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Jennifer Foster Marketing

chief marketing officer

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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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The Future of Marketing Depends on Marketing Technology and Operations

Marketing has always been thought of as a creative industry. “Marketing” folks are generally known for their ability to create and launch brand identities, their keen skills in developing the perfectly crafted sell sheets, advertising and leave behinds for their sales teams,  and lest we forget their awareness and ability to capitalize on trending social media topics.

However, in this day and age more and more marketing is becoming data-driven which is creating a new class of marketer: the Chief Marketing Technologist.

Sales collateral is not just customized, it’s personalized and tailored to its target.

Messages are automated based on an action (or inaction) with web sites or customer care centers.

Data-base marketing is becoming the standard by which teams deliver relevant content to customers.

Finally, all of these data-driven projects rely on even more aggregated data to create solid measurements when it comes time to budget for next year.

Wikipedia defines Marketing Operations as:  the function responsible for marketing performance measurement, strategic planning and budgeting, process development, professional development, and marketing systems and data.

Scott Brinker wrote an article in 2013 citing the need for a Chief Marketing Technologist who would sit within a companies’ marketing organization but serve as a technology expert for the purpose of improving the efficiency and accuracy of the organization. Some even go so far as to see marketing operations leader as a “Chief of Staff” because they are often responsible for handling so many aspects of the company’s success.

(Personal story: I remember dramatically lamenting to one of my former bosses who continually sent me on fact-finding and resolution missions with technology teams, that I wanted to work on things that “weren’t broken” — had I only known to simply dub myself a Marketing Technologist!)

Marketing-Driven Process Improvement
Marketing technology leaders quickly find themselves being experts in process modeling and improvement. Because they identify gap, and in my case propose and drive resolution, we are then tapped to create training and staffing plans. Then, we are responsible for incorporating metrics to prove the processes are better and the process starts all over again.

Brinker (@chiefmartec) includes a Forrester-created a diagram of how this role functions under the direction of the CMO.

The Marketing Technology Office

Breaking Out of Old Patterns
Companies who fail to understand this will continue to struggle. Several that I’ve seen firsthand, keep data tucked neatly away in the technology department without understanding how the data will even be used downstream, let alone understanding the consequences if it’s not correct. Marketing and communications staff will generally avoid understanding the complicated systems and their mysterious codes that generate the data.

This push-pull between departmental staff, over time will degrade the effeciency of how data moves through the process. Without anyone measuring the impact the organization slowly slides into a spiral of bad data, delayed activity and inaccurate measurements. Any data integrity projects are competing with mission-critical IT projects and its not hard to predict who will win if there isn’t an undertanding of the value of  marketing-driven initiatives.

The Future Relies on Marketing Technology
Marketing technology teams must become the biggest influencers within a company, and to do that we have to build our own accountability. At a recent client meeting I was faced with a very skeptical client who didn’t understand how marketing could measure itself. The short answer is probably that marketing can’t measure itself, however, it should definitely measure its effectiveness by the performance of its peers and vice versa.  The effectiveness of a marketing operations strategy and culture yields an increase in marketing efficiency and reinforces marketing in areas like customer care and information technology.

Building a successful marketing technology department is less art and more science, some data-driven industries like healthcare and finance, are definitely on the hook to adopt this approach sooner rather than later. But building it is only the first step, the operational intelligence that the team yields will need to be synthesized into meaningful priorities. Through continuous measurement, research and communication, a marketing operations team will stimulate ideas and internal discussion, provide cross-functional collaboration and give the entire executive team the tools they need for effective decision-making.