social marketing

  • March 26, 2013

    • Marketing Performance Management Isn’t Hard, It’s Good Business

    Sales has always enjoyed a quantitative edge over marketing but today that’s changing.  Sales managers measure many things like sales calls per rep per week, forecasted revenue, the time a deal stays in the pipeline or in a particular deal stage and much more.  Forecasts are often tallied in spreadsheets and they always involve an impressive array of revenue numbers and probabilities of close.

    Pity the poor marketer.  Marketing has been at a quantitative disadvantage because they have tracked response rates, click-through rates and many other qualitative measures of interest that can be as reliable as fickle customers.  Worse still, the rest of the C-suite speaks the language of costs and profits while the CMO talks about things that don’t directly result in revenue.  It doesn’t matter that some sales numbers, like probability of close, are just as qualitative.

    In the past all marketers could do to arrive at “serious” numbers was to add up marketing campaign expenses and divide them by the number of leads and revenue that came in.  This macro approach didn’t take into account which campaigns did the best job of attracting the customer initially or which one pushed the deal over the top.  As a consequence, marketers couldn’t tell if one campaign or style of campaign was better or worse at doing a specific job and resource allocation was hit or miss.

    But what if there was a way to define and track marketing metrics that more closely track revenue?  For many years marketers couldn’t hope to track those metrics but thanks to the confluence of big data, analytics, social techniques and CRM, marketers can track the data their campaigns give off and make measurements that can stand on an equal footing with sales metrics.  This reality has made the marketing funnel a real and important part of the overall sales process and spawned the discipline of Marketing Performance Management of MPM.  Full Circle CRM provides a good example of an MPM solution.

    A marketing department that tracks data on its activities can put itself and its company on a path to having greater certainty about its pipeline and revenue forecasts and greater influence in the C-suite.  Every marketing campaign generates valuable data from the raw number of prospects it attracts to the time it takes to close a lead and even to knowing how many prospects with initial interest make it all the way to closure.  So the issue for marketers no longer revolves around which data to collect or how to do it.  Instead emphasis has shifted to which calculations to make and which metrics to apply.

    If a marketing department tracks spending, dates of transition through the steps in the marketing funnel and number of leads generated — by each campaign — it can calculate many meaningful measures of performance that will make anyone in the C-suite smile.  Here are some metrics that every marketer who is intent on improving MPM should consider.

    1. Immediately, the cost of marketing becomes clear with simple metrics like cost per lead, cost per revenue dollar and conversion rates by each campaign.
    2. A slightly more sophisticated measure can calculate cost per lead based on campaign type — trade show, direct mail, social campaigns — whatever.  This can tell you the best sources of leads by volume and it can identify the best mix of campaigns by cost per lead and quality of lead.
    3. Capturing the date when a customer first raised a hand and date of close (from the SFA system) averaged over a number of leads in a specific time range gives the average sales cycle.  It also gives the overall velocity of the sales funnel — the speed from first contact to closed deal.  Further identifying leads by campaign type will also show which campaigns produce the most sales ready leads.
    4. You can use the deal velocity calculation on leads from specific campaigns too.  This will tell you which deals might be accelerated to help ensure sales plans are met.
    5. By capturing dates for transition from one funnel or pipeline stage to another marketers can tell conversion rates by stage and, most importantly, if and where deals get stuck.  This will naturally also show the kinds of campaigns that might be most effective at getting the funnel flowing again.

    All of this data can be captured and stored in the CRM system.  Many of these metrics depend on establishing historical norms or averages but that’s easy to do and the norms get refined over a short time.

    So, tracking data on a relatively small number of attributes and applying the right math can significantly improve marketing’s visibility into the funnel — that’s what sales does and marketing can do the same.  Of course, plenty of consideration ought to be given to the vagaries of each marketing department including overall budgets, product type and customer types.  Marketing organizations therefore need ways to customize weightings for various programs and scores for resulting leads.

    So when shopping for modern marketing automation solutions, keep an eye out for the performance management side of the equation and include marketing performance management as part of your shopping list.  It can easily mean the difference between success in your new approach to marketing and remaining at a quantitative disadvantage to sales.

    Published: 11 years ago


    The marketing funnel is not exactly a new idea but neither is sales or customer service though all have morphed considerably from what they were more than a decade ago when CRM got started.  Sales and service evolved organically making incremental changes as markets transformed and new technologies became available.  Marketing is in the middle of some major changes itself right now, especially considering the social revolution, though it was earlier constrained by finance trying to figure out its ROI, and justly so.

    Evolution of Marketing Metrics

    Back in the day, marketing somewhat resembled the weekend sailor’s definition of a boat — a place in the water into which you throw money.  Greater attention to the blocking and tackling of marketing (i.e. attending to program and campaign costs and the resulting revenue), helped mollify the accountants somewhat.  But as any seasoned marketing professional will tell you, it often takes multiple touches by marketing to move a prospect to action so accounting for marketing has remained an inexact science.

    Also, and very importantly, all of the major CRM disciplines have had to adjust to market changes that transformed new green field markets to mature zero-sum states.  Many researchers like Clay Christensen and Geoffrey Moore have noted that during green field days, sales and marketing are rather bare bones operations dictated by the simple hunting logic of see an opportunity, sell to it, close the business.

    Social media came along in force at the end of early markets’ salad days, just in time, not simply to provide a very low cost sales channel to the customer but also to provide a conduit of useful information from the customer.  Ditto for analytics without which all that social data would be a bunch of gobbledygook.

    What’s in Your Funnel?
    So that brings us to the marketing funnel (or what it used to be).  Just like a sales funnel where prospects and events are graded, scored and promoted or demoted as candidates for closure, the marketing funnel is a place where suspects and leads are scored and matured until they are acceptable to sales for the final push.  But the marketplace changes alluded to above have conspired to bring the marketing and sales funnels together and today everyone’s prosperity depends on it.  (See David Lewis’ book “Manufacturing Demand” for more.)

    The most successful organizations in many markets admit to little if any daylight between sales and marketing funnels beyond the obvious rationale that marketers and sales people manage the processes in their respective areas.  But generally, there is a mindset that all are one when it comes to progressing a lead from earliest contact to final closure.  That’s because, as Lewis accurately observes, it’s all about demand.

    So that brings up an important question, how do you know your marketing efforts are succeeding?  That they’re generating enough demand at a reasonable cost?  Certainly, cost per revenue dollar and similar measures of ROI are useful, but that leaves a great deal unsaid, like what’s happening with all the leads that don’t contribute to the “R” in ROI?  Are they stuck?  Where are they stuck?  What will unstick them?  For that you need Marketing Performance Management, a new term but you’ll pick it up quickly.

    MPM — Marketing Performance Management
    With process comes management and management requires measurement, which inevitably drives metrics.  In the sales part of the funnel most organizations have a process and metrics that help them to evaluate progress but in marketing?  Not so much.  Truth be told, sales has always been able to process leads faster than marketing could make them which means that marketing must make even more but it also brings us right back to management and metrics.

    If sales is going to persist with its process analysis and if marketing is ever going to bridge the gap to provide sufficient leads for sales, then marketing has to adopt some of the same performance management approaches that sales uses.  Of course we are not talking about using the same tactics or metrics; we are talking strategy.

    Strategy involves developing standards for lead development and velocity through the funnel.  This is where marketing performance management (MPM) comes in.  MPM might not roll off the tongue just yet but it neatly encompasses the need for strategic approaches to marketing and to managing the progress of leads through the funnel.

    Full Circle CRM is an early leader in the marketing performance management market.  They use a no-nonsense approach of collecting marketing data and analyzing it for patterns.  Full Circle CRM then enables marketers to easily develop the measures and metrics that can help them understand which leads are worth while and which campaigns and programs are driving the results they need.

    From what I can see, MPM is the next logical step in CRM’s long evolution.  It comes along at a time when spray and pray marketing techniques are just about played out and marketers are hungry for new approaches.  You will still need social media, content and inbound marketing to name a few other worthwhile tools.  But MPM is right up there with those tools to help you measure and understand your successes with your new marketing kit.

    Published: 11 years ago


    Look, we know the old truism that if you don’t have customers and profits you don’t have a business, you have a hobby.  But could we please get a little balance on the profit idea?

    Emerging companies typically don’t declare profits because they use excess cash to fuel growth.  Anything left over is plowed back into the business.  If the company is public, its stock price rises not because of some magical ratio of earnings or dividends to share price, but because the money the company invests in its people, processes, technologies, research and development and products make it a more valuable entity to anyone looking at its future.  The mini-computer makers were famous for this.  I recall Digital rising to $199.50 per share with never a dividend.  It’s a good model.

    This is the basis for my argument that subscription companies are being given short shrift by Wall Street analysts because they apply metrics more in tune with the manufacturing era than the information age.  You might disagree because companies like Salesforce, NetSuite and many others not yet public get plenty of attention.  But that misses the mark.

    Because the analysts don’t track things like unbilled deferred revenue, a measure of how much money is under contract but not yet on the books, they don’t get a realistic view of a subscription company’s health.  And since the analysts influence who buys what stocks and at what price, the market pricing mechanism in the stock markets may not be giving subscription companies — or investors —a fair shake.

    I caught up with Tien Tzuo last week to discuss this.  Tzuo, you may recall was CMO and chief strategy officer at Salesforce before co-founding Zuora, the subscription billing and finance company.  Say what you want about Tzuo but he isn’t shy when it comes to expressing his ideas about subscriptions.  Last week he was seen speaking on CNBC and wrote an article for All Things D on subscriptions with NetFlix’s recent stunning 40% appreciation in the background.  He believes some companies’ meteoric growth spurts are directly attributable to eschewing conventional Wall Street wisdom regarding profits and earnings.  The examples he gave me say a lot.

    “Salesforce vs. WebEx.  For years, WebEx was on a growth path that was 6 months ahead of Salesforce’s.  Then they went public, and listened to Wall Street’s insistence on earnings.  Wrong move.  Salesforce ignored it, overtook WebEx within 6 months after WebEx went public, and went on to soar to much greater heights.

    “Successfactors vs. Taleo.  Same thing, Taleo cared about earnings, SFSF went contrarian and said, ‘Hey not only are we not going to show earnings, we’re going to spend all our IPO money on growth, and show losses for years.’  SFSF started off a fraction of Taleo’s size, overtook them, and wound up with a $3.4 billion exit [SAP bought SFSF in 2012] which was almost two times greater than Taleo’s [Oracle bought Taleo for $1.9 billion in 2012].

    “And finally, to bring it back to current events, Netflix.  They didn’t listen to Wall Street (they never have); they knew their strategy was focusing on customers, and customers more and more want movies anywhere, on any devices, not just on DVDs, and they followed their customers’ lead.  This week when the stock soared 40% higher was a big vindication for them.

    Tzuo has a point and essays like his and speaking out are ways that the establishment eventually changes.  Of course this isn’t a statistically valid study though I am sure such things exist but it does raise some important questions.  If Wall Street is not valuing subscription companies correctly it is causing a lot of money to be left on the table.

    Traditionally, it takes the establishment some time to come around on a shift this fundamental.  After all, we wouldn’t want standards and controls to change so frequently that they failed in their primary mission.  But at the same time, as a wise man once told me, no one should have to be hit over the head with an old tire tool to see what’s so plainly obvious.

    All this affects CRM because the financial analysts have a great deal of influence.  But too much influence can inhibit companies developing the next great application by preventing capital formation where it’s needed.  Given how much of CRM and social are delivered as subscription applications by emerging companies today, it’s a concern.  So Wall Street really does need to kick it up a notch or two.

    Published: 11 years ago


    This is an unabashed plug for my next webinar which will be at 1 PM in the East Next Tuesday January 29.  Details are here.  I will be speaking about some recent social media research I did with the estimable Esteban Kolsky and how our results connect with the economic times we all try to do business in.  In other words, I am trying to connect a ‘Why’ to the social stampede.  I won’t miss it and hope you will not either.  So click on that link and go register.

    FYI, this all came about because I really like GetSatisfaction for what they are doing and because I offered a free webinar as a prize in last year’s CRM Idol contest.  You might recall that Get Satisfaction won that competition and I am flattered to be giving this little talk.

    Published: 11 years ago


    Has the emergence of social technology been faster than the roll out of other advanced technologies like CRM and ERP and why?
     

    I have recently been reading a dense technical book from 1990 with the improbable title (for CRM), The Rise and Fall of Infrastructures — Dynamics of Evolution and Technological Change in Transport, by Arnulf Grübler.  It’s a well researched examination of some of the social and economic trends that influence adoption of new transportation paradigms such as rail and autos.  But it also has some nuggets applicable to CRM today.

    I have lately wondered if our industry has speeded up in adopting innovation.  That was my hunch, and I am pleased to say that Grübler confirmed it.  His book was published in 1990, well before so much of what we take for granted such as the ubiquitous Internet and social media, were even close to business reality.  But it has a lot to say about those topics even now.

    Grübler quoted other researchers and sources, most notably, Everet M. Rogers and his 1962 book, Diffusion of Innovations.  It is hard for me to say definitively, but many of the ideas from Grübler and Rogers appear to have found their way into our consciousness through popularizers such as Geoffrey Moore and Clayton Christensen.  That’s not to discount Moore’s and Christensen’s work; it is only to show that their ideas spring from deep sources.

    Interestingly, while they and we are familiar with the bell curve segmentation of innovation adoption (Early Adopters etc.) the original concept of adoption was actually that of diffusion, as in the diffusion of an idea through a market or social network.  I think we lost something when we began thinking in terms of adoption rather than diffusion.

    The change represents the commercialization of an academic idea and the concept became one of vendors persuading adopters and we lost the connotation of a natural rhythm.  The concept of diffusion carries with it the idea of a rate by which adoption takes place by more or less organic means — someone you trust gives you an idea that you validate for yourself and later you may influence others just as you were initially influenced.

    I found two ideas under Rogers in Wikipedia that I think are relevant to this discussion.  The first one defines three types of innovation-decisions (my comments in Italics)

    1. Optional Innovation-Decision — made by an individual who is in some way distinguished from others in a social system.  This individual might be the “cool” kid in school that everyone wants to emulate, such as the quarterback or someone who has distinguished him or herself.  It could also be the class rebel.  When this kid does something, others take it up to be like him or her.
    2. Collective Innovation-Decision — made collectively by all individuals of a social system.  It is hard to distinguish this as a cause or as an effect of the decision above.  When “everyone” is doing something, the original seed crystal — the cool kid — might be lost to history.  Regardless, this decision appears to be a driving force behind exponential growth of an idea.
    3. Authority Innovation-Decision — made for the entire social system by a few individuals in positions of influence or power.  This is typically how big organizations buy and why salespeople try so hard to reach the C-level.  When the idea becomes institutionalized, i.e. everyone has to have it and the adoption is taken over by management.  This is especially noted in business adoption of large or expensive systems such as CRM.  Social media is right at the interface of a Collective Decision and an Authority Decision.

    The second concept defines the intrinsic characteristics that influence an individual’s decision to adopt (or reject) an innovation.

    1. Relative Advantage — How improved an innovation is over the previous generation.  Vendors of new category items always score high here because there’s little to compare with.
    2. Compatibility — The level of compatibility that an innovation has to be assimilated into an individual’s life.  In software this issue is often dealt with by the CIO who can over rule a purchase if it conflicts with the established order.
    3. Complexity — If the innovation is perceived as complicated or difficult to use, an individual is unlikely to adopt it.  Departmental buyers often have the say here, even after a purchase as anyone who has ever tried to get sales people to use a difficult SFA package knows.
    4. Triability — How easy an innovation may be experimented with.  If a user is able to test an innovation, the individual will be more likely to adopt it.  SaaS and subscriptions have a big advantage here, no wonder they are in the ascent.
    5. Observability — The extent that an innovation is visible to others.  An innovation that is more visible will drive communication among the individual’s peers or personal networks and will in turn create more positive or negative reactions.  We use case studies to fill this need but also, late adopters need good observability to make a positive decision.

    We see much of these five characteristics woven into sales and marketing strategies aimed at helping a new idea become diffused in a market.  In fact if you take these five characteristics and apply them to the bell curve of adoption —including Innovators, Early Adopter, Early Majority, Late Majority, Laggards — you can reasonably show a one to one correlation demonstrating these characteristics as the dominant features for an adoption (or diffusion) phase.

    If you apply this knowledge you can begin answering the question I posed at the beginning, namely, has our marketplace speeded up somehow?  I say the answer is “yes” in large part due to social media.  What’s interesting to me is that social media  is also the best mode of promoting itself to the marketplace.

    As an innovation decision, social began as an Optional-Innovation Decision.  Recall that only kids at Ivy League colleges were able to join Facebook initially but then the phenomenon quickly spread to other schools (a Collective-Innovation Decision).  When Facebook and other social technologies let down their barriers to entry the rest of the market, from high school kids to adults, joined in to the point that if Facebook were a country it would be one of the most populous on the planet.

    But, back to the speed up.  It took, by my estimate well over a decade for CRM to become mainstream.  If you go back to the first release of ACT! in the mid-1980s to 2000, the year that Siebel’s revenues surpassed the $1 billion mark, it took about fifteen years for CRM to become prominent. By 2002 Siebel (founded in 1993) was cresting because of persistent rumors that it was hard to use (the Complexity characteristic).  Also Salesforce was out flanking Siebel with the Triability characteristic of its SaaS model.

    Now take a look at social.  The signal event of the social revolution in the front office is the fourth edition of Paul Greenberg’s magisterial study, CRM At The Speed Of Light, published in 2009, just five years after Facebook was founded in a dorm room at Harvard.

    So as we turn the corner into 2013, we can look back on a very rapid adoption of social media, and it’s not an illusion.  It happened in part because the medium became the message in the same way that Marshal McLuhan described TV.  But more to the point, as a network, social had the advantage of bi-directional communication and instant feedback that TV never had and that only accelerated things.

    What this rapid adoption, thus far, says about the future is somewhat puzzling.   Social adoption is now at the level of an Authority Innovation-Decision but at the same time, entrepreneurs continue innovating on their original innovations and popularizing them through the same channel that has already demonstrated a propensity for truncating adoption and refining innovations with record speed.

    But innovation is proceeding down numerous smaller pathways as we discover more uses in segmentation, sentiment and all the other ways there are to analyze customer and market behavior.  Will these permutations drive a round of complexity or will vendors skip over that and drive Triability and Observability?  They will if they’re smart but maybe they all don’t read my column.  Ha!

    Published: 11 years ago