Building CMO Power by Driving Revenue in B2B


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2012 CMO CLUB Innovation Summit Slidedeck

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  • To begin, do you know what profits a 10% increase in your marketing budget would generate?According to the Lenskold Group’, the most common answer to this question is “I Don’t Know.”Forty-four percent of marketers have no idea what a budget increase could do for their companies.If you fit into this 44%, you’ll experience difficulty protecting your budget and will likely find yourself asking the question the other way around: “What will happen now that my budget has been decreased by 10%?” You can’t expect your organization to place value on something you’re unable to quantify. But when you do use the right metrics and processes, there is nothing more powerful to help marketing earn it’s rightful seat at the revenue table.That’s why the Definitive Guide delivers the strategies and methodologies you’ll need to measure and improve ROI. So let’s dive in.
  • To begin, what are the WRONG metrics?Vanity metricsToo often, marketers rely on “feel good” measurements to justify their marketing spend. Instead of pursuing metrics that measure business outcomes and improve marketing performance and profitability, they opt for metrics that sound good and impress people. Some common examples include press release impressions, Facebook “Likes”, and names gathered at tradeshows. True story – 38K twitter followers. Value? 400 people attended Revenue Rockstar…. OK… better is 400 people attended, X customers, y prospects. Based on this, we expect to create $1.1M ppipeline and influence / accelerate $YY more. Measuring Activity, not Results = Focusing on quantity, not qualityMarketing activity is easy to see and measure (costs going out the door), but Marketing results are hard to measure. In contrast, Sales activity is hard to measure, but Sales results (revenue coming in) are easy to measure. Is it any wonder, then, that Sales tends to get the credit for revenue, but Marketing is perceived as a cost center?A common example of this comes from the 2010 study from The Lenskold Group. They found that the number one metric used by lead generation marketers is lead quantity, and barely half of marketers measure lead quality. Focusing on quantity without also measuring quality can lead to programs that look good but don’t deliver profits. Having a packed event is no good if it’s full of all the wrong people.To take this idea to the extreme, the phone book is an abundant source of “leads” if you only measure quantity, not quality.Results convince finance and senior management that Marketing delivers quantifiable value. Activity metrics are likely to produce questions from the CFO and other financially-oriented executives; they are no defense against efforts to prune your budget in difficult times.
  • Cost metricsThe worst kinds of metrics to use are “cost metrics” because they frame Marketing as cost center. If you only talk about cost and budgets, then no doubt others will associate your activities with cost. As an example, let’s take a marketer who improved cost per lead by $10. Based on these great results, he went to the CEO to ask for budget. Did the marketer get his budget? No. The CEO decided the reduced lead cost meant marketing could deliver the same results with fewer dollars – and so she cut the marketing budget and used the extra funds to hire new sales people. What went wrong here? The marketer performed well, but he made the mistake of not connecting his marketing results to bottom-line metrics that mattered to the CEO. By framing his results in terms of costs, he perpetuated the perception that marketing is a cost center. Within this context, it’s only natural that the CEO would reduce costs and reallocate the extra budget to a “revenue generating” department such as sales.
  • Two metricsTalk about other metric types
  • Two metricsTalk about other metric types
  • The first step in Revenue Cycle Analytics is to define the stages of the revenue cycle, starting with potential buyer awareness and moving through marketing and sales to closed business and beyond. When marketing and sales collaborate to formally define each stage, as well as the business rules that determine a prospect’s movement from one stage to the next, they create the foundation for a comprehensive set of robust revenue metrics. Methodology SPIN Selling and Miller HeimanMarketer need to apply the same level of rigor to their portions of the revenue cycle. The foundation of Revenue Cycle Analytics rests in clearly defined stages and clear rules for how prospects move through the stages over time. Let’s look at Marketo’s
  • Success + stage types + detoursThree key ideas:Sales resources are relatively expensive. To provide the highest value, sales should not engage with prospects until prospects are ready to engage with sales. Sales interactions should start relatively late in the pipeline, once leads are well qualified, and use lower cost channels such as marketing to develop relationships with everyone else. No lead left behind. Don’t let potential customers end up in “lead purgatory.” Implement SLA stages {clocks} wherever possible to ensure your leads either flow forward or are recycled back to marketing. Keep your inventory stages {buckets} to a minimum – perhaps just one in marketing – so prospective customers don’t sit idle. A prospect’s journey from initial awareness to customer is often non-linear. Sometimes leads originally deemed “sales-ready” are not. Because no lead should ever remain stagnant in the system, these leads should be recycled back to marketing for nurturing. {Detours}
  • 1/3 of Leads are from New Prospects, 2/3 from “Slow”
  • Deals: 40% Inbound, 40% Paid; 10% Sales, 10% Referral.Importance of inbound - Website Prospects are 5X as good as Paid prospects.Paid Sources: AppExchange prospects rock!Tradeshows have really improved as we transformed our strategy – much lower CPPVirtual tradeshows good because cheapPPC solid – expensive but convert wellEmail and Webinars are workhorses (every month). Email flat; Webinars declining for us (saturation)?Content syndication not great – but way betterSocial Media – still working it outRed velocity = NURTURE
  • Present to the slideConclusion: The ability to create trusted marketing forecasts creates more power and influence for marketing, better justification for the marketing budget, and ultimately the potential for higher compensation for marketers. So how do you do it?
  • Examples:Lead generation versus targetsCycle timeInvestment Pipeline contributionProgram ROIConversion rate versus trend or benchmarkResponse ratesLift over control groupExpected contribution forecastSize of prospect database size
  • Focus not on how marketing or sales is performing, but on the overall effectiveness and efficiency of the end-to-end revenue engine. The single most important metric is total revenue (or bookings, or gross margin) generated divided by the total spend on marketing and sales. This metric, more than any other, provides an accurate measure of your revenue engine’s efficiency. For SaaS, >1 = invest and grow, great payback. Best marketing metrics are really about sales effectiveness. 1. What effects are marketing’s investments having on sales’ effectiveness and productivity? 2. How are marketing’s activities lowering the total expense-to-revenue ratio for sales and marketing combined (e.g. how is marketing improving the net revenue engine effectiveness)? Tradeoff tradeshow vs sales reps
  • Many marketers think of marketing ROI as reporting on the outcome of their programs. But the best companies measure ROI to find not just what worked, but what works better. They focus on “improving ROI,” not just “proving ROI.Planning for marketing ROI involves three main activities:Establish targets and ROI estimates up-front: With ROI goals in place, the CFO will see not just costs going out the door, but also exactly what benefit is expected to come from that cost. 2. Design programs to be measurable: As part of planning, you should answer three questions: - What will you measure? - When will you measure? - How will you measure? By planning this upfront, you’ll be sure to include the variance necessary to measure relative lift.3. Focus on the decisions that will improve marketing: You’ll deliver the best ROI when you move past backward-looking measurement to forward looking decisions. Your highest-ROI decisions will often flow from strategic questions about offers, messages, target segments and geographies – not simply “pass/fail” assessments of specific programs or tactics.
  • Two metricsTalk about other metric types
  • Different pipeline allocations – first / even
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