The 3 complications of calculating an accurate ROI on your digital marketing investment.

Nov 18, 2019 | Marketing, Social Media

Self styled ‘experts’, flog all sorts of metrics that are supposed to tell you how well your digital marketing efforts are doing.

Many of them do give useful information,  but it is only ever partial.

I am certainly one who loudly  advocates the extensive use of data to measure and improve the productivity of marketing investments.

Opt in rates

Sales Conversion rates

Earnings per click

Cost per click,

On, and on, and on.

Being an old fart means I like simple stuff, and the simple measure of the effectiveness of your marketing dollar is the return on investment. ROI. The actions taken as a result of the investment divided by the cost to inspire and  motivate that action.

Always has been the best measure, always will be!

Until the digital stuff took over, the best you could do was take an educated guess, informed by some research and experience.

Now you can usually get a pretty good read on ROI if  you think hard about it.

How much did we spend divided by how much we got back.

There are  really only three  complications, beyond the technical ones involving statistics, and the lies that they can tell. Also, unfortunately, many marketers are lousy at statistics and mathematics, which is often a challenge to credibility.

First. Over what time frame do you do the measurement?  For example, the lifetime value of a customer means you need a framework to make the calculation. This involves a lot of data as well as assumptions, and an intimate knowledge of customer behaviour over an extended period. This is very hard to get right, so most just use averages, which are almost always misleading. If my right foot is in a fire, and my left in a bucket of ice water, on average, my feet are at a comfortable temperature. Nonsense.

Second. Attribution. Which part of the investment led to the transaction? Was it the digital marketing activity, or the manner in which the receptionist took the phone call, or a thousand other sometimes tiny things that contribute to the transaction evolving. This challenge is not exclusive to digital marketing, it is to all marketing activity. However, the specific and very misleading claim made by most digital urgers, that you can measure the effectiveness of an investment in digital because you can measure movement through the ‘sales funnel’ is simply ignoring the reality of attribution. The claims made by the urgers of digital that they can reliably deliver attribution sufficient to make micro adjustments to the allocation of resources in an ever evolving competitive context is rubbish. You can get closer than a ‘best guess,’ but not with anything resembling statistical reliability.

Third. There are still things that we simply cannot measure. Most of us would agree that being a good parent is a great investment in the success of our kids, but how do you calculate an ROI on parenthood? Similarly, the impact of being part of an enterprise culture that encourages and values diversity of opinion,  enables all stakeholders to have a genuine voice, and creates alignment of objectives, is hard to measure.

None of the above should restrain you from making the effort, and continuously improving the methodology as you learn more about your customers, and their behaviour, but it is a warning to those who just believe the nonsense peddled by digital urgers with a dog in the fight for your money.

Header cartoon credit: Tom Fishburne at www.marketoonist.com

 

 

13 Ideas to use analytics to improve the credibility of marketing investments.

Nov 10, 2019 | Governance, Marketing

 

Marketing is all about making assumptions about the future, and how your investment in marketing activity will enable you to deliver revenue and commercial sustainability.

Therefore, making informed assumptions then testing their validity as you implement, reassess and improve is a vital part of the exercise in investment optimisation.

CFO’s and CEO;s do not trust marketing: they are often seen as the makers of nice adds and suppliers of pens and mousepads to their children, they do not carry the credibility quotient of an analytical profession.

For a marketer, having credibility in the ‘c-suite’ is essential. You are seeking resource allocation decisions to be made on the basis of your best estimates of what the future holds, an imprecise exercise.

Therefore, tracking the performance of previous estimates, being transparent about those that did not work, while improving those that did,  is an essential part of building credibility.

Essential to continuous improvement of the returns from marketing investment is the ability to allocate scarce resources where they will deliver the most bang for the buck.

  • Shift revenue generating activity from low margin products to  those with higher margins. To do this you need to be able to segment revenues and margins by customers and product, as well as by actuals and percentages.
  • Focus investments in those larger opportunities at the expense of the smaller, maintenance ones. Unfortunately these are often the easier ones to ‘sell’ to the corner office, and it looks like useful activity so it is often the default. Explicitly dropping lower return projects in order to fund those with higher returns, and/or more strategically consistent outcomes builds credibility.
  • Increase investment in reducing customer churn, and increasing lifetime value. Recognising the costs of customer acquisition Vs the cost of retention explicitly, usually makes this an obvious strategy,  often ignored, particularly in commoditised markets.
  • Increase investment in attracting higher share of wallet for strategically important customers. Defining the depth and breadth of the ‘customer wallet’ usually leads to interesting debates that must be sheeted back to strategy, and where strategy is absent or thin, this debate throws a light on that situation.
  • Focus resources in the growing part of the portfolio where there is some level of product differentiation that customers value. As Warren Buffett has said often: ‘Price is what you pay, Value is what you remember’. Understanding the price/value trade-off your customers make is challenging, as there is so much inherent variation between customers and the context in which a purchase decision is made, but being able to articulate the quantitative parameters of those trade-offs builds great credibility.
  • Automate repetitive tasks while increasing the personal engagement at the close of the transaction cycle. The locus of power in the purchase decision has moved from the supplier to the customer by virtue of Dr Google. Potential customers no longer need sales reps, the most expensive part of the sales budget, to provide information, but customers still do often need the reassurance of another person to make the final conversion. Use your most expensive sales resource where you generate the best return from the investment.
  • Move into adjacent market areas, after demonstrating the risks and rewards of such a move.
  • Collaborations through the value chain to deliver leverage to your capabilities.
  • Increase investments in actionable marketing and market intelligence, and demonstrate the impact of good intelligence in the past.
  • Optimise high performing segments. Being explicit about the optimisation of current performance as a means to fund commercial sustainability builds credibility, and enables the more risky ventures to be supported by senior management.
  • Understand the customer journey and focus on the areas where conversion rates can be improved. Conversion rate dashboards are now relatively easy to set up and monitor in real time, and offer transparency and opportunities to improve by being tactically agile.
  • Increase investment in strategic account planning for strategically important customers. This may not always  be your biggest customers, it is those most aligned to your strategic aspirations, where a deepened relationship will deliver long term revenue sustainability.
  • Use the accountants tools, financial ratios, NPV and IRR, in your arguments, showing rolling results that give insights to the trends happening, and providing analysis that explains the trends.

 

Marketing will increasingly become the key  differentiator between success and failure in commoditising markets. Failure to build the credibility with the ‘c-suite’ necessary to make the long term investments in marketing required, will result in a shortened commercial lifespan.

 

Header cartoon courtesy of Tom Fishburne at www.marketoonist.com

 

 

What do bees know about marketing strategy?

Nov 6, 2019 | Collaboration, Marketing

 

Bees are essential to our survival, they are fascinating insects. There is much we can learn from their habits, the outcome of millions of years of evolution. They do not just fly around at random, pollinating as they go, they are highly organised, focused, collaborative, and each plays a specific role in the hive.

As a kid, I used to watch my grandfather catch bees in his fantastic rose garden, cultivated to attract bees. He captured them in a bag, and made them sting him on his knees, believing it eased his arthritis, born of a life of physical labour. Modern medicine has isolated a molecule in bee venom that is associated with arthritic pain relief, demonstrating again, that old wives tales are sometimes true.

Back to  the question, what do bees know about marketing strategy?

It turns out, a lot.

Advertising and mutual benefit.

Flowers, which attract the bees, need to tell the bees that there is something they like, nectar, on offer. However, there is a mutual benefit, as the bees pollinate the flowers as they take the nectar. A mutually beneficial arrangement, with many variations across the varying ecosystems.

Value proposition.

To attract bees, plants that need to be pollinated, have flowers, the bigger and more decorative, in general the better. They want the bees to be attracted, be rewarded for the visit, and return, so they offer lots of nectar. The flower is an attractive façade that makes a promise, fulfilled by the nectar. This encourages the bees to return, which is much better than a once only visit. Bit like building a brand. Invest, attract, and work towards repeat business.

Communication and referral.

Bees communicate, they signal to each other when they have found a good source of nectar by doing elaborate ‘dances’ in the air. ‘Word of wing’ advertising perhaps?

Selective Resource allocation

Plants use a lot of their limited resources producing flowers. Being a world where nothing happens on a whim, it follows that there is more value in the allocation of resources to creating flowers than to alternative uses. Perhaps flowers are just plants with an advertising budget?

Collaboration and innovation.

Bees have roles in the hive. One role is of the explorer. These bees ignore the ‘word of wing’ of their colleagues, and range more widely looking for new sources of nectar. This is a necessary function, as if there was not exploration, the nearby sources of nectar would be consumed, and with no alternatives found, the hive would die out. In commercial terms, these are the R&D or Innovation bees. They are making the investment now, so the longer term survival of the hive is assured.

Not always as it seems

Not everything that appears attractive is valuable.  Orchids are rare, beautiful, and highly evolved, and are traps for the unwary bee. Usually orchids are a one stop shop for a bee, the scent of the orchid lures the bees in, they pollinate the orchid, but then cannot get out. Once word gets around the bee community these plants are dangerous, the bees avoid them, which is why orchids are an early flowering group of plants, and are widely scattered, so the bees have less opportunity to spread the word of the danger. They are like that really  nice looking restaurant in a tourist area, the locals avoid it like the plague, but the tourists go in, and get fleeced, but the owners know the tourists are a once only visitor, so it does not matter, as there is no tomorrow, it is a once only transaction.

 

Metaphors from the natural world abound in management literature, for a very good reason: we can learn a lot from them.

 

An alternative view of ‘KPI”

Oct 11, 2019 | Customers, Marketing

 

We all understand the term ‘KPI’, Key Performance Indicator. It is always used as a term to describe internal performance metrics.

Our customers employ us to deliver value, a solution to their problems, a means to deliver some sort of gratification. Yet, we use as performance measures things that are of importance to us, usually irrelevant to customers. Sales revenue, margins, share of wallet, customer churn, inventory turn, factory efficiencies, and so on.

How many of your customers give a toss about your factory efficiencies or sales revenue?   The reason they came to you is that you made them a promise, sometimes unspoken via your brand, sometimes explicit via your advertising.

Perhaps the KPI metric should be reversed to ‘Kept Promise Index’.

The promises we make have no positive weight unless they are kept, then they carry weight. When promises are not kept, they also carry weight, far greater than when they are kept, but it is negative weight.

In my experience, a promise not kept is remembered, commented upon, often generating disproportionate  anger and frustration to be vented somewhere, usually these days on social media.

Last week my internet service went down without notice for 16 hours, as always, right in the middle of a research project. I will remember that, and act on it, whereas for probably 99.9% of the time, the service is there, uninterrupted, at my demand, but that is the promise, so I will not necessarily remember that 99.9%, it is simply expected.

However, when the promise is made explicit, and it comes with a guarantee, it can become a huge marketing benefit. For example, if I was a plumber servicing domestic  markets, I would explicitly make two promises: turn up when promised, and leave the work site cleaner when we leave than it was when we arrived, or there is no charge.

I think there would be a premium price in that, as it is a guarantee of a promise to be kept!

How many of your KPI’s would your customers care about?

 

Header cartoon courtesy Scott Adams and ‘Dilbert’

How do you delight a customer?

Oct 7, 2019 | Customers, Marketing

Delight the customer has become a cliché, popping up in all sorts of places from PR blurb, to websites, mission statements, and sales rev-ups.

However, few seem to have any real idea of what it really means, can put a solid foundation under the fluff, to make it something meaningful.

I asked the question recently of a group, one of whom had used the words as a throwaway.

 ‘What does delight the customer mean to you’?

I got the expected fluffy strings of adjectives and adverbs back, until someone at the back of the room came up with what I think is the right answer.

She said, ‘We provide an answer to a pressing problem for our customers that is dramatically superior to anything else they have seen’

Do that, and no matter the words, your customer will be delighted.

 

Photo credit: David Woo via Flikr

Content marketing or Marketing content?

Sep 23, 2019 | Communication, Marketing

These two things are different, absolutely different.

Content marketing means different things to different people. Last week I attended a presentation of a self-styled content marketing expert. He was pontificating from the stage about the value of content, and content marketing, but when I asked his definition of content marketing, all I got was clichés.

To me this is pretty typical, disappointing, but perhaps forgivable, as we are just in the early stages of really understanding how best to use this new(ish) medium.

To me, the best definition is that of Joe Pulizzi who runs the Content Marketing Institute.

‘Content marketing is a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience — and, ultimately, to drive profitable customer action’.

This definition does not at any time mention selling. It focusses on delivering information of value to an audience, which may, in time, result in a transaction.

This implies there is a strategy in place, an organised, strategically focussed process that generates content for publication, that reports to someone who carries the accountability for the process and its management.

Without a process, and someone accountable, it becomes chaos.

Trouble is, much of the so called content pushed out is just rubbish. Chaotic gibberish that rehashes what others have said, not an original thought amongst them. Any good stuff in that maelstrom of rubbish is likely to be lost.

Whenever I hear the words ‘Content marketing campaign,’ which is often, usually from agencies of various types, I cringe. Content marketing is not a campaign, at its best, it is a consistent, ongoing  flow of information that may be of value. It is a journey, not a campaign!

Marketing your content is different again, it is simply the management of the challenge of getting your content, good, bad or indifferent in front of those who might be interested, gaining their attention, and extracting an action.

It is largely an exercise in channel management. In the ‘good old days, you had a few options, radio, TV, magazines, letterbox drops and direct mail. Not so now, when there are multitudes of channels all fighting for the attention of potential customers.

You can do a good job of marketing your content, but if your content is crap, it will not do you much good, indeed, it will work against you. Poor content is toxic to the receiver, as it has consumed some of their valuable time, but delivered no value in return.  

 

Header cartoon courtesy of Tom Fishburne www.marketoonist.com