their enrollments. So while the budget is soaring, so is the income, and therefore the ROI should be strong. Your finance folks need to understand more than the budget’s bottom line.
  4. Sales. Your sales team is not automatically market savvy. It’s no secret that combining your sales and marketing is a recipe for disaster in my book. Generally, if you do it, you will end up with a “sales” and “sales support” team, not a marketing team. With that agreement under our virtual belts, hopefully, you’ll follow me when I say that that your sales team needs to intimately know your top competitor products. That’s a great first step. But how well versed are they on the consequence of doing nothing? Do your sales leads understand the industry well enough to know what the cost of saving the money your product costs? If not, they’re not fully market-driven — they should understand the market they’re operating in.
  5. Your marketing peeps. What do you mean all marketing people are not market-driven? No. They are not. Not even most marketing professionals are market-driven — because they don’t measure things. They likely have no idea if their activities are successful at influencing your target market or not. Marketing leaders must work cross-functionally to help their colleagues know better and perform better. Do they get to boss people around? Yes. I mean no. I’m kidding. Sorta. Marketing-driven doesn’t mean that marketing drives everything. It means that as market research and best practices become available it is shared, discussed and assessed.

Tell me some of your successes (or struggles) with being market-driven?

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The First Step to Marketing ROI: Valuing your Customer

So last week we talked about building your 2016 marketing budget and assuming you did that, this week you’ve heard from your finance and accounting partners that they’re cutting it by 10%. In order to avoid these cuts you likely will be asked to defend your budget, and that comes in the form of (insert scary music sounds here) proving the Marketing ROI.

Actually, the finance partners probably aren’t asking for your ROI because, well, they’re probably just managing to the expense lines, and THIS is where you put your expertise to work! Because you, as an astute marketing manager, can illustrate why spending this hard-earned corporate money will result in a very specific amount of revenue.

Nine out of ten (90%) global marketers are not trained to calculate return on investment (ROI), and 80% struggle with being able to properly demonstrate to their management the business effectiveness of their spending, campaigns and activities, according to new research. Fournaise Group Marketing, 2014

Before you can value your marketing you have to value your customers. A few key measurements are:

  1. Cost of Acquisition: Cost of acquisition is calculated by the amount you spend to acquire a customer over a given time, and dividing it by the number of customers you acquire in that given time. Don’t forget to take into account EVERYTHING it takes to find and acquire a customer like vendor costs, sales, support, and marketing staff compensation.
  2. Customer Lifetime Value (CLV): The CLV is a prediction of the net profit each customer can deliver over the course of the relationship.  So while the cost of acquisition looks at what resources your organization uses to land a new customer. Simply stated, CLV examines the potential value that customers bring to your organization.
  3. Customer Retention Rates (CRR): Customer retention may be a performance measurement that most marketing managers simply don’t see. This blind spot is one of the fundamental problems with a sales-driven marketing team. Customer retention is left to Customer Service or other more operationally-focused teams leaving Marketing out of the process entirely.* To calculate retention take the original number of customers, subtract your lost customers and divide by the original number of customers for the that given timeframe. For example, if you start the month with 45 customers, and lose 5, the formula would be: (45-5)/45=89% Retention.**

*Meanwhile your competitors are hitting up your customers right and left — so DON’T ever stop marketing to your existing customers.

** Obviously you should exclude new customers in this calculation

Once you have some value of your customers, you can begin to know how much you can logically spend to acquire them and still make a profit. The higher your revenue per transaction the more you can spend to acquire (but you probably have a longer buying cycle which will drive your marketing costs up in relation.)

The best predictor of future success (or failure) is past success (or failure). So now’s when you pull out your historical campaign measurements. You should be able to assess how many customers you gained from your direct mail, you should know how many customer service issues you resolved using social media, and exactly how many qualified customers found you using paid or other search. These metrics become crucial when creating your marketing “balance sheet.”  Don’t fool yourself into thinking that, without any other changes, your newsletter open rate is going to jump from 2% to 15% this year simply to justify an added $25,000 to your email marketing budget.

When you compare your previous campaigns (and their successes) you should be able to then create a forecast that says spending X number of dollars on direct mail yields me Y number of customers.  X number of dollars spent making my website more engaging yielded me and additional Y number of customers. And so on down your budget line items.

If you don’t have previous examples to follow, for new products or new marketing channels, you generally can gather secondary research information that will help you, but it will be somewhat of an estimate because your unique offering, sales conditions and product can play a big role in the metrics.

You can’t expect your organization to value anything that you, yourself cannot quantify. This also becomes a lesson in making sure that your measurements are in place throughout the year so that when it comes time to budget you have clear numbers to rely on and your 2017 budget (and ROI proof) will be a breeze.

 

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Q3 Planning: Putting together a marketing budget for your 2016 activity

It’s September and the activity that you’ve put off all summer is looming. It’s time to develop and turn in your 2016 marketing budget.

My closing question during an initial consult is  “What sort of a budget are you looking at?”  Usually that’s when I hear the long pause and then they generally drop their gaze and reply, “I don’t have a budget.”  Or, the other typical and equally painful response, is “I’d like you to tell me what it will take.”

You know you need marketing to grow your business. No poiMarketing Budget Planningnt arguing that, but, so many “marketing” schemes are out there that it’s totally understandable that my clients are reluctant to give me a number. But can you imagine contacting a real estate agent and not letting them know whether you were shopping for a $175k fixer-upper or a $345k fully renovated mid-century modern? You wouldn’t.

Small budgets can be just as effective for a growing businesses as a large budget is for a more profitable one. So just like you need to give your real estate professionals some guidance, you should have an idea of what type of marketing budget. Here are a few tips for putting one together for 2016.

1.  How much should I budget? Rule of thumb is no less than 5% of your revenue and if you’re a stable business in a stable market this will work just fine. However, if you’re looking to grow, or if your industry is growing (i.e. competitors are entering at a fast pace), you’ll need to up that to 10-12%. If you’re in a highly competitive market, especially in a direct-to-consumer space, you’ll need to allocate as much as 15-20%.

2. What is the best marketing investment? The very first place you should spend your money is on your web site. If all you are spending is the 5% noted above, start here. You need a good web site and, again, if you’re in a consumer-facing space, you need a great web site. It needs to have great content (think quality over quantity) and it needs to be engaging and specific. Good content will aid your Search Engine Optimization (SEO) efforts and save you time and money on it down the road.

3. Where should social media fall in my budget? Social media is your public relations. The good news is that it doesn’t have to be costly. If you’re starting your business and you are comfortable with social media tools, you can do a lot of the engagement on your own. Outsourcing it will cost you a couple of hundred dollars per week, and honestly if you don’t have an interest in doing a really good job on your own social media — well, you should outsource it.

4. What about event marketing? I’m a huge fan of business-to-business marketing that includes attendance at industry conferences and events. Now before you book your space and pack up your booth, I generally think that attending conferences is a better ROI when dollars are tight. I suggest to nearly all of my clients that they speak on panels and to attend networking events. Join non profit and advisory boards where your expertise can be showcased and highlighted, and where you’ll meet people who can help you find more business or more speaking engagements.

5. What part does branding play? Once you have more than a handful of sales collateral (including web sites, business cards, presentation templates, etc.) you likely need to consider some sort of a branding plan. Branding is more than just how things look and feel, although that’s very important, it can also be the key messages and having a level of consistency across all pieces. It can be tempting to create a new sales sheet for every new idea that comes up, a solid branding and collateral plan can help make sure your materials get the most bang for their buck.

Most companies will gravitate toward under-spending on their marketing budgets; it’s simply human nature — heck, I probably even under-spend on marketing myself to you all — but not spending can’t be confused with saving. It bears repeating: You have to spend money to make money. The trick is to develop a budget that encourages you to spend your money wisely. Keep in mind that your marketing efforts have a direct bearing on your revenue — and you have to measure them, so now is not the time to be penny wise and pound foolish. We’ll talk about measuring them in the next blog so stay tuned!

If you’re developing your 2016 budget I’d love to hear from you about any tips and tricks you have. If you’re working with an agency or consultant and need an objective third party review, I can help there, too.