Why Marketing is Important in 2019
According to the American Marketing Association, marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
This blog explains Why Marketing is Important in 2019. And also explores new Marketing Technologies and Strategies used to boost sales and business.
As you know, customer behavior has changed radically in recent years because of forces like social media, powerful mobile devices and tools like real-time price comparison apps.
THE PURCHASE FUNNEL
People won’t buy from you if they don’t know you exist, what you’re selling and how it benefits them. That’s first-year marketing student stuff, and while the tools to create awareness and affinity have mostly turned into ones and zeroes, the purchase funnel endures. That doesn’t mean it hasn’t evolved, though.
The basics: through multiple points of contact, your marketing communications should take your prospects through every stage of the ever-narrowing purchase funnel. Let prospects know you’re out there, get them leaning forward, push their buttons with features, design or value, and incentivize them to purchase.
Today’s funnel—adapted for the digital world—is a little more complicated and looks something like this:
THE PURCHASE FUNNEL
Aware: Learn that your brand/product/service exists. A higher awareness score, with effective execution elsewhere in the company, nearly always leads to higher sales volumes.
Interest: Find out more details about your product or service (e.g., watch a video; read an article; meet a representative).
Research: Visit your website, read reviews and compare prices; find out what the Internet and neutral observers are saying about you.
Consult: Call/text/use social media to get input from friends.
Desire: They want it and will send “buying signals”.
Trial: Test drives a car; download a free version of the software; sign up for a month-long trial of a subscription service; use samples of cosmetics, etc.
Action: Purchase or subscribe
Share: Review your product/service—happy or unhappy—and tell friends all about it.
Loyal: Make repeat purchases, perhaps of more expensive or complementary products; stop shopping for other brands.
Evangelize: Tell the whole world how awesome your company is.
Companies have always tried to segment their markets into audiences based on value and then target their messages to those audiences. In the past, that might have meant targeting young adult males by running ads in “lad mags” like FHM instead of the daily newspaper. Segmentation was a fairly blunt instrument.
Not anymore. Not only has FHM ceased to exist, but—thanks to Big Data—we can segment with incredible precision, based on factors ranging from an ethnic group, marital status, and age, to location, online interests, and purchase intent. Segmenting is still relevant, but now it’s done with a razor blade. Today, segmentation is about things like:
Using data to identify, target and re-target prospect groups with the highest predicted lifetime value
Positioning messaging and branding based on segment demographics, digital behavior and prior relationship with your company
Blocking ads from showing, and thus saving money, for segments who never react, or react badly, to your ads
Targeting loyal customers with content they can share
According to the American Lifestyles 2015 report from Mintel, nearly 70% of online consumers (81% of Millennial) make their online purchasing decisions based on reviews posted by strangers.
That’s all good because he’s also giving you the ability to know more about him than has ever been known about any consumer in the history of commerce. That’s the data that will make the difference between businesses that thrive in the digital age and those that fade into memory.
CUSTOMER LIFETIME VALUE
McKinsey’s 2013 Datamatics Survey found that companies that used customer analytics extensively had an 86% higher growth rate versus those that didn’t. Despite this evidence, most companies aren’t using the customer lifetime value approach.
In “Building Loyalty and Driving Revenue in the Digital Age”, Econsultancy surveyed 900 companies and agencies. While most thought LTV was critical, only 42% said they knew how to measure it.
“We believe in an integrated marketing strategy in which marketing automation, email marketing, social media, and CRM are linked together and reinforce each other. The customer is at center stage in this context.” —Andre Lejeune, CEO of Selligent
As the CEO, it falls to you and your marketing team to walk a fine line: delighting your customers with how much you know and care about them while letting them know that you respect their privacy.
When you collect data, make sure you don’t break the law. The principle is, don’t collect data you don’t need. If someone’s sick, you don’t need to know that, because you’re unlikely to use that in marketing.
It’s not useful and it’s a bit twisted. Anything you have needs to be anonymized, and you must be 100% sure nothing ever leaks. Ask Target, Sony and Home Depot about the financial and PR carnage a data breach can unleash.
Make your CRM messages and offers relevant. Customers will tolerate a lot more intrusion if what you’re sending them meets a need or solves a problem. On the flip side, send Jack Daniels ads to a 56-year-old Mormon mother of five and you’ll pay dearly.
According to a 2015 study by Gigya, 43% of consumers said they disregarded all future messaging from companies that sent them irrelevant products or advertisements. Even worse, 20% simply quit doing business with those companies.
The line is actually a tightrope, and the best way to keep your balance on it is to adopt a simple, organization-wide policy: privacy and respect for your customers come before sales.
A default position that remembers that customers are human beings, not numbers in a database, is your safety net against overzealous personalization and dangerous intrusiveness.
Social media Marketing
Everybody talks about the marketing potential of social media, but do you know how to capitalize on that potential?
Here’s how: get someone’s email address and use it to custom-target them with ads on their Facebook, Instagram, and Twitter feeds. It gets better: once you’ve got email addresses, you can go to a third-party data source and say, “Tell me what you know about these people.”
An email address is like your membership card to the swanky first-class lounge at the airport, only instead of getting free water, charging ports and vaguely comfortable chairs, you can get a person’s household income, marital status, job, the car they drive, what they buy in the supermarket and a lot more.
You might never even know the person’s name (though for legal privacy protection reasons, it’s better if you don’t), but you don’t care about their name. What you care about is their lifestyle and needs and who they are as a person. That’s what lets you target them with messages that matter to them.
Let’s say you purchase data from a reputable data exchange. You can get incomes, credit scores and more. Add them all together and a good customer database probably has between 15 and 30 facts about each consumer—whether they’re a customer of yours or not.
You can get all sorts of other cool random stuff, like who has a long commute. People with long commutes have different buying patterns and needs than people with short commutes. There’s virtually no limit to how you can parse the data.
Then, use it for segmenting based on demographics, each person’s place in the purchase funnel, your existing relationship or about 50 other variables. This seems obvious, but from what I’ve seen, too many CEOs and CMOs haven’t got a clue about what’s possible.
Some of them might be a bit old-fashioned and spooked by the idea of acquiring all that information on people, but the hard fact is that if you don’t do it, your competitors will. And you’ll lose.
How long ago did you last Google for something? What did you search for? Search marketing is another power-user trick you can access when you have someone’s email address. What have your prospects been searching for lately? I don’t have to tell you that’s a good indication of purchase intent.
If someone is searching for a real estate agent, they’re probably going to move soon, which probably means they’re going to need a mortgage.
If you’re in the lending or mortgage brokering business, you start targeting that person with mortgage-related ads. If you’re a moving company, you start running ads for moving services in their Facebook News Feed.
It’s elementary, my dear chief executive. If someone is searching for car reviews on YouTube, they’re probably thinking about buying a car. If someone searches for cruises or airfares, they’re about to blog a vacation.
That’s interesting, especially when you consider that more than 80% of consumers say they do research via search before making a major purchase.
HOW DO YOU MEASURE DATA QUALITY?
Clearly, you won’t be doing all of this yourself, so how do you monitor progress? What does good look like? Here are some thoughts to help you assess your progress regarding customer data:
Current Customers: What do you know about your current customers?
Email address and mobile phone number
Core demographics—age, sex, marital status, income, etc.
Relationship with your company—products and services, past communications, price sensitivity, etc.
Lapsed Customers: What do you know about your lapsed customers? Similar data to the points above.
Potential Customers: What data do you have regarding potential customers? What third-party data are you working with to find and target them?
Pragmatic Use of Data: How is the data being used now, regarding things like:
Have you identified your most valuable customers? What do they have in common? What is their LTV?
What are you doing to upsell/retain those valuable customers?
How are you going to find more people like that? What have you tried? What was the cost to acquire them?
What will you do with other, less valuable customers, regarding acquisition and retention?
What the types of people that you plan to avoid at all costs, to minimize wasted effort and money?
Continuous Improvement: What is the team doing to constantly improve the data, insights, targeting, ROI, etc.?
Is Marketing running lots of multivariate tests?
How do they codify what they learn from them?
How are they measuring success?
To be fair, marketing still has a pretty big pie all of its own. These are the key areas that sit squarely in the marketing department’s section of the bakery—that your CMO is responsible for:
Strategic Brand Planning:
What does your brand stand for? How are you positioned? What’s your unique selling proposition? What are your key performance indicators (KPIs) that will show how well your marketing is working? Page views? Data capture? Leads? Conversions? What’s the plan for using all your tools, from social media to media placement to sponsorships, to reach your audience?
The main job of Marketing is to create and execute that plan. How does your team allocate its budget—based on results or by cutting and pasting last year’s media plan?
Audience and Channel Research: Who are you targeting and how are you segmenting that audience? If your main prospects are college students, are you customizing your messaging based on gender, race, location, spending habits, or something else?
Once you know your audience (or more likely, audiences), what are the optimal channels to reach them? If you’re going after Baby Boomers, you might be doing direct mail and TV spots.
If you’re chasing Millennials, mobile and social ads are probably your sweet spot. Where are you likely to get the most bang for your buck, and how will you track it?
Creative: Marketing gets to play with the concept, copy, form factor, script, messaging...all the fun stuff. The goal is to use an efficient iterative process to come up with a message that’s consistent over multiple media types—offline and online ads, blog posts, videos, websites, brochures, podcasts, webinars, SEO and beyond—and drives results based on KPIs.
It’s the brainstorming, sketching, deadline-driven part of marketing...and your people are probably great at it. The efficient iterative process? Probably not so much.
Media: Whether it’s in-house or working with an external media shop, Marketing’s probably got its fingerprints all over your company’s media spend, both the “how much” and the “where”.
“Marketing and IT still work in separate, non-communicating spheres. Gung-ho salespeople make deals that IT can’t support. Marketing professionals want sexy new features installed on their companies’ web pages immediately.
Companies lose deals because marketing’s glossy image doesn’t always accurately represent IT’s back-end capabilities. And IT professionals don’t always have the communication skills or clout to withstand marketing’s demands.” —Lee Pender, CIO magazine
For all the above, marketing and the CMO should be capable of taking the lead, setting the tone and producing results. If your marketing team isn’t pulling its weight in all those areas, plan on some tense conversations. But that’s not the whole picture.
FINGERS IN THE PIE
Marketing’s private bakery smells good. But there are a lot of other bakers in your organization—Product, Sales, IT, Customer Service and Finance—and they all want to have their fingers in some of the pies, too. They should because this is digital marketing and data is king. It’s not about fiefdoms.
That was for the days when marketing was high prestige, low accountability. Now, marketing success is about who can get the data, parse it, and use it to bake something wonderful.
These are the other pies and the players who should have a piece in each:
Sales and Finance should be involved in campaign analytics because your salespeople know what your customers are asking for.
Engineers or product managers with analytics skills can be invaluable in flagging online/mobile consumer behaviors and patterns, thus identifying important markers that show where customers reside in your sales funnel. Analysts from Finance can be helpful in determining LTV.
CRM: This is another cross-functional collaboration, whether your marketing team likes it or not. Sure, they are in charge of customer messaging, but what about selecting and developing the database platform, ensuring data protection and access controls?
Or developing things like automated email scripts in Salesforce, or whatever platform you’re using? Sales and Customer Service are also likely to chime in with ideas for acquiring, upselling, cross-selling and retaining customers.
Platforms: This is another clear crossover. Who owns the website and the mobile app? This could be marketing, product, eCommerce, Engineering, Customer Service, etc. It’s more likely to be all of the above. What about marketing platforms for serving ads?
Selecting Vendors: When selecting third-party vendors, such as agencies, ad tech companies, and data brokers, the marketing department is clearly essential. However, many companies also involve their procurement departments and technology experts, too.
Budget: Who will ensure that, between Marketing and IT, there is minimal duplication and a highly efficient plan to develop all of these awesome technologies and data platforms? Many companies inject the finance team here to adjudicate.
Online Brand Development:
Attractive, clean-functioning websites, landing pages, and mobile apps that offer seamless, satisfying user experiences are essential to fostering customer relationships and leveraging traffic to boost sales and are probably owned by Marketing. But it’s not just about pretty pages.
It’s about technology, too—things like fast load times, 99.9999% uptime, integrating the user frontend with the backend, logistical and billing systems, etc., IT would likely own these.
IN HOUSE VS. OUTSOURCED?
Back to the 2013 Gartner Digital Marketing Spending Survey: It says companies outsource about half of all their digital marketing activities. The most common functions?
Content development and social engagement, strategy consulting, analytics or monitoring, design work, and campaign or multichannel integration and consistency. What are you outsourcing and how’s it working?
Hopefully, by this point in the blog, you will agree that managing your CRM database is absolutely critical to your marketing (and company) success, and should, therefore, be controlled in-house. But what does “in-house” actually mean? Should you write your own CRM data strategy?
Not necessarily; you could use consultants to help you. Should you develop the database software? Probably not, since there are lots of third-party CRM database software solutions out there that you can license. Should you store your data in your own server farm? Unlikely.
These days, typically storing your data in the cloud (e.g,. renting server space in an Amazon facility) is easier, cheaper and better for backup.
Therefore, when it comes to managing your CRM data in-house, it actually means that you have an ambitious, integrated strategy for gathering, managing, using and continuously improving your CRM data. You own the data, which is seen and used as a major source of competitive advantage versus your competitors.
This also means that if you change agencies, you don’t lose any data. Gone will be the days of having fragmented and underappreciated data, of poor quality and spread amongst numerous silos, with no integrated or ambitious strategy.
Although developing an awesome CRM database and strategy is the new bedrock of world-class, integrated marketing (and your CMO’s most important objective for the next few quarters) it still represents less than 10% of your marketing team’s activity. So what about the rest of Marketing? What should be done in-house and outsourced?
Let’s start with the advertising agency. More and more businesses are opting to move at least some of their marketing functions in-house. A 2013 survey by the Association of National Advertisers found that 58% of respondents had in-house agencies.
Among the companies with in-house agencies, 56% had moved an established business that used to be handled by their external agency to their in-house agency. If you run an agency, that’s the kind of news that ruins Christmas.
Here’s my take on agencies. Simplistically, there are two types of agencies: creative agencies that generate your key messages and content, and media agencies that run your campaigns and spend your media budget.
Creative agencies these days go wrong when they think they can still charge you $1 million for coming up with a 30-second TV ad that can take six months to produce.
That mass marketing model is obsolete. As the world of marketing gets closer to 100% digital, it’s about the precision targeting of different messages to different customers, combined with high-speed learning and iteration.
Media agencies go wrong when they push media dollars towards the areas where they make the best margins as opposed to recommending the media that delivers the best ROI (typically search, social, and digital video) in order to make higher margins for themselves from your media spend.
The agency can survive...if it evolves. Forbes got it right in a May 2015 article that reported, in no uncertain terms, that the “agency of record” is as dead as the dodo. Instead, a much more complex organizational model is required, which will definitely mean doing more in-house.
Major corporations like Frito-Lay are moving to a “project” model, where instead of hiring one jack-of-all-trades agency, it contracts specialists as needed to address a specific marketing issue, from collateral design to SEO.
That has its own problems, of course. Your team needs to have enough bandwidth to screen, select and brief third parties properly, assess their quality, and regularly shop around to see if you’re missing something.
But even with that, the project model is agile and adaptable. You can maintain a strong in-house creative core and mix and match creative agencies for different concepts. You don’t need a five-year relationship to get brilliant work, because today’s model is all about speed, throwing out ideas, and seeing what works.
Forbes’s seven signs it’s time to outsource your marketing:
Revenue isn’t growing fast enough
Marketing staff are overworked
You’re always behind
Your strategies are thrown together
You’re using the same channels over and over again
You focus on tasks, not strategy
.Your results are disappointing
Here are some guidelines regarding in-house versus outsourcing decisions:
The preceding table is highly simplistic, but the principles should help you. To show how complex it can get, let’s use an example.
Let’s say you’re trying to choose between outsourcing your Facebook ad campaign management to a third party rather than managing it in-house. You actually have four options:
Run the campaigns yourself, using no specialist platforms (i.e., use the basic ads platform Facebook provides).
Get your media agency to run them for you.
Work directly with a social media specialist company, and ask it to run the campaigns for you, using its own technology.
License a platform from a social media technology company, but run the campaigns yourself.
Typically option 1 is what tech-savvy small businesses do. Most big companies choose 2, 3 or 4. They often start with option 2, since it’s an easy way to get started.
However, as you start spending more and more money on social media ad campaigns, you want world-class specialists running them, so many advertisers then carve out their social media spend and shop around for the best specialist to run their campaigns.
For many big brand advertisers, they stop with option 3, as campaigns come and go, and they don’t want to have in-house specialists sitting around doing nothing in between campaigns. For advertisers who spend a lot of money 365 days per year, such as eCommerce and gaming companies, they often progress to option 4.
When you’re trying to make your decision on which third-party to use, one thing you can do is ask agencies and/or third-party technology companies to do what is often called “bake-offs”.
Not enough people do these, in which you give two or more vendors the same campaign to complete, and assess their performance in terms of ROI, speed, insights, service level, etc. Many advertisers also do this to compare the performance of third parties versus their in-house team.
The bake-off is a simple concept: if you don’t know who’s going to be best at, say, acquiring customers through Google, running efficient video campaigns, or driving mobile app downloads, you put out an RFP and get potential vendors to submit their proposals.
You then winnow the contenders down to your favorite two or three companies and give them a similar campaign to run and see who does the best job.
How quickly did they get set up? What cost-per-action (like for like) did they achieve? What engagement levels did they drive? What customer insights did you get from them? How do you like working with them?
The final message of this blog is that there’s no hard, fast answer to the question, “Should I outsource?” It depends on many factors. The key messages are as follows:
Change is Constant: Marketing technologies and options available are constantly changing, as are your needs. So you should be constantly challenging what you do in-house versus what you outsource, and fine-tuning your operating model. “Because it has always been like this” is the lazy answer to organizational questions.
Key In-House Activities: Some activities, such as managing your CRM data, media planning, plus tracking and analyzing ROI, should always be in-house, due to the strategic importance of these functions, and the need to keep the ecosystem honest.
Vendor Selection: This is a critical skill set going forward, and shouldn’t be delegated to an agency-of-record, but conducted in-house. And don’t forget to make use of regular bake-offs.
In-House Headcount: All of the above points are likely to lead to an increase in your marketing team’s headcount unless there are some other activities that you can cut.
However, these hires will deliver massive improvements in marketing effectiveness, efficiency, and overall ROI. This, in turn, should enable you to reduce your costs for third-party fees and media spend, which more than offsets the costs of your new hires.
In a survey of 182 marketing executives by Conductor, 61% said data had become a more important part of their creative decision-making. As a result, they plan to hire both creative and data-driven personnel. I’ve worked with many CMOs over the years, so I have the unique perspective of being on the outside looking in. And I can say this:
Clients get the work they deserve.
From observing first-hand what has worked well (and not so well) for a wide range of CMO, I can candidly tell you how to earn the respect and praise of the entire agency creative team—the kind of respect that will have them wanting to jump through hoops to do great work for you.
As CMO, you are in the unique position to deliver maximum impact—to inspire and expect the best creative work from your team and to help that great work see the light of day by shepherding it through your organization. The million-dollar question is “How?”
How to Find Marketing Waste?
William Hesketh Lever once said, “I know that half the money I spend on advertising is wasted. My only problem is that I don’t know which half.” The previous statement by William Hesketh Lever should no longer be true. If it is true for your organization, fire someone.
With the size of Marketing’s spend, a few percentage points in either direction— toward efficiency or waste—can translate to hundreds of thousands of dollars saved or burned.
Back in the bad old days of advertising, when expense account money flowed like wine, agencies would spend the GDP of Micronesia just to throw the Pets.com sock puppet against the wall and see if it stuck. Not anymore.
Today, with so much data and so much ability to track the impact of every piece of your marketing strategy, inefficiency is inexcusable. Time for a primer on ferreting out and reducing waste.
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Assuming that you have a good product/service and a decent marketing strategy, then it becomes all about execution, and that is where the costs stack up—for people, media, technology, and third-party services.
In a perfect world, headcount and third-party costs would be minimized, allowing you to spend the bulk of your budget on content creation and media.
That media spend would then be so perfectly targeted that every single ad seen would have a positive effect on your brand and sales. Then, to complete this picture of nirvana, the marketing campaign would energize your customers so much, that the campaign would go viral, driving loads of free love, marketing messaging and product sales.
Although worth striving for, this hardly ever happens. However, if you keep the creative juices flowing, challenging (and measuring) everything, and eliminating waste, you can get much closer every time.
The four main forms of waste and inefficiency in advertising are as follows:
1. Content production costs take the majority of the budget
2. Paying for fraudulent or low-value traffic
3. Excessive ecosystem margins and kickbacks
4. “Set and Forget” campaigns
Let’s dig into those one-by-one:
1. CONTENT PRODUCTION COSTS TAKE THE MAJORITY OF THE BUDGET
There are still far too many advertisers spending the majority of their campaign budget on developing creative (e.g., TV ads) in the hope of creating the next viral sensation—being talked about and shared by consumers for free, thus saving on the media costs. This is almost always a mistake for the following reasons:
There are only a handful of viral sensations per year, so the chances of your campaign making the grade are close to zero.
Even if your content has the kind of quality to engage consumers and be shared, you need a large media budget to get meaningful distribution in the first place.
You also need a media budget to amplify the sharing, as major ads platforms (such as Facebook) have algorithms that throttle free sharing unless you put some media spend behind boosting your campaign.
Much of the best viral content of the past few years has not been all that expensive to produce. Challenge your marketing team to create an awesome video for, say, $50-100,000, and see what they come up with.
A few good rules of thumb for you:
1. Don’t Bank on Viral: With only a few exceptions each year, your “earned media ratio” (i.e., the percent of content views that are free as a result of sharing) is unlikely to exceed 10-20% of your total views, so although you should try to go viral, don’t bank on it.
2. Produce More Content, More Efficiently:
Video production— often the most expensive part of your content costs—does not need to be over $1 million, as many vendors would try to convince you.
If I were a CMO and had a budget of $1 million per year to make a TV ad, I wouldn’t try to save that money, but spend it on making 10-20 videos, enabling much more experimentation and better precision marketing, with different messages to different segments.
3. Spend > 70% of Budget on Media: A major retailer (and customer of mine) recently insisted on spending 70% of a campaign budget on content production, with a limited media budget, in the hope of creating the next viral sensation. This failed, and the campaign only achieved 10% of the target video views and engagement levels.
Going forward—after significant research—that same advertiser has now decided that at least 70% of each campaign budget will be spent on media and distribution. Given that the price of media is relatively straightforward to predict, that means the company will always achieve its “base” targets for each campaign.
If the content happens to be awesome, then the advertiser will exceed its goals through sharing.
2. LOW-VALUE TRAFFIC
In December 2014, Google announced that 56% of ads served on the Internet are not even visible on screen for at least one second. In other words, advertisers are paying for impressions that are, for all intents and purposes, never seen. As one writer put it, that’s like advertising to a TV playing in an empty room.
It can get even worse. An Asian client recently discovered that, of impressions paid for in a recent online display campaign that had been run by their agency, 99% were fraudulent!
The fraud can be blatant. Interviewed in Digiday, an anonymous former Internet publishing executive who resold “bot” (i.e., fraudulent) traffic said, “When we told them we were looking for the cheapest traffic we could possibly buy, there would be sort of a wink and a nod, and they’d make us aware that for that price, the traffic would be of ‘unknown quality’.
How much you pay determines how much bot traffic you’re getting, so when you’re paying $0.002 a click, you’re getting mostly bots. You can tell it’s bot traffic just by looking at the analytics.
We’d see a traffic spike in our real-time analytics dashboard and then we would see all of our traffic for the day serve in a couple of hours. Or it would all come from users using the same really old version of Internet Explorer.”
There are three main ways to ensure that you get what you pay for:
1. Fraud Detection Software: There are now numerous media valuation platforms out there, such as Integral Ad Science and DoubleVerify, that help you filter fraudulent traffic. Your team should use them.
2. Vary Pricing Based on Quality: Aiming for cheap media—the lowest cost per view— indiscriminately may drive your campaign towards the dodgiest inventory sources. It’s better to pay different prices based on your understanding of quality.
Take the Facebook vs. YouTube debate, for example: If you run a video campaign on YouTube, the ad may be skippable, meaning that only those who want to see the ad will actually do so.
The viewer will be focused on the screen for at least 15 seconds and the sound will be turned on. That is a pretty high-quality view/engagement. On Facebook, a video view might be even better targeted, given Facebook’s superior data. However, you will pay for a video view even if the sound is never turned on and the view only lasts three seconds.
This is clearly a much lower value view. However, Facebook views are also much cheaper, reflecting this lower quality. The key is to assess the relative value of those views to you and vary your pricing in line with this analysis.
3. Measure Value, Not Just Cost: As outlined earlier in the blog, ideally you can measure the absolute ROI on every dollar spent. However, if you can’t, like for brand building campaigns, there are ways to still drive optimal ROI across different media sources. These include benchmarking for things like:
Cost per Completed View: For each media source, work out the cost of, say, each time a consumer watched at least 15 seconds of your video with the sound turned on.
Cost per Engagement: Look at secondary metrics, such as how many consumers shared the content, visited your site, downloaded your app or liked you on Facebook. The cost per engagement is a good proxy for the ROI you are getting from each media source.
EXCESSIVE ECOSYSTEM MARGINS AND KICKBACKS
Many media agencies and ad tech companies earn margins that are probably too high, meaning less of your media dollars get through to the website, app or another publisher where the ad is shown.
Instead, that budget gets stuck in the hands of middlemen, which can also mean that your money gets spent on lower quality media in order to boost the agency’s margins.
There are two main ways that this happens:
1. Media Rebates: Agencies receive “rebates” from media companies. Typically, the companies paying the biggest rebates represent the low impact, fraudulent or declining media.
This often means analog media such as TV, print, radio and outdoor, but can also include digital ad networks. These rebates can be as high as 20% of media spend. The rebates are not directly linked to specific advertisers but are paid to the agency based on aggregate spend.
2. Trading Desks: Many agencies have their own trading desks and will allocate a major part of media budgets to be spent through these teams/platforms. What they typically neglect to mention is that those in-house operations typically make over 40% margin.
Advertisers often try to find these excessive margins and kickbacks by getting their procurement departments involved in the vendor selection and pricing process. This can help, but you need to be aware of two risks that can backfire if not managed:
The main ways to resolve this are:
1. Media Planning: Ensure that an in-house team decides where you spend your media budgets. This will drive your spend to media that has the best ROI, and typically the lowest need for rebates. Also, only choose agency trading desks if they can deliver a better ROI than the alternatives, which can be decided in a bakeoff.
2. Transparency: Drive 100% transparency into your vendor relationships.
3. Move Budget to the Best ROI: Clearly, if you are able to measure ROI and shop around (with bake-offs) frequently, most of these problems will diminish over time, as you will allocate more spend to inventory sources and vendors that deliver the best ROI. Your vendors will, therefore, have to do an outstanding job AND keep their own margins sensible, in order to win your budget.
4. “SET AND FORGET” CAMPAIGNS
The majority of marketing teams and their agencies do not optimize their campaigns once they have gone live. This is a MASSIVE missed opportunity and leads to a major percentage of budgets being wasted on every campaign. These kinds of optimizations can include things like:
Creative Optimization: Try multiple different images/videos/calls-to-action to see which ones drive optimal engagement.
New Data Sources: Find new data sources, from third parties or from your own CRM database, to constantly improve segmentation and targeting.
Pricing Variability: Most of the big digital inventory sources, such as Facebook, YouTube, and Twitter, have auction pricing and allow precision targeting. That means prices fluctuate based on supply and demand. It also means that sometimes a particular customer segment gets really expensive because other advertisers are targeting them.
For example, gaming companies love to target regular game players just after they get a new phone, in order to drive an app download. Based on this, campaign managers need to be constantly looking at pricing and moving the budget to where the ROI is greatest.
Kill Bad Targeting: In every single campaign, there are things that just don’t work. By don’t work, I mean things like: targeting consumers who never watch the whole video or those who never visit your website, or who never download your app. Sometimes you don’t know why they don’t engage, but that doesn’t mean you can’t stop serving ads to those people.
It may be a person of a certain age/sex/marital, status/device type/location, etc. If they’re not responding, either stop serving ads to them (save your money) or try something else that might get them to engage.
New Marketing technology
According to ChiefMartec.com, in 2015 there were 1,876 marketing technology companies, up from 947 in 2014, an increase of 100%. Wow! No wonder most people are confused. I am actively involved as an investor, board member or executive in several marketing technology businesses, and I still get confused about precisely who does what.
And even if I work it all out, it will change in a month! You may feel this way too, but you can’t give up, because if you can find the right technology and apply it the right way, it can dramatically improve your marketing effectiveness and efficiency.
Realistically, you can expect your marketing team to understand: 90% of the industry terminology
How campaign budgets get allocated (the methodology) and how your money gets spent, along with the business models of your various vendors
Where your ads get served (which sites, social networks, mobile apps, etc.)
High level: how clicks, ads, and data flow through the ecosystem to ensure that your advertising is run according to best practices —if your CMO can’t explain this to you on a whiteboard, you have a problem
How you avoid key risks, such as fraud and brand safety issues
How your CRM data is gathered, managed, applied and continuously improved
How you eliminate waste
How the marketing team proactively stays abreast of the industry, in a structured, insightful and efficient way
If your marketing team hasn’t heard of every single company out there, or the precise details of each technology, they can be forgiven—provided the team is keen to learn, and actively taking steps to stay abreast of what’s going on in the industry.
This blog will aim to give you a high-level overview of the key “buckets” involved in marketing technology, and equip you with some good ways to ensure that your team knows its stuff.
If you ever get lost, remember this: all money in this ecosystem flows from the advertiser (you) to the publisher, in order to engage consumers.
Publishers are the websites, video-on-demand services, social networks and mobile apps that consumers use as part of their lives, and could be anything from Facebook and YouTube, content websites to mobile apps.
Everyone else is a middleman. That doesn’t mean the middlemen are bad; your marketing team probably serves hundreds of millions of ads per day and needs to ensure that each one is well-targeted and continuously improving.
Since you can’t have a meeting per ad served, you will need technology and specialists to make that happen efficiently. Your marketing team’s job is to work out an ecosystem of in-house teams and third-party vendors that optimize your marketing effectiveness and ROI.
The marketing technology landscape breaks down roughly into ten territories, or “buckets”, you should become familiar with:
Advertising and marketing technology
Advertising technology, or “ad tech” for short, covers everything involved with getting your message out: video ad networks, mobile ad networks, online ad networks, native ads, social advertising, ad exchanges, verification, and the dozens of ad types, platforms and metrics involved.
Should you use SMS, interstitials, surveys, video or sponsored stories? Should you run your ads in mobile apps, on blogs, Twitter, on news sites, or all of the above?
Analytics tracks, tests, and measures the reach and impact of every piece of digital marketing to determine attribution—what resulted in a page view, shared email address, product download, subscription or purchase.
Analytics companies and tools break down customer activity, campaign performance, social traffic patterns, mobile usage patterns, page views, video views, downloads, census and panel data and more.
They use it to a) assess the effectiveness of a campaign; b) quantify the quality of customers reached to help determine ROI and LTV, and c) predict the best strategies for future campaigns based on likely outcomes. Done well, analytics is powerful stuff. Done badly, it’s a money pit.
These service providers deploy tech to manage just about every aspect of your marketing campaign. They warehouse your data to keep it secure, as well as manage and sort the leads your marketing generates.
They run your email campaigns for retention, upselling and conversion and might even handle your media buying, or simply function as technology consultants as you lay out your campaign.
Commerce is where you take in dollars. You want your customers to buy what you’re selling, whether you’re B2B or B2C. Tech for eCommerce includes things like payment functionality. Also review and recommendation engines, which are hugely important because a majority of consumers now base purchasing decisions, in part, on what others say.
They include social commerce and mobile messaging commerce, which means completing transactions on-the-go within the ecosystem of a social network like Facebook or a message sent to a mobile device. It can also include things like digital offers and coupons, powerful incentives for pulling leads and converting prospects.
A 2014 report from Goldman Sachs predicted that by 2018, mobile eCommerce (often referred to as mCommerce) would total about $626 billion—about half of all global eCommerce activity. That’s a train your company needs to be on. So it’s vital to understand what goes into mobile marketing.
Your CMO will interface with technology related to mobile app development, mobile advertising networks, and in-app ads/commerce, geotargeting, mobile search and even emerging technologies like augmented reality, where mobile users see a real-time view of a location with relevant information and marketing messages overlaid on a phone’s display.
Mobile is the platform of the future; you must have some fluency in it.
Social media is neck-and-neck with mobile for the hottest marketing platform. It includes everything from social community management, to social ad campaigns, to social listening. Social advertising companies are specialists in running social ad campaigns that engage notoriously ad-resistant users.
Social analytics companies/platforms pull data from blogs and social networks to determine customer interests and attitudes, which can then be used to develop better-targeted messages and strategies.
Search, as I wrote in an earlier blog, is where many consumers give a massive indicator about what they’re about to purchase. Therefore, not only should you run world-class search engine marketing (paid search) campaigns and search engine optimization (free search click) campaigns, but you can also target prospects off the search engines, based on what they’re interested in.
Path-tracking technology allows you to draw behavioral profiles of your customers by their search strings and target them with customized offers.
Everybody is talking about user experience or UX. Anything that shapes the experience that prospective and current customers have with your brand goes in this bucket. This might be your website’s user interface or the activity in user groups or on Twitter.
It could be the way your CRM provider manages your customer email campaign, or experience targeting programs that let you market to customers who already have a relationship with your company. UX can even include the way you manage digital assets like audio files and published materials.
The video is a vital online and mobile marketing channel, as it is the future of TV advertising.
Within the next few years, as more and more consumers embrace on-demand video streaming from the likes of Netflix, Amazon, and YouTube, and stop watching traditional (scheduled, and packed full of badly targeted ads) television, all “TV” ads will effectively be targeted the way digital video ads are targeted now.
According to Forbes, in 2014 the viewing audience for online video grew by 43%, with 60% of the viewing taking place on a mobile device. YouTube served the most views, with about 800 billion per month.
That’s a big audience and your CMO needs to know how to reach and leverage them with engaging, relevant ads, how to cost-effectively produce and test multiple iterations of the same ad for different audience segments, and how to buy spots using programmatic spending, where a computer determines the optimal times and audiences for given ads based on certain objectives.
With all the chatter about mobile and social, the desktop/laptop-based Web almost seems quaint, but it’s still where most consumers go to find what they want.
Marketing needs to master the essentials: UX design, launch and offer pages, lead capture, mobile sites, eCommerce, surveys and feedback mechanisms, exit offers and other visitor conversion tools, live chat and other engagement features and a lot more.
So now that you are a little better informed, how can you ensure that your marketing team knows ten times more than you, and is capable of understanding this ecosystem, and getting the most out of it?
Here are a few questions to ask and things to look for:
Marketing Technology Strategy: Your team should have a technology strategy, that includes the core platforms, such as CRM and billing, along with the other platforms that will either plug into these bigger platforms or work in a standalone manner.
Organizational Knowledge: Your team should have technical experts, probably hired from the world of advertising technology, who write this strategy, and constantly stay abreast of technological trends and possibilities. This person/team should also be rigorous in assessing new potential vendors.
Speed: Multi-year planning, or putting anything important off until next year, is no longer acceptable. Even multi-quarter planning should only be used for the major strategic initiatives, like implementing a world-class CRM database. Every campaign is an opportunity for renewal.
Culture: Everyone in marketing should be obsessed with improving ROI. The CRM, media and analyst teams should all be hardcore data junkies.
No exceptions. Even creative teams should be constantly testing creative content, then monitoring the engagement data, to work out which creatives to kill, which ones to promote, and how to be more effectively next time.