What is Marketing?
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 hasn’t changed much in decades. What else from the era of “Mad Men” can we keep?
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. If you want to stay relevant, you can’t approach today’s consumer in the same way you did in the 1990s. However, some of the classics never go out of style.
Fully embracing the age of digital marketing doesn’t mean breaking up with some of the marketing fundamentals that you learned to love in business school. If you took a Marketing 101 course as part of your MBA, don’t hit delete on all that knowledge. Some of what you learned still works. You just need to dust it off and be prepared to adapt your mental model for the modern world. These are some of the core concepts that are still valid in the age of data exchanges and social networking.
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. In the old days, it was the old AIDA model: awareness, interest, desire, action. 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 (ADAPTED FOR THE DIGITAL WORLD)
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 drive a car; download a free version of 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 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
THE FOUR Ps
Some things never go out of style: a good pair of jeans, jazz, James Bond, and the four essentials of launching a new product. It doesn’t matter how digital you are or whether retail sales are happening in a brick-and-mortar building or on a smartphone at 35,000 feet, you’ve got to have “the Four Ps” covered, which are:
Product: Offering a product or service that is needed, meets a need, is easy to understand and differentiated vs. your competitor products/services.
Price: What’s the sweet spot for pricing? Is your audience shopping for value, prestige, or low cost? How can you ensure that your price is competitive, while not unnecessarily giving up margin? Should you offer a “freemium” pricing model?
Obviously, you have to promote. But now there’s a universe of options for targeting precise demographics: direct mail to retired people, emails to loyal online shoppers, social media to teens, Spanish language YouTube spots for Latino Millennials, etc.
Placement: Where will your product sell—both offline and online? How can you make it top of mind, and optimize the path to purchase?
See? You don’t need to toss the baby out with the bathwater. You just need to understand that the baby has grown up. Now he wears skinny jeans, has multiple lip piercings and tattoos, carries a phone that costs more than your first car, and spends half his waking hours staring at some sort of backlit screen.
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 IS THE INTEGRATING LOGIC
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.
The digital marketing landscape is overwhelming. CEOs and CMOs have to sift through advertising technology, social media, analytics, mobile, eCommerce, user experience and more in making decisions. You have an array of potential ad types at your fingertips, from leader-boards and in-text ads to sponsored stories and SMS.
From books to tablets, there are more locations than ever to place your content. Meanwhile, the sheer volume of metrics—and the tools you could deploy to measure them—can cause the most intrepid MIT graduate to wake up in a cold sweat.
How do you make sense of it all? You don’t—at least not in the beginning. Because before you even glance at tools, strategies or content, you have to know whom to target. Out of all the metrics you’re monitoring on your business dashboard, there is one that captures the heart, soul, and ROI of your efforts: LTV, or customer lifetime value.
WHAT IS LTV?
LTV is the present value of the projected future cash flow your business will realize from a customer relationship. LTV pummels traditional return on investment (ROI) metrics because they only reflect the profit you make from a customer today. As an example, consider Domino’s Pizza.
If you’re Domino’s and you spend $8 to acquire a customer, and you get $15 revenue from that customer’s order, some might say that your ROI is $7. But you don’t want that customer for a single order, do you? Ideally, you want them to download your app onto their mobile phone and order from Domino’s for years. And you also want to understand profit, not revenue. That’s where LTV shines.
The fatal flaw of traditional ROI measurements is that they’re based only on the cost of acquiring the customer for a single transaction. Acquisition cost is typically your highest cost. Once you’ve acquired a customer, you’ll usually spend less to retain or upsell them and still make money from them as long as they do business with you. But there could be a real revenue opportunity here. You could spend a bit more to engage them, but that should increase their lifetime value.
With LTV, you can predict the lifetime value of your customers based on historical data. By looking at the numbers like the frequency of purchase, the total number of purchases before the customer churns, the profit per transaction, and the cost of acquisition, you can get a good idea of that customer’s lifetime value.
Customers who make the most purchases or spend the most money per purchase become your A-listers—the ones you work hard to keep happy. The people in the middle are your B-listers, the ones you try to upsell. As for the cheapskates who rarely make a purchase, you can choose to stop chasing them and spend your money to acquire more potential A-list customers. For Domino’s, that segmentation looks a bit like this:
According to the RJMetrics eCommerce Buyer Behavior Benchmark , the top 10% of a company’s customers are worth 600% of the revenue of the average customer. The top 1% are worth 1,800% more. One customer from the top 1% will bring more billings than the entire bottom 50%.
In this case, it’s more profitable to pay $300 to acquire customers with a predicted lifetime profit of $2,600, rather than to pay $30 to acquire customers with a predicted lifetime profit of $15. Common sense, right? But is your marketing team working this way?
If you use LTV as your primary framework for success (which most companies should) then your CMO’s main job becomes:
1. Predicting which customer segments will have what potential LTV. In particular, identify the characteristics of the highest-value potential customers.
2. Engineering a cost of acquiring, retaining and upselling customers that is significantly lower than their predicted lifetime values, segment-by-segment. Do that with a few million customers, and you’ll create an enormous amount of shareholder value very, very fast.
CEOs (and CFOs) love lifetime value because it ties directly to shareholder value, which is what you were hired to protect and grow. I’ve even written an equation that shows how it works.
In essence, if you acquire two million customers for $25 per customer, but after accounting for the cost of retention and upselling, you determine you will make $100 over the lifetime of each customer, you’ll earn $75 on two million customers. That should increase your market value by $150 million, which will boost your share price.
Lose one million customers who would have generated $100 in profit per person, and your market value should drop by $100 million. This correlation between LTV and share price is what makes LTV such a powerhouse way of operating.
ILLUMINATING THE BLIND SPOT
LTV shines light into marketing’s biggest blind spot: the inflection point where long-term value begins to outpace short-term gain. Focusing on it will help you understand how much your customers spend, how often they spend it, and which campaigns and touch points are most likely to make them more valuable customers.
In fact, it’s probably possible to measure all business activity in terms of how the collective LTV of the current customer base has increased over time, minus the marketing costs required to drive that increase. Do that equation and you’ll learn to think beyond driving one sale at a time to driving multiple sales from loyal customers. Even better, you’ll start to think in terms of schemes that increase the lifetime value of each customer.
You’ll also start thinking more strategically when it comes to retention. If you can predict which customers will churn, determine how much that churn will affect profits.
Value Creation Equals
The lifetime value of a customer is the present value and develop retention strategies that cost less than the predicted lost profits, you’ll have another way to quickly create enormous value.
So why isn’t everyone operating to understand and maximize LTV? First, because CEOs are not insisting on it. Second, because there’s no agreed-upon standard for figuring it out. Calculating LTV is complex; I barely feel like I’ve reached a point of clarity on it, and the same is true of the world’s best marketing minds. However, it’s also where your biggest opportunity lies. The ability to develop a clear, long-term view of your marketing spend will give your company a lasting advantage over your competitors.
To be sure, there are substantial barriers to using LTV. It requires a massive amount of consumer data that takes multiple quarters (and even years) of focus to compile and analyze. It’s expensive: there are IT costs, data purchasing, man-hours and more. It doesn’t yield many quick wins within the first year, which— in an era when the average CMO lasts less than three years and faces enormous pressures to show results now—can get in the way of enthusiastic adoption.
That’s where you come in. As CEO, you can protect your CMO and marketing team against the pressure for only delivering short-term gains and give them the resources and runway to turn LTV into a competitive edge. Here are my suggestions for getting out of the starting gate:
1. Get Buy-In: Convince your CMO, CFO, and CIO to commit to measuring and driving LTV for the long-term. This cross-functional senior alignment will help with resource allocation and organizational focus.
2. Build your Data Infrastructure: Review and organize your current customer data. Assess data hygiene and usefulness. Collect as much new data on your customers as possible. Build your CRM database and ensure that it is easily accessible for your marketers.
3. Understand the Value of Different Segments: Segment your current customers in different ways. Use data to understand the value of different segments. Test ways to acquire each segment with a lower cost of acquisition vs. predicted future profits.
4. Uncap your Marketing Budget:
When you find something that works—for example, a way of acquiring new customers in a particular segment for significantly less than their predicted lifetime value—spend more to scale up quickly. This may give you a short-term cash flow and profit hit (using standard accounting rules), but can be justified based on the predicted future profits from those investments.
5. Ensure Continuous Improvement: Acquire more data about your customers using incentives, offers, email capture, third-party data exchanges and more. Ask your ad platforms/networks for additional insights into your customers’ behavior. Create quarterly goals for all the right people—in marketing and elsewhere—to drive continuous improvements. Measure what’s worked, what hasn’t and why. Iterate by fine-tuning your work streams, improving your database, and trying again...fast.
“Profit in business comes from repeat customers, customers that boast about your product or service, and that bring friends with them.”
— W. Edwards Deming
Most important, stop thinking about marketing as old school marketing, i.e., a cost center. It’s not. It is an investment, focused on value creation. Apply the same mathematical rigor that you do to acquiring companies.
I have heard a lot of people saying, “That doesn’t work in my industry.” It’s certainly true that it is easier in, say, eCommerce than in consumer packaged goods companies. However, that doesn’t mean the principles don’t work. For an example, look at a company that knows a thing or two about creating value, Coca-Cola.
A while back, it launched a free mobile app called Freestyle, based on those really cool machines—named Freestyle—that allow consumers to mix and match soda flavors to create a bespoke drink. This app lets customers create, save, and share their favorite soft drink mixtures on Facebook, and comes with a location finder to help users take advantage of special offers at local Freestyle outlets.
The campaign is creative, but it’s also a step in the direction of applying LTV principles. First, it takes “create your own drink” to the next level—create it on your device, save it, share it, find it in real life, and then try it out. This helps create an engaging user experience across devices. Next, the app helps create individualized user-level portraits that yield several great results:
1. Offers an attractive user experience—Coca-Cola’s Freestyle machines and app—which helps win favorable placements in high-volume leisure locations, like cinemas
2. Increases consumption of frequent soda drinkers, as they can pre-plan their drinks and have fun doing it
3. Turns Freestyle users into brand advocates, discussing and sharing their cool/weird flavors with friends
4. Captures data on brand advocates, such as email addresses, which can be used for profiling and retargeting with tailored messages at a later date, increasing the loyalty and LTV of their most loyal customers
5. Provides insights (e.g., which flavors are most popular) to develop and prioritize new products.
The end result is much more than a Coke with a splash of vanilla or orange. It’s a customer who will be engaged for much longer. Is getting that kind of data—and making that kind of connection with your most valuable customers—worth some extra time, expense and pushback from your marketing department?
THE IMPACT OF MARKETING CAN BE MEASURED
“Revenue for revenue’s sake is dangerous. Too many chief executives are enamored with boosting the top line. The theory goes, ‘Where revenue flows, profit will follow.’ Not always. Look at Groupon, which struggled after going public because of its early high-volume/low-margin business model.” —Bloomberg Business, Sept. 26, 2013
So customer lifetime value is the most important marketing framework, but is that all you need to measure? Unfortunately not. There will be lots of tactical measurement required, too. Now it’s time to go after the most amorphous metric of all: return on investment, or ROI. How do you ensure that you and your team are getting a good ROI from your marketing spend? More to the point, how should you be measuring this notoriously elusive thing in the first place?
Want to make ROI less vague? It’s all in how you measure it. First, know what you’re measuring. Are you just looking at the cost of gaining each customer? Or are you comparing the cost and return of different media, like social video compared to pop-up ads? Second, how much weight are you giving the results? The world of commerce is just too unpredictable for any model or metric to account for every dollar of cost or revenue.
BAD AT MATHEMATICS
I’ve done brainstorms with some of the smartest people in the industry, and when you dig into the truth of statements like, “We can prove to you the ROI of every single ad you ever showed”, you find they’re all lying. Okay, sometimes they’re not really lying...they’re just bad at math.
I’ll give you an example. You run a campaign in which you buy video ads, search and some other stuff. You ask, “When someone sees our display ad, how much more likely are they to do a search on Google?” You can work that out if you track the online activity. Let’s say that you show that when you run a display ad, people are more likely to search.
If you’re doing what’s called attribution, you follow it by asking, “How many people purchased?” In theory, that will tell you the total amount you spent on ads shown to that individual and the profit generated by the transaction. It should also tell you whether the cost of driving that sale is higher or lower than the profit from the transaction.
Well, no. I would describe it as interesting. Unfortunately, a lot of that data is misleading. I wish it weren’t so, because I really want to be able to show you that attribution is an amazing tool, but here’s the problem: there are too many variables that are out of your control and impossible to measure. The ROI ecosystem is crazily complex and impossible to pin down.
Let’s say you run the same media for a year, get the same strong click-through and search results, and yet watch sales decline. That might have nothing to do with you. It might be that your campaign is great but your chief competitor is killing it with a new product or promotion. It might be that their product was just featured on the cover of Vogue.
Maybe they dropped their price. Perhaps your product has become obsolete, or that all your target customers have purchased one, and don’t need another. None of this means you’re doing bad marketing. It means something else changed that you didn’t measure and can’t control.
The danger in using ROI numbers to conclude that a campaign succeeded or bombed is that correlation doesn’t equal causation. A bad quarter might not mean you should fire your entire marketing department. It works in reverse, too. A quarter of rocketing sales doesn’t mean you’re suddenly Steve Jobs. Maybe there was a promotion that had nothing to do with media. Maybe your competitor went bankrupt. If you’re selling umbrellas when it rains, you’re going to make money.
There isn’t an attribution model or ROI metric in the world that takes account of all these variables, so be cautious. Don’t over-attribute either positive or negative numbers to your content, media spending or placement strategy. It’s important to know how well your marketing is working, but it’s equally important not to overreact to outcomes that weren’t entirely a result of what your marketing team did.
HOW TO MEASURE ROI
The bad news is, you still need to measure ROI. The good news is that ROI doesn’t have to be life and death. There are other metrics—return on sales (ROS), conversions, page views, and of course, LTV—that can help give you a clearer picture of how you’re doing. But you’re going to measure ROI, so it’s important to know possible ways to do that. There are three methods, with
With digital marketing, you can get real ROI and stop throwing darts at a board in hopes of hitting the bullseye. How? Tracking, of course. Ensure that all your content—and every customer who interacts with it—can be tracked and that data can be collected.
1. ABSOLUTE ROI
This is basically, “I know what I spent, and I know what I made from that spend and I can prove it.” Take the Domino’s Pizza example. Say you drove a million downloads of your mobile app and the average cost per app download was $3, then you spent $3 million. If you can prove that the profit generated by those million downloads was $50 million, that’s a brilliant ROI. You don’t even need to do any more math. Just keep spending more money on mobile app downloads, and fast, before your competitor works out what you are doing.
That’s the easiest way of measuring ROI. You should always try to achieve a positive absolute ROI if you can, as there are then no doubts.
Short-term metrics to track here are things like:
Cost per subscriber
Cost per mobile app installed
Cost per purchase
Cost per test drive
These can then be compared to the predicted LTV of those actions. For any customer segment, if the cost per action driven is less than the predicted lifetime value of those actions, then you have a winner. In our experience running thousands of digital advertising campaigns, more than half of all marketing campaigns don’t fit this model neatly. If yours does, throw your marketing budget constraints into the trash can and uncap your spending.
Strike while the iron is hot, and before your competitors acquire those customers.
2. RELATIVE ROI
If you can’t prove the absolute ROI of a marketing campaign, but believe it is an essential spend required to build your brand, then relative ROI is the next best option. This means comparing the various ways you can achieve the same engagement with your target audience. Video advertising—which includes both TV and digital video advertising—is the biggest example of this. Few video ad campaigns achieve a measurable positive absolute ROI, so you need to find the most efficient way to achieve your brand engagement goals.
According to IPG Media Lab and YuMe , as far back as 2011, more than 60% of all viewers watching TV spent time distracted by data applications on mobile devices, while 33% watched TV with their laptops open. Just 6% of those monitored watched TV with no distractions at all.
All those distractions lead to a dramatic reduction in ad viewing. According to the report, 63% of TV ad impressions are ignored, and just 25% of viewers studied were able to recall advertising they had seen during TV shows unaided, with 28% recalling TV ads with help. Imagine what those numbers look like in 2016...
For example, think about this question: “What is the ROI on my digital video campaigns versus my TV campaigns?” You do this to measure the cost per relevant view (CPRV) of online and mobile video versus TV ads. Here’s the methodology for comparing the two media:
Absolute Price: Look at the price you pay for your current TV advertising. To keep the calculations simple, if you are paying a $10 CPM (cost per thousand ads shown), that means you’re paying around $0.01 per ad shown on TV.
Filter for Non-Viewers: You typically buy TV advertising based on the audience numbers for a particular show. So you have to filter out
all the people who don’t actually watch the ads because they go to the bathroom, channel surf, grab a beer or browse Facebook. Let’s assume that only 30% of people actually concentrate on your ad, a reasonable assumption. That means you’re actually paying around $0.03 per viewer.
Filter for Relevant Audience: Clearly, not everyone who sees your TV ad is a target customer. On those rare occasions when I flip on scheduled TV instead of watching on-demand streaming services, I typically see ad after ad for old people drugs—which spend half their air time telling me all the ways that particular drug might kill me.
I am not that old, so this is an example of waste. If you assume that 30% of the people who actually watch your ad are target customers, now you’re paying around $0.09-0.10 per relevant TV ad view. This is getting a lot more expensive...
Compare TV Cost to Digital Video: The prices for video views vary, in the U.S., the range is currently from a few cents to as much as a dollar—which you might pay for a perfectly targeted B2B campaign with a click-to-play long-form video ad. In my experience, a B2C advertiser will typically pay around $0.10 for each completed view of a 100% brand-safe, fraud-free, well-targeted digital video ad. That’s similar to the cost per relevant, completed TV ad view. So, funnily enough, there seems to be a “wisdom of crowds” with video ad pricing.
Or is there? Are we really comparing apples to apples?
Estimate Additional Value of Digital Video: Digital video ads have additional value over TV ads, so they should be worth more. I call these the “Five Ts”:
1. Targetable: You can go beyond basic demographics (as on TV) and target based on everything you know about the consumer from your CRM database and based on past interactions with your brands.
2. Tailorable: Match videos with specific audiences. For example, you can make one video for English-speaking audiences and tweak the same video with a different voice-over for Hispanics. However, it can get even more tailored: sending “awareness” videos to potential customers, “loyalty” videos to existing customers and “incentive” videos to lapsed customers.
3. Tolerable: Because digital ads targeting is optimized, you will minimize showing your ads to people who don’t need your products, and therefore you are unlikely to annoy people for whom your products/services are irrelevant.
4. Trackable: This is ROI gold. Measure and optimize ad campaigns, to do more of what is working and less of what isn’t, in real time.
5. Tweetable: Good video content, well targeted, gets shared. For example, our native video company, Giant Media, runs campaigns that average 36% “earned media” (additional, free views) for their clients, as a result of viewers sharing.
Not to put too fine a point on it, if the results from the different channels are the same, spend your money where the cost per engagement is cheaper. That’s the best relative ROI. Your numbers will vary depending on a lot of factors, and this example is based on my in-depth knowledge of digital video, but this comparative methodology works for any kind of media.
Of course, because digital media are inherently more trackable and adaptable than old-school media like broadcast TV, it’s smart to allocate as much of your marketing spend as possible to media that let you see what’s happening and make adjustments on the fly. That’s what’s happening in our world, as more and more advertisers are migrating media spend from traditional TV to digital video.
3. ATTRIBUTION MODELING
This is the Holy Grail of ROI measurement. In theory, it lets you measure the impact of each part of your marketing spend—TV, video, search, display, social, outdoor, print—and precisely allocate results and revenues to very specific campaigns and strategies. With successful attribution modeling, you might find a CMO, chest swelled with pride, telling you something like, “My video campaign drove 24% of sales, so the value of a completed view is 35 cents. As the cost of each view was 15 cents, this represents a spectacular ROI.”
And then you wake up and smell the coffee.
ROI reminds us not to fall in love with a type of media just because it’s popular. For example, everyone’s talking about social media these days, but according to the Direct Marketing Association, email still beats social media with an ROI of 4,300%. Yes, 4,300%. The lesson: it’s about what gets results, not about what’s cool. Results are the goal, not coolness.
Attribution modeling should be the eventual goal of marketing ROI measurement. Maybe one wonderful day, when all marketing campaigns are digital, all consumer databases in the world are linked to each other, cash purchases have ceased to exist, and the sky rains sunshine and puppies, we will reach this nirvana.
However, I recently had a workshop with a group of diverse, experienced and highly intelligent marketing people on the subject of attribution, and we went around in circles. We asked questions like:
A video builds a brand for more than a single campaign, so what is the impact on next year’s sales? No answer.
The quality and price of the product or service are massive drivers of success. How do we measure their impact on a campaign? Tricky.
Past customer experiences also drive repeat sales—how do we account for that in media attribution? Not sure.
How do we link cash purchases to a consumer’s digital profile? Not possible yet.
What if a child uses YouTube under their parent’s login name. How to we account for that? Ask me one about sports.
What is the value of outdoor advertising? No idea
What about word of mouth? Head explodes.
You get the point. Not only is there no consensus on how to attribute, but there is alson’t one on what to look at, either. One thing we did agree on was the value of testing, especially for digital media. It’s very easy to target one group (e.g., a particular geographical area) with one campaign, and target another group with a different campaign to compare the differences in impact between different control groups.
That sort of thinking—exhaustive tracking, quick testing, subtle adjustments in content, incentives or targeting—is what we’ll need if real attribution modeling is ever to be more than a CMO’s idle daydream.
THE FOUNDATION OF SUCCESS
Many CMOs don’t grasp customer data. According to the most recent CMO Survey from Duke University, CMOs expect spending on marketing analytics to double in the next three years. But only 13% of them say they know how to use that analytics data, despite the fact that 61% of CMOs said they are under pressure from their CEOs to turn the data into measurable results. Hmmm...
Of course, all this talk about customer lifetime value is pointless without great customer data. You can have cracking video scripts, terrific ad design and flawless placement, but if you don’t know enough about your customers to target them based on their interests and behavior, what’s the point? That’s what customer relationship management, or CRM, is all about.
As a CEO, you’ve heard the CRM acronym being flung through your office’s hallways like a paper airplane, but are you clear on what it is? Just in case, a quick refresher: CRM is the umbrella term for technologies and methods that capture data about every point of contact a customer has with your company— online sales, phone support, point of purchase, Facebook, you name it—and analyzes it in order to develop strategies for optimizing your company’s relationship with that customer, in order to acquire them, upsell them, retain them and increase their lifetime value.
IT’S ALL ABOUT THAT (DATA)BASE
Reaching LTV goals requires data. Lots of data. That database would try to link all customer data to two key unique identifiers: mobile phone number and email address. These are the critical ways of linking all your data about a customer to unique, personal, persistent data points tied to a specific individual.
The email address is the consumer’s primary digital ID for engaging in electronic commerce. It’s the best, most valuable piece of data you can acquire, because you can link it to your accounts and then your sales database. That’s the information that’s going to tell you what kind of ads to create, who your most valuable customers are, what’s working, and what’s flopping. It is also persistent, meaning it doesn’t change very often.
Think about your CRM database as a collection of answers to a lot of questions about your customers. For example:
What have they bought from us so far?
What have we said to them so far, using which media?
How did they react to each message?
Who are my most valuable customers, and what do they have in common?
How do their reactions and buying decisions correlate with what we know about their income, ethnic group, marital status, level of education, mobile device and so on?
What did it cost me to acquire each customer, and how does that compare to their lifetime value?
Slice and dice that data in every way that’s relevant. If you’re Toyota or Ford, correlate sales and response data with credit scores and data about who is driving which car (and how old it is) to find out who your best auto buying prospects are. If you’re AIG, cross-reference your information with a pension database to figure out who’s ten years from retirement and in need of financial products.
Find great third-party data sources and don’t be shy about using them. In the digital world, with so much data available, your mission is to find actionable data—the facts about each consumer that improve your lifetime value economic model.
The goal is a unified view of each customer that you can cut and segment in different ways depending on your marketing objectives, from customer acquisition and retention to upselling, reactivating dormant customers to lead generation. But don’t lose sight of the ultimate purpose: determining which customers have the highest potential lifetime value. Marketing based on LTV is the most important thing you will ever do, so having an amazing database is critical.
That’s where your profit is, and that’s why a solid gold CRM database is foundation job #1. Building that database and using it to maximize marketing ROI is why you hire a CMO in the first place. Chief Marketing Officer isn’t just a marketing job anymore; it’s also a data job.
THE DATABASE IS TOO IMPORTANT TO OUTSOURCE
Since the database becomes your company’s oxygen generator, breathing life and meaning into every action, everybody wants a piece of it. The TRUSTe Privacy Index 2014 Consumer Confidence Edition found that only 55% of U.S. Internet users trust businesses with their personal information online. 74% of Internet users were more worried about online privacy than in 2013.
Your customer data is your business, and you need to keep control of it. There are lots of things you could outsource, but this isn’t one of them, though you might want to license the software required to organize it.
One area where the CEO, CMO, and legal team need to be on the same page is the use of CRM data for retargeting. Retargeting is an artifact of our zero-privacy age when every mouse click and keystroke can be logged, captured and mined for data on age, gender, income, geographic location and more.
When a consumer goes to Amazon.com to look for lawn chairs but doesn’t buy them, the system uploads a “cookie” (a tiny code-based identifier within a browser) to her computer. When she goes to Facebook, she sees Amazon ads for lawn chairs next to her wall or in her News Feed—a digital kind of “Don’t forget that you were interested in this” nagging. That’s retargeting version 1.0.
Yes, it’s a little intrusive and some people even find it annoying. However, done well, it’s a powerful tool for tracking consumer behavior across multiple online properties and getting relevant offers into the hands of people who are planning to make purchases. And now the growth of the CRM database has brought us “CRM-driven targeting”, a major advance.
Instead of those irritating “Stop following me around the Internet!” ads, CRM tools let a company use the information in its CRM database to send much more targeted messages to the social media pages of customers with whom they already have a relationship.
Instead of being shadowed all over the Web by cookie-enabled reminders that, yes, for five seconds they were curious about the inexplicable appeal of Duck Dynasty, consumers get relevant messaging based on who they are and what they care about. The targeting is based on matching the customer’s email address or mobile phone number with a profile of her when she visits, says, Facebook.
That’s leveraging your CRM database to communicate with your customers in meaningful ways, differentiating yourself from competitors whose marketing is less personal, and engaging your best customers for the long term.
KEEPING THINGS FROM GETTING CREEPY
There’s a catch in CRM marketing, of course: the fine line between personalized and creepy. Many consumers love the benefits of sharing their information online and on mobile devices—custom coupons, special birthday deals and the like—but they shudder at the idea that data collectors know so much about them.
What 60 Minutes correspondent Steve Kroft said during a 2014 report entitled “Data Brokers” illustrates this tension: “I just didn’t know it was going on. I had no idea. When you go on a website when you visit it, you are, in effect, giving them permission to take any information they want—that’s the standard for consent.
I figured that if I didn’t know it, probably a lot of people didn’t know it. And then when I started asking questions, almost nobody knew it. They’re able to marry what you’re doing when you’re offline—where you’re shopping, where you’re going, what you’re buying—to the information that’s online.”
“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. To borrow from Kenny Loggins, it’s a danger zone. One wrong move in personalizing your product or service and you could go from being a trusted solution provider to the nosy neighbor peering through the blinds with binoculars.
Policies can help and a sharp focus on the user experience is the gold standard. It really comes down to making sure your process of data collection is transparent and honest: “We’d like to know more about you so that we can design products and offers to meet your unique needs.” Your customers aren’t stupid; they know you’re trying to sell them. They just don’t want to be manipulated. Also, make sure they can easily opt-out of data collection and tracking at any time.
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.
EXPLAINING THE ETHICS OF DATA COLLECTION AND USAGE
How do you respond to accusations that collecting and using customer data in such ways is unethical? I would respond as follows: Consumers love the fact that almost all websites and mobile app, including Google and Facebook, are free. They are free because they are supported by ads.
Therefore, you are going to see ads, whether you like it or not. By collecting and using consumer data for improved targeting, consumers will see useful ads instead of ones that are badly targeted, generic and annoying. That provides a better experience for consumers, better ROI for advertisers and better revenue for the publisher. Everyone wins!
GATHERING AND USING YOUR CUSTOMER DATA
How you use your data matters at least as much as the quality of your data. According to eMarketer’s 2013, marketers who use automated email systems to follow up with consumers—including messages like birthday emails and shopping cart abandonment prompts—enjoy conversion rates as high as 50%. If your CMO isn’t championing that kind of data use, why not?
What data can you collect and where does it come from? How are you putting that data to work once you have it? This isn’t a privacy question. It’s an optimization question. Once you have your data, are you using it in the way that produces optimal ROI?
In business school, would-be CEOs learn that it’s the volume of data that matters. But that’s like saying it’s the raw ore—not the gold—that makes a mine valuable. It’s possible to have so much data that you smother your marketing under a slagheap of irrelevant information. Valuable data helps you optimize customer LTV.
NURTURE, NOT NATURE
If you’re selling exclusively online, for instance, chances are you’ve captured your customer’s email address. If you’ve also gotten permission to send those customers email, you can start sending them promotions as part of your CRM campaigns. If you’re selling to people in a retail shop, that’s an opportunity to capture their email address and/or their phone number as part of a point-of-purchase conversation, an incentive program or a comment card.
You’re not doing those things? Come over here, because I need to check your pulse. How is your business still alive? If you’re not capturing email and mobile phone information at every point of contact, start yesterday.
Just as valuable is something called email nurturing. That’s a touchy-feely way of saying you’re combining the personal info in your CRM database with emails to send regular, personalized communication to the inboxes not just of people who’ve bought from you, but people who haven’t...yet.
Nurturing works, especially when it comes to converting prospects into customers. KissMetrics says that 96% of first-time visitors to a website are not ready to buy, so it’s your job to get them ready by reaching out with targeted messaging.
Your CRM system tracks a visitor’s activity on your site—searching, browsing product reviews, taking surveys—and their place in the sales funnel, and sends relevant, automatic emails based on individual activity. Over time, this turns prospects into customers: the MarketingSherpa 2012 Lead Generation Benchmark report said that organizations that nurture their leads show a 45% increase in lead generation ROI over organizations that don’t.
Need more proof? The Annuitas Group says prospects who have received nurtured campaign messages spend 47% more money than non-nurtured leads. If your CMO hasn’t been using nurturing, that thump you just heard may have been him or her fainting after reading this blog.
A report from eMarketer indicates global spending on social media advertising will hit a mind-boggling $36 billion in 2017, with nearly two-thirds of that money flowing to Facebook.
GETTING PERSONAL, AND SOCIAL
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.
YOUR OWN PERSONAL KARDASHIAN
Are you familiar with the phrase “key influencer”? You’re familiar with Kim Kardashian, right? Then you know what a key influencer is: someone who shapes other people’s opinions about a product or company. For some reason, Mrs. Kanye West gets upwards of $10,000 for sending one tweet about a product or service to her 40 million followers. Your company’s social media influencers may not be in Kim’s class, but they don’t need to be, and they’re easy to find.
Who are the people spending a lot of time talking about your products and sharing photos and videos on Instagram, Pinterest, and Vimeo? Those are your influencers. Your marketing department will get far more bang for its buck if it can get the right messaging into the hands of active influencers. Give them something to get excited about and they’ll tell everyone they know online. That’s how you go viral.
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, plus:
Reason for lapse?
Which of your competitors do they now buy from?
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?
WHAT SITS IN MARKETING NOW?
We might have reached the end of Marketing’s “low financial accountability” honeymoon. According to an Ernst & Young survey, 54% of CFOs report communicating more often with CMOs in the last year. However, a third of the 652 CFOs surveyed said that a lack of clear performance metrics between Finance and Marketing is getting in the way of collaboration. Time for some marriage counseling.
It’s the marketing department’s job to turn this tsunami of data points into a steady stream of leads, conversions and revenue. But with so much overlap between departments, divisions and individual jobs, what’s really in Marketing’s job description?
Back in the Jurassic Age, this question would have had an easy answer. The CMO would have worked with cigarette-smoking Mad Men and dedicated most of his time and energy to TV and radio spots, print campaigns, direct mail and outdoor. Terms like SEO and CRM would have been either unknown or dismissed as Silicon Valley nerd-speak.
In the digital world, the answers are more complicated. CEOs who remain trapped in the tar pits of the old world persist in thinking that marketing should just focus on developing the brand, market positioning, and messaging— handling creative, managing media and (maybe) community outreach. That’s it.
Except that we should all be nerds now. Digital and Big Data are baked right into the marketing pie, critical to the mission of extracting full value from every customer interaction and maximizing ROI. Segregating marketing and other divisions of your organization into their own silos without accounting for the overlap just doesn’t make sense. Nobody can have the entire pie.
In the world of Big Data, every functional leader inputs some ingredients and effort into the recipe, and takes a slice of the fully baked product. If you are in marketing, maybe you can take out an extra large slice, but the key point here is that teamwork is essential.
NOW 100% MARKETING-FLAVORED
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?
Marketing also owns all company outreach, from generating media coverage to getting the CEO interviewed in Inc., to dealing with complaints posted on Twitter or Facebook. It’s your CMO’s job to coordinate with you on what your brand stands for, then to support that brand through every communication channel—website, social, speeches, press coverage, and more.
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”.
Lifetime Value: Finally, a qualified CMO should have a pretty clear idea of LTV and how to determine it for your various target groups. Which group has the highest potential LTV and should be where you spend more of your budget? Also, the CMO should also know the optimal strategies to increase each audience’s LTV.
“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.
IT’S A PHILOSOPHY
Your organization may break down a little differently; you could have other stakeholders in play. For example, you might have a chief product officer who’s always at odds with Marketing over the question of who owns consumer insights (in some companies, the head of marketing reports to the head of Product, which has its pros and cons).
There’s definitely a crossover, but there aren’t any hard and fast rules. Consumer insights data are about improving products, but it’s also used to acquire and retain customers. The solution is collaboration. The CMO and CPO have to work together.
Bottom line, many functions play a role in marketing, and the Marketing department plays a role in how Finance, Product, Sales and Customer Service operate, and how every other department does its job. So this isn’t a question of territory so much as one of philosophy. Great organizations with great marketing efforts are holistic; departments support each other and everybody keeps their eyes on the goal. As CEO, it’s your job to make all that happen.
BRIDGING THE CMO-CIO CHASM
Gartner predicts that by 2017, CMOs will spend more on IT than do ClOs. That might not be a bad thing. According to CEB’s “Marketing Investments Benchmarks” report , CMOs spend only 10% of their functional budget on IT, but devote more of that spending to IT innovation than the IT department does. So more CMO IT spending might actually lead to greater innovation in IT.
Hopefully, you have a handle on what Marketing needs to handle and how everyone else ought to be contributing. But in many organizations, there’s trouble brewing. As you know, data is the key to everything, and since Marketing and IT both have a plausible claim to the database, your Marketing and IT departments might be at odds.
If you’re not careful, your CMO and CIO could wind up fighting over who gets to be “the man” with regard to your CRM database, and the last thing you need is two senior executives chest-beating like a pair of silverback gorillas.
CEO AS CONDUCTOR
The CEO is the conductor who has to ensure that the teams make beautiful music together. You’re coordinating, facilitating collaboration and making sure these people, who have egos and territories to protect, don’t kill each other and waste a lot of money in the process.
How? One way is to ensure that you have a CMO who is a digital native and has a decent grasp of database technology. That should be a prerequisite of even landing a CMO job interview today. Make sure you have someone in the position who understands what IT does and how tech fits into their mission, give them their quarterly goals, support and challenge them, and ensure that the organizational culture lives up to the brand promise.
Sounds simple, doesn’t it? Not so fast. You’re still going to be responsible for resolving the thorniest conflict since Coke vs. Pepsi: who owns the CRM database?
IT’S THE VISION, STUPID
First principle: nothing matters more than your customer data and how you use it. You get that, and your marketing and IT people get that. So let’s settle this eternal CIO/CMO potential feud over control of the CRM database. Put the CMO and CIO on the spot and ask each of them—separately—about their vision and passion for your CRM database. “How would you build it, how long would it take, and how much would it cost?”
There is a good chance that your CIO will have a dull vision of the database. To IT, it’s a software and hardware development problem. Your CIO might say something like, “It’ll take three years and cost ten million dollars.” That answer belongs in the 1990s trash can. Many old school engineers hate shortcuts, which might lead to failure.
On the other hand, your CMO may either have a brilliant, unorthodox vision or be flummoxed because of a lack of understanding about databases or IT in general. That’s a huge red flag. How can you be a CMO today without a solid understanding of databases and information technology?
Bzzzzzz! Trick question. You can’t.
“CMOs realize that technology is a key enabler for any effective marketing program, but easy access to technologies that do not require IT support perpetuates poor communication and the stereotype of the dysfunctional IT/Marketing relationship. ClOs recognize that the definition of their customer is changing from employees on the payroll to anyone that uses technology to interact with the company.”
— Simon Yates, Forrester Research
Pro tip: If Marketing says, “Here’s what I would do, and here’s how I’d build it, and I’ve spoken to a vendor who can do it in six months for $500,000” give the database to Marketing. If IT says three years and ten million bucks, give the database to Marketing. You can’t wait three years; that’s insanity. Your CIO should serve Marketing as an internal customer, and shouldn’t grumble.
But suppose Marketing comes back with fluff, no numbers, and no rationale for how it would optimize the data and metrics. The same day, IT offers a nimble plan that includes automation, analytics and more while controlling costs and rolling out the finished product fast. You give the database leadership to IT and fire your CMO.
In my experience, it probably plays out this way: backed against the wall, Marketing comes up with a plan that reflects the organization’s goals while IT comes up with a plan focused on building the thing.
That’s not a bad outcome as long as both sides can collaborate effectively. As long as roles and responsibilities are clear and communication is seamless, you could end up with Marketing as the key customer of IT, controlling the use of the CRM database while IT controls the build, feature improvement, bug fixes, platform stability and data security.
WHAT THE CIO SHOULD BE DOING
None of this diminishes the importance of IT. Digital marketing technology is evolving so quickly that even if you have a CMO who “gets” database technology, no one can possibly stay current on it all. So the IT department has to be in command of the software, hardware and network side of marketing.
Assuming you have people in IT who understand the media landscape and key concepts like CRM, SEO and lifetime value, you should hand that department responsibility for everything from predictive analytics and your website’s CMS to app development and innovation. These are some of the domains where IT is master...and can really help marketing crush it:
Data Collection: Marketing might take the lead on determining what data to capture, but IT brings valuable knowledge to that discussion regarding things like how to de-dupe overlapping data sources. Data streaming and application data from sources like your website or Facebook campaigns not only allow marketing to learn more about the customer than ever but to study factors like brand awareness in hours over an audience of millions. Your engineers and coders are also your go-to resources for database security and hygiene, as well as insights on data capture tech like QR codes, barcodes, and RFID.
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.
Historically, IT and Marketing have been at odds, but they don’t have to be. As David Chan, director of the Centre for Information Leadership at City University London, remarked in Computer Weekly, “There is nothing fundamentally different between Marketing and IT. It is about the culture of the organization. If the departments work together, you shouldn’t have a problem.”
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?
The advertising agency is dead.
Or am I?
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 (typically TV, print, outdoor, radio and their own trading desks) 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:
1.Revenue isn’t growing fast enough
2.Marketing staff are overworked
3.You’re always behind
4.Your strategies are thrown together
5.You’re using the same channels over and over again
6.You focus on tasks, not strategy
7.Your results are disappointing
Here are some guidelines regarding the 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:
1.Run the campaigns yourself, using no specialist platforms (i.e., use the basic ads platform Facebook provides).
2.Get your media agency to run them for you.
3.Work directly with a social media specialist company, and ask it to run the campaigns for you, using its own technology.
4.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 CMOs, 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?”
THREE THINGS EVERY CMO SHOULD DO
1. Define your Brand Purpose:
Defend it to the end. No one else is in a better position to ensure that your organization is clear on what your brand values, what motivates you as a business and how you measure success. Figure out how to express that purpose so you can share it with others who will help grow your brand, from your staff to your agency partners. Appoint yourself head watchdog and ferociously guard your brand against any who overstep the bounds of how your brand comes to life each and every day.
2. Be Fearless: To succeed, you must have a mindset of constant experimentation. Always be looking for new ways to take
ideation in new directions. Think about what unexpected element, talent or partner you can introduce to take imaginations to new places. Some will work, others won’t. When they do work, be the first to celebrate with the team. When an idea doesn’t work out, reinforce the fact that it was a learning experience—after all, you did learn something!
3. Inspire a Culture of Creativity: Creativity is not a department; it’s everyone’s job. It’s the mission of a great CMO to draw creativity out of everyone. That means teaching people to be agile and to innovate with whatever they bring to the table. That means welcoming constant change. It means getting rid of the status quo processes, procedures, and marketing models. It means relentlessly driving education and evolution. It means getting up every day ready to create, launch, learn and know you’re going to start all over again the next day.
10 MUST-DOS TO FOSTER AN IDEA CULTURE
Still with me? Good. Let the creativity begin. How do you doggedly, fearlessly encourage creativity in your CMO, your organization and your marketing partners—what I call creating an “idea culture”? Some suggestions:
1. Look for human truths
The most powerful ideas come from real human insights. Things that are universal. That really connect. Whether through primary research, social insights or other means, uncover the real insights into what consumers are feeling.
As a quick example, a large fast food chain we were working with needed to sell a new sandwich. Unfortunately, the sandwich had a name that was difficult to pronounce. Knowing that people love to correct mistakes on social media, we purposefully mispronounced the name of the sandwich throughout our campaign. This not only gave customers permission to order the sandwich—and have fun mispronouncing the name when doing so—but also encouraged an extraordinary amount of social conversation as people corrected our “mistake”.
2. Give your customers control
It may seem counterintuitive to loosen the reins, but the better you define your brand and encourage a strong emotional connection to it, the more your customers will feel ownership. You’ll be amazed at how they’ll defend your brand. How they help reinforce your beliefs. Become your co-conspirators. That creates the most powerful type of marketing. It’s real. Honest.
You must also maintain consistency. As soon as your words or actions don’t reflect who you say you are as a brand, your customers will call you on it. An airline that we worked with is a master of this mentality. It empowers its people at every level of the organization to live the brand; that mindset permeates every word and action.
As a result, customers understand what the brand is all about. So much so, that when a negative comment appears on social media, this airline rarely has to say a thing. Its loyal customers quickly jump in to become defenders.
3. Realize your customers are very busy people on a constant journey
Wouldn’t it be great if you could make your customers slow down and listen to your message? Sure. The chances of that happening are slim to none.
So the question really is, “How can your brand join them on their journey?” How can your messages become so meaningful that customers can’t turn away? Think of a day in the life of your customer. Think about your brand purpose and how it can come to life in new ways and in every connection your customer has with you.
4. Become best friends with the CIO
Sometimes the best ideas are forged from unlikely alliances. Look for those collaborations. Take your CIO...please. First, your missions must be aligned and centered on the consumer experience. Then, whether through eCommerce solutions, customer service or database marketing, both the CMO and CIO can look for new ways to make every customer engagement lead to a positive perception and strong brand reinforcement.
5. Leverage technology, but don’t rely on it as an idea
You’d be amazed how often clients come to VML asking to “be on Facebook” or saying they “need an app” without having a clear idea why. Using technology in this way—just to say you did—is absolutely the wrong way to go. Start with the idea, then see how it can best come to life. If that’s through technology, run with it. Get on Facebook or build an app. But don’t do tech because someone else did or because it’s buzzworthy. Great creative is idea-driven, has an objective and aligns with your efforts to drive results within your target market.
6. Challenge the status quo every day
You don’t have to do things the way you’ve always done them. Sometimes you’re better off if you don’t. Question and disrupt your legacy processes and procedures on a daily basis—not just to be disruptive, but because there could be a better, more dynamic way to solve a challenge. The old adage “If it ain’t broke, don’t fix it” leads to stagnant thinking, complacency, and risk aversion. Make sure everyone you work with has the mindset of always looking for a better way.
We worked with a client with a brand in a state of decline. Seems like the perfect time to question the status quo, right? But rather than do that, the company continued to cling to and reinforce bad habits: delivering briefs loaded with too many points, conducting focus groups that tested ads to within an inch of their life, performing legal reviews that removed all impact and making all decisions by committee. It was easy to see why the brand was failing and the future was looking ever more bleak.
7. Create spaces that encourage collaboration
Make your office environments and culture open to collaboration and innovation. It sounds simple, but I can’t tell you how many clients tell us how they envy our open office environment.
What’s stopping you from having this same type of open environment and collaborative workspace for your marketing team? If your teams are locked in offices or stuck behind cubicles, their creative spirit is being held back. Work to bring energy into your office. Find ways to support your team’s efforts to work together.
If your culture won’t allow you to reconfigure office spaces, leave the office every so often. After all, you’re the boss. Sometimes the best collaborations happen in a new and unexpected place. So take your teams outside their everyday environment on occasion and find a new one—and some new ways of thinking.
8. Get your leaders to commit to doing what it takes
Great companies reinvent themselves. The alternative is to become one of the countless mediocre brands out there—to fall into a vast sea of sameness. Do what it takes to be great. Do what it takes to be exceptional. That means ensuring you and your leadership are all involved in creativity.
If you’re relying on mid-level managers to bless strategies and review work before it hits your desk, you’re wasting time and energy. Ultimately, everyone is trying to predict what you will like and not like. You and the other C-level execs must be involved in strategy, direction, and objectives and invested in providing feedback along the way—or the second-guessing will kill the truly great (and often scary) ideas.
9. Expect greatness from your partners
People rise to what’s expected of them. We know which clients demand greatness and which are content with marginal work. We want to do the great work. We want our clients to expect great work every time. Let’s do it together. Expect nothing less.
10. Keep your eye on the ball
Others may get caught up in the day-to-day drama or a crisis. The CMO can’t do that. He or she must keep the brand on the course and delivering the only result that matters: business growth. So measure your efforts and stay true. That might require evolution, like rethinking how you do testing. It’s not just a TV world anymore.
Today’s pace is quick and one of constant monitoring, iteration, and optimization. Every move you make—and every great idea you and your team develops—needs to remain firmly centered on moving your business and brand forward.
WHERE AND HOW TO FIND THE 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.
TYPES OF WASTE
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. (Unless you want to hire David Beckham as your spokesman.) 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. PAYING FOR FRAUDULENT OR 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 other 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:
Agency “management fees” get squeezed so low (by your procurement team) that they can’t make money without all of those kickbacks and excessive margins, making the media buying ROI even worse. Agencies are told to deliver the lowest costs, like cost per view, driving your campaign budgets to the lowest quality—often fraudulent—inventory sources.
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. The more popular contracts involve things like:
Pay a fair percent of media spend as the management fee. Typically the bigger the campaign, the more complex and time consuming, so this logic can work nicely A “cost-plus” model, in which you agree on the level of resources—like headcount—that your vendor will use to support you, then pay the agreed costs plus an agreed mark-up Licensing technology and running campaigns in-house Stamp out all rebates, or insist on them flowing back to your own budget “pot” if paid, so that they do not distort decisions
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 the 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 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.
Other Engagement Drivers:
There are many other drivers of campaign success. For example, we often run campaigns that serve ads, or adapt campaigns, based on the weather forecast, which can dramatically improve results.
The causes of this problem are two-fold:
1. Inadequate resources in the marketing team or at the agency, meaning no one has any time to monitor and optimize campaigns after launch.
2. Ignorance about the potential improved ROI that comes from continuous optimization, often exacerbated by a lack of focus on useful ROI metrics.
The solution here is simple. Either ensure that your marketing team or agency is well-equipped with experts who do this kind of optimization every day, or hire specialists companies that can—typically by using a combination of programmatic technology, math geeks and additional data sources. These specialists may cost you more, but the improvement in ROI will be well worth it.
SUMMARY: A MASSIVE OPPORTUNITY
If your marketing activities are currently suffering from all four of these areas of waste, what would it be worth to fix them all?
Let’s imagine that right now, your combined marketing activities achieve an impact of 100. For the sake of this calculation, it doesn’t really matter what the unit is. It could be 100,000 customers acquired, $100 million of shareholder value created, or $100 million of incremental revenue as a result of your marketing activities. Now let’s assume that you eliminate all of your waste. The impact that the same marketing spend could have would be as follows:
Original Impact = 100
Fix #1: reduce spend on content creation (without reducing quality) and increase media spend by 30%
New Impact = 130
Fix #2: eliminate fraud and low value impressions, which accounted for 10% of your impressions, while improving media planning
New Impact = 143
Fix #3: reduce ecosystem margins by 10% with the money flowing straight to media spend
New Impact = 157
Fix #4: continuously optimize campaigns all the way through, increasing ROI by 40%
New Impact = 220
Total increase in marketing impact—the value created—is 120% better than before the changes
And these numbers are not atypical. What do you think? Worth pursuing?
KNOW WHAT TECHNOLOGY YOU NEED WITHOUT EXPLODING YOUR HEAD
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 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 (ads that match the form and function of the platform, like advertorials), 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 (targeting recipients based on location), 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 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 lets 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.
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 a given ad 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.
SHOULD YOUR CMO FACE THE FIRING SQUAD
In July 2012, the impetuous CMO of General Motors, Joel Ewanick, was unceremoniously and publicly fired. In addition to hiding the true cost of a sponsorship deal with Manchester United (causing significant internal friction), he had stated publicly that Facebook advertising didn’t work and pulled all of GM’s ad spending from the social network.
Such an overt demonstration of ignorance deserved to be punished.
How is your CMO coping with the new world?
According to a Spencer Stuart survey, the average CMO tenure is now 48 months. That means that 25% of CEOs will fire or lose their CMO this year. Do you need to practice the phrase “You’re fired”?
By this stage in the blog, you are well aware that the CMO role is now critically important, massively complex, more data-driven than ever and constantly changing. Is your CMO up to the task?
Let’s break it down into the key things to look for in your most senior marketing leader. In this new and complex world, is your CMO: Defining and communicating a clear brand vision that is compelling, differentiated, motivating and shaping your company culture?
Building an awesome marketing team of A-players?
Integrating and continuously evolving an ecosystem of technology partners to win?
Smart (and creative) enough to understand the opportunities and risks, and look from fresh angles?
Writing and executing strategies to drive the digital transformation and outperform the market?
Firing underperformers and bad agencies?
Measuring and optimizing everything using data, and linking it closely as possible to the LTV approach?
Setting high standards and never satisfied?
Collaborating with your finance, IT, product and sales teams?
Out of the corner office, with sleeves rolled up (or better still, in a T-shirt) leading from the front?
I’ve created a simple 10 question survey for CEOs to assess whether it’s time to hand your CMO a cardboard box and have security ready for an escort to the front doors. It’s a classic format: answer each question according to how strongly you agree or disagree with the statement, scoring on a scale from 1-10 (In this case: 0 means your CMO doesn’t possess that quality or conduct that activity at all, while 10 is world-class at that attribute/activity.) Then add up the numbers for a total score, and see the scoring key that follows, which will tell you if your CMO should stay or go, or if he or she is a borderline case.
THE “SHOULD I FIRE MY CMO?” ASSESSMENT SURVEY
Capability Score 1-10
Defines and communicates a brand vision that is compelling, differentiated, motivating and shaping your company culture and activities. External brand communication is aligned with the customer experience and internal culture. Ensures that customers actually experience the brand promise.
Is building an awesome marketing team of A-players, including critical roles like CRM, media planning, analytics, creative, technology. The marketing org structure is well thought through. S/he has made the case to increase internal headcount to fill these roles, paid for by reducing agency fees (by bringing more in house) and reducing media spend (through improving efficiency).
Is integrating an ecosystem of technology platforms and partners to win, while staying abreast of industry developments and ensuring continuous evolution. Uses bake-offs to select vendors.
Intellect & Creativity
Is smart enough to understand the opportunities and risks, and raise the bar on own team before the CEO starts asking questions. Can out-think competitor CMOs. Takes time to reflect, learn from other companies and challenge own team.
Writes and executes strategies to drive the digital transformation and outperform the market. The strategy feeds into rigorous quarterly goals cascaded throughout the team, right through to campaign planning. Iterates plans regularly, based on learnings and market changes.
Regularly reviews team and agencies, firing underperformers. Holds third parties accountable to stretching KPIs that are measured in house.
Measures everything using data, linking KPIs as closely as possible to the LTV approach. Has weekly and monthly dashboards for all KPIs that matter, plus data-driven reviews of every single campaign. Uses it to maximize the ROI from creativity (rather than kill it).
Is never satisfied. Every campaign review should identify room for improvement. Every team member should have development plans. Every vendor should have stretch goals. Hates waste and is obsessed with minimizing it (without killing experimentation).
Collaborates well with your finance, IT, product and sales teams on key cross-functional initiatives such as product launches/CRM database/improving customer experience/driving sales productivity.
Is mostly out of the corner office, with sleeves rolled up, leading from the front. Personally uses your website and app as well as those of competitors. Actively engages in social media. Listens to customers. Sets standards and inspires the team.
There, that wasn’t so hard, was it? Okay, maybe it was. It’s not easy to rate someone you might consider a close colleague, judging them for things that you might not fully understand. How did your CMO rate? Total your points from 0-100 then work out next steps:
Total Points Verdict < 40
Don’t even finish reading this blog. Stop right now and fire your CMO. Go on. Call Legal and arrange it. I’ll be here when you get back.
41 - 60 This is still firing territory; it’s just not as urgent. To be honest, anyone who scores outside of the zone of solid competence shouldn’t be your CMO. Plan on letting him or her go as soon as you have found a replacement.
61 - 80
You have someone who’s far from perfect but could she or he grow into the CMO you need? Or could key gaps be filled with the right hires? Do you have the time and resources to grow this person? If you see potential there (brains, restlessness and EQ) then maybe it’s time for a no-nonsense talk and some training. If you’re not sure, then seek a replacement.
80 + You’re in strong shape with a CMO who’s got the gifts, discipline and leadership ability. Count yourself lucky.
Lucky is the right word. Based on my exposure to hundreds of CMOs, and confidential chats with many of their bosses, I estimate that only 20-30% of organizations have a future-proof CMO with > 80% score. Someone with the toolkit to take the company to the next level in the digital world. If that’s you, congratulations! You just found out that you have one less problem than everybody else. You and your amazing CMO can—together—focus on creating enormous value, based in the principles in this blog.
HOW TO HIRE A FUTURE-PROOF CMO
If you’ve just, ahem, parted ways with your CMO, then you will soon find that finding a future-proof, A-player replacement is really hard. Writing for Business2Community.com, consultant and writer Jeff Swystun nails the situation:
“It has been called the most dangerous title in business and many pundits have suggested it does not work and should be banished. No role in the last fifteen years has been scrutinized and debated more than the Chief Marketing Officer. Businesses have struggled with the title and role since it was first coined not too long ago.”
The position was created to give Marketing, which is central to so much of any organization’s success, a seat at the conference room table as a peer of the traditional C-suite: Operations, Finance, Engineering, Sales, IT etc. But somehow, while those other positions are all about 30,000 foot thinking and the big picture, the CMO is expected to have one foot in global strategy and the other in the granular details of campaigns.
Clearly, your CMO job description will depend on your industry, the state of your marketing organization, your geographic footprint, etc. It will also depend on the existence and responsibilities of other C-level executives, such as chief digital officer, chief revenue officer, chief product officer, et al. Everything below will therefore need adapting, but let’s have a go.
Here’s an attempt at a generic job description for a global CMO of a Top 1,000 company, based on the key principles of this blog:
JOB DESCRIPTION – CHIEF MARKETING OFFICER
The chief marketing officer will drive profitable and sustainable customer and revenue growth through defining a differentiated and compelling brand strategy, plus rigorously executing the strategy with defined customer target groups, supported by world-class, data-driven marketing and CRM activities, while ensuring that the customer experience meets or exceeds the brand promise.
Brand Leadership: Define and communicate a brand vision that is compelling, differentiated, motivating and shapes the company culture and activities. Ensure that external brand communication is aligned with customer experience and internal culture, and that customers actually experience the brand promise.
Team: Build a best-in-class marketing team of A-players, including critical roles like CRM, media planning, analytics, creative and technology. Put in place a clear and effective marketing organizational structure for a data-driven and relentlessly innovative approach. Bring critical capabilities in-house, funded by reducing third-party fees and media spend (through eliminating waste).
Ecosystem: Act as your own agency-of-record and build an integrated ecosystem of internal team and systems, combined with third-party technology platforms and creative partners to win, while staying abreast of industry developments. Use rigorous “bake offs” wherever possible to select vendors.
Planning and Execution: Write and execute strategies to drive our digital transformation and outperform key competitors. Your strategy should feed into rigorous quarterly goals cascaded throughout your team, right through to planning for each campaign. Iterate your plans regularly, based on learnings and market changes.
Data and CRM: Build a world-class CRM database and approach. Measure all activities using data, linking KPIs as closely as possible to the customer lifetime value approach. Ensure weekly and monthly dashboards are in place and used for all KPIs that matter, plus hold data-driven reviews of every single campaign. Use data to maximize the ROI from creativity, rather than kill it.
We understand that building a world-class marketing ecosystem takes more than one quarter. Therefore, to incentivize the right behavior, your success (and bonus) will be based on:
Quarterly MBOs: These will focus on delivering many of the activities and outputs defined above, in order to build a world-class marketing function over multiple quarters.
Customer Lifetime Value: Given that much of your focus will be on efficiently acquiring, upselling and retaining customers, while simultaneously improving their lifetime value, you will have a bonus linked to the total predicted future value of the CRM database (audited by Finance). As this role should have enormous impact on company value, there is a very generous stock option plan in place for the selected candidate.
We are looking for someone who can transform the marketing organization for the digital age. Therefore, we expect the following experience and qualifications:
Strategy: In-depth strategy experience, either at a top-tier consulting firm or on the strategy team of a respected company
Broad Functional Experience: Prefer candidates who have worked in more than just the marketing function. Ideally, in addition to marketing, also in analytics, product, sales, eCommerce and project management roles. Experience working within an agency-of-record would also be useful, as you will be building those skills in-house.
Digital Marketing: In-depth experience in digital marketing, including a working knowledge of customer lifetime value, plus search, social, video and mobile advertising. Experience working in a marketing technology or Big Data company would be advantageous.
Leadership: Have built and led world-class teams to attract, develop and retain top talent, plus manage out underperformers.
Highly Numerate: Ideally studied for a numerate degree (e.g., economics, statistics, engineering). MBA would be beneficial
Project Management: Have run/overseen large complex technical projects, such as CRM system implementation
Beyond these specific experiences and qualifications, we also expect the CMO to possess the following characteristics:
Sense of Urgency: Love winning and working at speed. Have a track record of setting industry standards and benchmarks. Smash through obstacles. Doesn’t accept “no”
Intellect: Have the brains and confidence to be accepted as a peer of the other C-level executives. Have been a thought leader in all your former roles
Creativity: Use data and insights to continuously find new and better ways to get stuff done. Can identify and nurture creative talent to drive business success
Teamwork: Display a history of successful collaboration with peers in other functions
Toughness: Have a track record of firing underperforming people and suppliers, and dropping/pivoting initiatives if they haven’t delivered the expected results
Action-Oriented: Don’t need a corner office or an assistant. Spend your days with sleeves rolled up, either with your teams getting stuff done, listening to customers, or checking out the competition
Global: Have lived and/or worked for significant periods in at least five countries
Prepared to Travel: This job requires constantly taking the pulse of customers and front line marketers, as well as evangelizing the brand, therefore it requires 50% travel
Does that make sense for your organization? Feel free to adapt for your specific company and role.
RECRUITING FOR SUCCESS
So how on earth do you find and hire someone like that? It isn’t easy. Let’s break it down into the core steps:
First 90 days
The outline below is only that—an outline. You should definitely adapt it for your company and role.
As this is a critical role, you will probably use a headhunter with a global reach (who needs to read and understand the contents of this blog). That said, you can do a lot yourself these days. Given the critical importance of hiring this role, it’s worth a significant investment of time. In addition to hiring a headhunter, here is what I would also look to:
Linkedln: If you don’t already have it, upgrade to the premium version of Linkedln to allow structured searching and filtering. Clear your calendar for 2-3 hours and get the coffee machine warmed up, then start searching. Every single person that you would want to hire will have an impressive profile on Linkedln.
If they don’t have one, don’t hire them, as this shrieks “dinosaur”. The tricky part is finding those rock stars; 32 million people have the keyword “marketing” somewhere on their LinkedIn profile. That is why you need to filter your search based on things like seniority, location, having a numerate degree, etc. On LinkedIn, you can search for people who are:
Already CMOs at companies that you respect Slightly more junior, but smarter, more tech savvy and hungrier (e.g., a VP of digital marketing or eCommerce)
Senior thought leaders working in advertising or marketing technology companies
People who have worked at both strategy consultancies and in senior marketing roles
You may wonder why I insist that if their Linkedin profile is weak, you shouldn’t hire them. What, I hear you ask, if the candidate hasn’t polished that Linkedin profile out of a sense of loyalty to a current employer? Here are my reasons why:
Recruiting: Even if the person wasn’t looking for a job, she or he should have been using Linkedin for recruiting, and you can’t approach people on Linkedin unless your own profile is impressive. Before you send a note to a potential hire, you need to look like the kind of person that A-players want to work for.
You want a CMO who is a thought leader. Thought leaders publish articles on Linkedin (and elsewhere). They also make speeches, and therefore need a polished Linkedin profile, so that when audiences check out the speaker on the platform, they’re suitably impressed.
Business Development: A good CMO is an active networker. That includes proactive outreach to potential partners, suppliers, VIPs, etc. And the best medium to do that on is Linkedin.
Conference Speakers: Look at the speaker list for major marketing conferences like Cannes Lions, Festival of Media, Advertising Week. The people invited to speak tend to be those who are setting new standards and innovating. They are also good communicators.
Awards: Same logic as for conference speakers—thought leaders often win awards
Alumni Networks: Leverage your network, and that of your C-suite. People from your past—whether it be from business school, consultancy or a former employer—are more likely to respond to you, will respect any confidentiality involved, and have a skill set that you understand and can check up on easily.
Friends: I find that a lot of CEO friends ask me for advice on this topic, as I am a CEO who is exposed to a lot of CMOs. Who do you know who might be able to help?
This is critical. For all people who apply to a job ad, are on the headhunter’s long list or are referred to you by friends, you have to rigorously screen them against the criteria laid out in your job description. For example:
Does the person have a numerate bachelor’s degree involving a high level of mathematics and “systematic thinking” such as economics or engineering?
Has the person worked outside of marketing, including in roles focused on strategy consulting, sales, business development, analytics, technology?
Has she or he lived, or worked, extensively abroad?
Has she or he set new standards, won awards, made presentations, written thought leadership pieces?
A word of caution: the perfect candidate doesn’t actually exist, so you should probably allow each candidate one “gap” versus your ideal CMO, in order to decide who should progress to the next round.
At this stage, if they pass the screening and you want to give them the homework then a Skype call is required. This puts a human face on the interaction, helps to justify the homework that they are about to be sent, and increases the chances of them actually completing the assignment.
I recommend three elements of homework to be assigned to your 4-5 most promising CMO candidates:
Personality Profile Test: Give them a personality profile test, so see how well they know themselves. This is a useful discussion document at the actual interview. My company uses the DISC test.
Experience Questionnaire: A list of around 10 questions that asks them to give examples of the critical things you are looking for, for example:
1. Developed and rolled out a brand strategy
2. Been a thought leader in the world of digital marketing
3. Implemented a customer lifetime value approach to marketing
4. Selected a new vendor/supplier with a bake-off
5. Fired an underperformer
6. Dramatically improved the ROI of a marketing campaign
7. Led a technical project or initiative, such as bringing in a new technical platform
8. Developed and implemented a business strategy
9. Conducted a complex numerical analysis using massive data sources
10. Worked/lived abroad
Presentation: Give them a real problem to solve, resulting in a 10-15 slide presentation, that 1) tests whether they could actually solve your problems, and
2) gives them a flavor of the kind of work they would be doing. This could include things like:
1.Competitor analysis and recommendations for your brand strategy/differentiation
2.An analysis of your website and/or mobile app, with recommendations for improvement
3.A segmentation and targeting proposal, based on a subset of your CRM data
Probably one or two of the candidates will either fail the homework set, or drop out when they receive it. Having candidates drop out is fine; it eliminates lazy people, those who want to use an offer from you to negotiate their pay with their current employer, and those who realize they are not suitable.
That leaves two to four people who should be interviewed face-to-face. There are two purposes of the in-person interview:
Determine whether you think the candidate would be a successful CMO in terms of experience, personality, fit, etc.
For those candidates who could be a good fit, impress and excite them with your vision, the caliber of the team and the expectations of the role.
A typical agenda should be something like:
Dinner: With the hiring manager (you) and some key C-level peers
Homework Review: Go through the three elements of homework in detail. The candidate can present it, then you can discuss/challenge (2 hours)
Additional Case Study: To see how they think on their feet, set aside at least an hour for tackling another real-life situation. For example:
Designing the marketing organizational structure
Selecting an agency
Implementing a CRM database
Defining strategic differentiators
Why Would Candidates Do All That Homework?
Not many companies expect candidates to complete this amount of homework. When I explain our process to other CEOs, they ask me how many people complete it, and why would they bother using up a weekend to do so? What I explain to candidates is:
Your future peers and team have all passed this rigorous recruitment process, so imagine their caliber and work ethic. If you don’t do the work then you are a slacker and won’t fit with this elite team.
This gives you a good feel for the job and really tests your “fit”. This means that if you do take the job, you will hit the ground running and have a much higher chance of success.
Weakness Drill Down: Drill down into each candidate’s weaknesses—from the screening, homework, or performance on the day. Openly discuss your concerns, and brainstorm possible ways to mitigate them (one hour).
Tour: Give the candidate a tour of your office/campus to get a feel for the culture and maybe introduce them to key people on the route.
Q&A: Let the candidates ask as many questions as they want, especially if you think they are suitable. Get their concerns out now, so that you can address them while you have the candidates face-to-face.
It goes without saying that you need to do reference checks. But it’s also worth noting that these can be very bland and unhelpful. Two tips from me here:
In the interview, don’t just ask for references. Ask this: “After you have taken the job I might bump into your old boss. What would she or he tell me about you—good and bad?” In my experience, that often gets more insights than the actual reference checks. Try to add some reference checks of your own, like people the candidate didn’t offer as a recommendation. Linkedln will show you who your mutual connections are.
THE FIRST 90 DAYS
This is a critical time for any new hire. In the spirit of moving fast and winning, for your CMO’s first 90 days, you should reasonably expect: A review of brand strategy and market differentiation, then a proposal of tweaks to strategy or execution (a full rebrand might take longer).
A review of all current marketing activities—in-house and third-party—and work out where the weaknesses are. Make a plan, and get your senior team’s sign-off for the revamped marketing organizational structure and new hires, as well as the ecosystem of technology to be built. Get all senior/critical open positions to have offers accepted within 90 days (the people may not have started yet, depending on their notice periods).
A written strategy for the customer LTV and the CRM. Also, get sign-off on platform, budget, and timeline. An increase in KPI measurement, rigor and a sense of urgency to all marketing activities, from creative iteration to media spend optimization.
Meeting a good representative sample of customers and front-line marketing employees, to take the pulse of both customer sentiment and staff attitudes. Summarize the findings and actions required to ensure that your company culture and customer experience are aligned with your brand.
A review of your website and mobile app, and a plan for any improvements.
Agreement on clear quarterly objectives for marketing for the next 90 days that align neatly with the overall strategy. The list above assumes that the marketing team is at least 60% staffed by competent people on the arrival of the new CMO. If the team is much weaker/shallower, this list of activities may take a little longer. But all critical open positions should have offers accepted within the first 90 days, so that you don’t lose another quarter.
Do a rigorous review after 90 days, to ensure that you, your new CMO and your other C-level team members are aligned about the state of marketing, and what needs to happen. You don’t want to take too long developing this plan, or let your CMO start implementing one you don’t agree with.
How should you and your CMO judge success? What KPIs should you use? With what frequency should you review them? How do you get the right balance of strategic and tactical focus? I would argue for three categories of metrics to track for a perfect marketing scorecard:
Progress versus strategic goals
Key initiative progress
Let’s look at these one-by-one:
PROGRESS VS. STRATEGIC GOALS
For the big strategic goals, such as building an awesome CRM database, maximizing customer LTV, or shaping your company’s reputation, you should set BHAGs or “Big, Hairy, Audacious Goals”. These BHAGs define the desired end state: this could include the database size and quality; market share; customer numbers; revenue per customer that are you trying to achieve in the next 2-3 years.
You can then set quarterly milestones, i.e., break your BHAGs into quarter-by-quarter goals, so that you can track progress towards meeting your BHAG over multiple quarters.
KEY INITIATIVE PROGRESS
These are related to one-off campaigns or projects, which could be focused on specific marketing goals, or back-end marketing processes and capabilities. Each initiative will have goals that need to be monitored before, during and after the initiative, but at some stage, you will stop tracking and move on to the next initiative, because they will be completed (or killed). This makes a “standard” marketing dashboard—that never changes—a mistake. Examples of trackable initiatives could include:
Launching a new product or service
Entering a new market
Seasonal campaigns, e.g., Christmas or Back to School or the Super Bowl
Launching new/revamped websites and apps
Overhauling the creative process to make it more efficient, scrappy and iterative
Introducing a new platform
For each initiative you’re tracking, you’ll have a different dashboard and set of KPIs, and they probably won’t fit neatly with the quarterly schedule. If in doubt, for most initiatives, KPIs fit into one of three buckets:
Are the right things happening at the right time to stay on track, as per the plan?
Is everything costing what it should?
Are the outcomes meeting or beating expectations?
These are the KPIs that demonstrate daily impact, and the KPIs around which a lot of marketing activities can be optimized. They fit more neatly into a dashboard, and would typically be tracked daily by the marketing team, weekly by your CMO and monthly/quarterly by you. They would include things like:
Awareness: Lean back interactions, in which potential customers are reminded who your company is and what you do, but don’t need to do anything. For example:
The number of target customers reached with your non-engaging messages, such as TV or display ads (“reach”)
The number of times those customers saw your message (“frequency”)
Brand awareness survey results
Interest: Lean forward interactions, in which consumers actively engage with your brand content. For example:
The number of visits to website
The number of times your mobile app was opened (without purchase)
The number of videos watched to completion (when skipping was an option)
Total number of articles read
The count of other engagements with consumers, like social media shares
Intent: The times in which consumers demonstrate that they’re thinking of spending money with you. For example:
Mobile apps downloaded (free version)
The number of appointments bloged (e.g., test drives)
The number of people who submit their details (email addresses, phone numbers) in order to learn more
The number of samples ordered/coupons downloaded
Sales: Instances in which consumers actually spend money with you. For example:
The number of new paying customers
The ratio and number of existing customers upsold/cross-sold
Revenue and gross profit, broken down by geography, channel, product, etc.
Loyalty: Times in which existing customers extended their relationship with your brands. For example:
Percentage of customers renewed/lapsed
Change in customer LTV
Marketing Efficiency: Work out the ROI on your marketing spend to determine:
Marketing costs as percentage of predicted LTV created
Marketing spend versus LTV created
Taking these three elements of the scorecard into account, each quarter you should set your CMO quarterly MBOs. These are the SMART (specific, measurable, achievable, realistic, timebound) goals, defined in detail, that you expect the CMO to deliver in the current quarter. They could be related to the BHAGs, key initiatives or optimizing a particular tactical KPI. Likely a combination of all three.
You need to set these to avoid the trap that many marketing organizations fall into, in which the only tracked metrics are tactical KPIs, while the department never transforms marketing or achieves market preeminence.
Your CMO should also set quarterly MBOs for each direct report so that every single person makes tangible progress towards the most important BHAGs each quarter.
THE CEO AS BRAND STEWARD
Like it or not, a company’s reputation can sink or swim based on its CEO’s reputation. According to the work of PR agency Burson-Marsteller, more than 50% of corporate reputation is “based on the esteem of the CEO.”
There have always been companies that are hard to separate from their CEOs. Often, the famous CEOs are also founders, such as Steve Jobs, Bill Gates, Larry Page and Mark Zuckerberg. Even when CEOs are not founders and are less famous, their decisions and behavior can dramatically shape brand reputation and, with it, company valuation.
WHEN CEOs DAMAGE BRANDS
For an extreme scare story, look at Volkswagen’s former CEO Martin Winterkorn. VW cheated emissions tests under his watch, which will cost the company more than $10 billion in fines and recalls. It also cost Winterkorn his job and reputation, and he may face criminal charges in some countries. Far more important, the scandal wiped $55 billion off VW’s valuation, as future consumer trust and sales are uncertain given lost credibility. Brands have values and—implicitly or explicitly—make promises to their customers.
In VW’s case, the brand promise was always pretty simple: “Reliable family cars that you can trust, with awesome German engineering, at affordable prices.” Consumers don’t know what to think about VW anymore and will ask some difficult questions before getting behind the wheel of a Volkswagen again:
If I buy a VW, will it poison my family and destroy the planet?
If I buy a VW, will it be recalled, creating a major nuisance?
Will my VW have any residual value when I try to sell it? After all, who wants to buy a used VW any more?
If VW lied about emissions, what else did it lie about? The fuel efficiency? The airbags? The warranty?
The CMO of VW was almost certainly unaware of those decisions that the engineers made at VW. However, it’s hard to believe that the CEO didn’t know that his engineers were cheating emissions tests. Even if Winterkorn wasn’t aware, as the CEO, he was still accountable. He either created, or failed to prevent, a culture in which such appalling decisions were made.
The business news has been full such examples, of decisions made outside of marketing that have the potential to dramatically damage the brand. For example:
U.S.-based companies such as Google, Facebook, Amazon and Starbucks avoiding paying taxes in countries outside the USA, creating a consumer backlash.
Microsoft bundling Internet Explorer with Windows and being found guilty in the European Union of anti-competitive behavior.
GM ignoring data that showed ignition switches caused fatal accidents.
Arthur Andersen cooking the blogs for Enron and going bankrupt.
WHEN CEOs ENHANCE BRANDS
In contrast to the scare stories above, there are also many examples of CEOs enhancing and defining their companies’ brands and valuations. This includes people such as:
Warren Buffett living a simple life in Omaha, Nebraska, and eschewing the typical lifestyle and behavior of New York investors— showing the world that Berkshire Hathaway is a no-nonsense, sensible company.
Richard Branson’s glamorous lifestyle and flamboyant personality, giving the various Virgin companies a touch of glamour. Bill Gates donating most of his fortune to charities and working tirelessly with his wife to do things like fight malaria. This also made the anticompetitive scandal diminish and become history.
Sam Walton, CEO of Walmart, famously living a frugal life, to show that at Walmart, they were obsessed with reducing costs for their customers.
YOU PERSONIFY THE BRAND
Your reality is probably not as extreme as any of the examples laid out above. However, just because you are not a billionaire and didn’t start your company doesn’t mean your behavior won’t affect your brand. It will.
Bottom line, as the Burson-Marsteller data shows, as the CEO you personify the company. How you conduct yourself can and does affect everything from corporate morale to share price. Think about it as though you were the president of the United States; when the president speaks or acts, in the eyes of the world his words and behavior indicate the position and beliefs of the U.S. as a whole.
If he makes an offhand comment in a news conference about not liking sushi, the Japanese people might be offended. You’re dealing with the same dynamic. When you write articles, make speeches or meet customers, everyone assumes that whatever you do or say is an indication of what the company believes. Everything from how you dress to where you take your vacation will reflect upon your company’s values, for better or worse. You’ve got to live up to the brand promise every day.
“Watch your thoughts, they become words;
watch your words, they become actions;
watch your actions, they become habits;
watch your habits, they become character;
watch your character, for it becomes your destiny.”
— Frank Outlaw, late president of the Bi-Lo stores
A few thoughts—hopefully all obvious to you—to ensure that you lead by example:
Ensure that you make decisions that are aligned with your company’s values and brand promise.
Regularly talk about the company’s values to help others understand why you made certain decisions or behaved a certain way.
Ensure that your external communication—speeches, interviews, articles—are fully aligned with other marketing messages and your brand values.
Likewise, ensure that your internal communication is also aligned.
Keep your social media activity, on Facebook, Twitter and elsewhere, aligned with the brand. Anything off-key will be noticed.
Spend your days living the company values. For example:
If you promote openness and modernity, don’t spend all day hidden away in a corner office, wearing a tie.
If you promise awesome customer service, regularly spend time with customers to listen to their needs.
If you promise low prices, don’t be seen to be wasteful.
If you say you have a “work hard, play hard” culture (my favorite), don’t forget to play.
CONNECTING THE DOTS OF BRAND VALUES AND PROMISE
Beyond your own behavior, how do you keep your finger on the pulse of your organization, so that you can ensure that everyone is representing the brand? How do you prevent people from getting complacent and comfortable to the point that they make mistakes that could cost you customers and revenue?
Hiring and Training: Since most decisions and actions your customers see do not involve you, you need to ensure that all of your employees share the company’s values. Hiring and training are key here. For example, if you promise great customer service, hire employees who genuinely like others and want to help them, then train them well. If your company espouses environmental greenness, hire green employees.
Customer Feedback: Your customers have to see that your company meets or exceeds your brand promise, and does so better than your competitors. So what better way to find out than to ask them? This can be in the form of surveys, but also by meeting them and asking them in person.
Employee Survey: When designed well, this is a great way to take the pulse of the front line, as seen through the eyes of your employees. How do they observe themselves, their bosses and their peers behaving? How aligned is it with your company values? Be sure to reveal to employees what the biggest issues were, and what you’re going to do to address them.
Front-Line Visits: There’s a reason that CEOs pick up a lot of air miles. You are the face of the company and all of your teams want to meet you. When you’re out and about, don’t just make presentations. Do deep dives and listen to people’s opinions. Meet customers and partners. Do interviews with journalists. It all helps to both take the pulse of the organization and to promote your company values.
QUESTION THE DATA
Finally, given that you have (or are about to build) a world-class CRM database, you will soon have all sorts of data to query, with questions such as: “We’ve lost X customers. Show me the demographic breakdown and give me an analysis of the reasons why we lost them.”
“What percentage of our customers are in the database and how much do we know about them? I want to know at least 15 things about each one. What do we have to do to get there?”
For your CMO: “If you had to fire one of your direct reports, which one would it be?”
In summary, you need to just keep your finger permanently on the pulse of your company culture and customer experience, and lead by example.
I said I’d keep it short and respect your time, so I did. Everything that you need to know about marketing in under 130 pages. That’s it, unless you want to learn more.
So what now?
To begin with, understand the reality of the situation. Marketing is changing faster and more radically than any other time in the history of commerce. This is about survival. If you maximize LTV, and execute CRM and creative iteration well, you’re going to win market share, grow profitably and increase your share price. If you don’t, your company will wither and die.
While that may seem melodramatic, trust me when I say that it’s not. Cutting edge marketing strategy and execution are critical to your company success and it’s not enough to be good. You have to be better than your competitors, or you will lose.
Here are some steps you can take over the next 30 days to ensure that you’re the winner.
Assess your CMO: Should you keep or fire your current CMO? You need to know that first, as you can’t build a world-class marketing function without an A-player as the leader. If you conclude that your CMO is a keeper, then executing everything below gets MUCH easier. If not, then you need to work out how much you can get done, while you find a new CMO.
Assess the Organization: Complete the checklist and—more important—dig deep into the questions it brings up. How’s your talent pool? What’s your marketing culture like? Does your creative process produce genius or mediocrity? Does everyone collaborate? What needs to change?
Assess Third-Party Providers: Are your vendors, contractors and service providers delivering value or ripping you off and costing you
big money? Time to find out.
Review your Use of Data and Technology: Are you collecting all the customer data you should? Is it secure? Are you leveraging it for your CRM strategy? Are you effectively using social, mobile and search?
Assign Responsibility for the CRM Database: Remember, it’s either the CMO’s or the ClO’s baby. Figure out who’ll do it better and agree on the strategy ASAP. Get sign off from all key stakeholders.
Set Aligned Marketing Goals: Determine where you want to be in the next year and what metrics will tell you that you’ve arrived. Be clear and precise with the goals you set, make sure everyone knows them, and hold everyone accountable.
Determine your Role as Brand Steward: Define how you will personally embody the brand in your actions, behaviors, and communication—both internally and externally.
End the Waste and Inefficiency: From overcharging vendors to marked-up media buys, there are a hundred ways your organization could be wasting money and hurting results. Find them.
Determine How You’ll Stay on Top of Marketing Changes: Are you going to be checking in on the dashboard? Sitting in on strategy meetings? Meeting with the CMO? How will you interface with Marketing on a regular basis? You need key people attending conferences and trade shows, reading white papers, surfing blogs and more, staying current with the latest marketing IT and ideas. Who gets that responsibility?