Strategic Marketing in a Digital World
High-velocity digital marketing can transform the long-term sustainable value of your organization.
By Mark L. Frigo, Ph.D., CMA, CPA, with Steven Mark Kahan
In today’s digital world, businesses need to embrace a new way of thinking about marketing. Ongoing research in the Return Driven Strategy Initiative at the DePaul University Strategic Risk Management Lab has recently focused on how companies can increase the effectiveness and efficiency of marketing in today’s digital world and develop new key metrics for the return on investment (ROI) of marketing.
In this article, I am joined by Steven Mark Kahan, author of The Wall Street Journal best seller High-Velocity Digital Marketing. He shares his insights on how companies can transform the way marketing is done in a digital world based on his experience as a chief marketing officer (CMO).
Part 1: Shifts in Technology
CFOs need to understand and evaluate the forces of technological change that drive the need for new way of thinking about marketing strategy, marketing investments, and the ROI of marketing, which leads to High-Velocity Digital Marketing (HVDM).
Mark L. Frigo: In your book, you discuss three seismic shifts that impact marketing: (1) knowledge parity, the leveling of the playing field between buyer and seller; (2) digital dominance, the centrality of technology; and (3) metric availability, the rise of data and measurement. Could you describe how these changes impacted marketing in today’s digital world?
Steven Mark Kahan: In the beginning of the 21st Century, those three seismic shifts occurred, all inextricably tied to technology that changed everything about marketing. Yet few marketing professionals understand these shifts, so they rely on outdated techniques and strategies that ultimately don’t efficiently contribute to the attainment of revenue objectives. As much as these shifts have caused challenges, they also present huge opportunities. If you as CFO understand the shifts and how to market in the digital world, you can help your company deliver more revenue growth at a lower cost.
Shift 1, Knowledge Parity. Until the early 1980s, there was a wide knowledge gap between buyers and sellers. For the most part, buyers relied on their gut and what the seller told them to make decisions. The best marketers exploited this imbalance. They focused on finding creative ways to play to buyers’ emotions to drive sales, while only highlighting the best parts of their products or services. This was the age of catchy slogans, taglines, and funny campaigns.
The ubiquity of the internet changed all that. Now buyers can access almost all the knowledge in the world in an instant. And, perhaps more importantly, they can read reviews. In the business-to-business (B2B) world, marketers can’t hide aspects of their products or rely on emotional messages to persuade customers to purchase them. Of today’s B2B buyers, 67% no longer prefer to interact with a sales representative as their primary source of information.
Instead, they gather information online through digital content. This means that to be successful, modern marketers must focus on creating thorough content that quickly connects with buyers and gets them to act. While this requires a pivot in strategy and tactics, it gives modern marketers a real chance to set the tone for the entire sales process.
Shift 2, Digital Dominance. Digital is the core of everything in marketing. It has gone from one of the things marketing does to the thing that marketing does. A Forrester research survey
found that 62% of B2B buyers say they develop selection criteria for finalizing a vendor list based solely on digital content. This shift is great news in many ways, but only if you understand how to exploit it. Digital technology makes it possible to reach much larger audiences and target them with far more precision than traditional media does. You can do this by leveraging marketing technology. But it’s often difficult to know what marketing technologies you must have. Even if you get the right ones, those technologies also can be difficult to master, which means that today’s marketing leaders need to understand (and make sure their teams understand) how to use it to maximize return on investment of marketing.
Shift 3, Metric Availability. Several of the most successful companies, including Amazon, Apple, and Google, achieved their heights by selling, managing, and leveraging data in the new data economy. Few fields have felt the impact of data more than marketing. Marketers now can use the huge amount of personal information that exists on the web to create incredibly personalized and far more effective campaigns than ever before. And they can track the performance of specific ad buys and campaigns with an unprecedented degree of detail.
Part 2: Measuring the Effectiveness, Efficiency, and ROI of Marketing
In this section, we discuss how HVDM can help CFOs to measure the effectiveness, efficiency, and ROI of marketing; and to help them support HVDM in a company. In the Return Driven Strategy Initiative, we focus on disciplined performance measurement and valuation as a bedrock foundation of the framework that can be used to position HVDM as part of the overall strategy of an organization.
MLF: Based on your experience, how do the three shifts in technology impact strategic marketing and the way CFOs can better measure the effectiveness and ROI of marketing?
SMK: Far too many of the companies I’ve initially met (from small start-ups to the biggest Fortune 500 companies) claimed to be all about data and metrics. Most have invested large sums in data-processing technologies, and some have teams dedicated to statistical analyses and reporting. Yet, somehow, they struggle to find the answers to the most basic questions required to run effective marketing strategies, such as:
- Where did my leads come from?
- How much did I pay (in either time and/or money) to generate those leads?
- How much pipeline and revenue did those leads produce?
You would be shocked to know how many of the world’s biggest companies can’t answer these three simple questions. According to HubSpot, only about 50% of marketers measure customer acquisition costs (CAC). To me, this is inconceivable. As a marketing leader, if you can’t demonstrate marketing ROI, someone higher than you will reduce your budget, which ultimately shrinks marketing’s impact and revenue growth. It becomes a vicious cycle. If you can master marketing data and measurement, you will score a huge advantage over your competition and create a virtuous cycle of value creation.
Part 3: The Killer Value Proposition
What is a company value proposition and how do you link it to cash flow, revenue growth, profitability, and ROI, as would be done in a balanced scorecard strategy map?
MLF: In your book, you describe how developing a “killer value proposition” is key to successful marketing. Based on your experience, can you describe an example of a value proposition?
SMK: A value proposition promises value to a customer. It tells customers exactly why they should buy from you, as opposed to a competitor. If I could give you only one piece of advice to improve conversions on your website, it would be to make sure your value propositions quickly resonate with target buyers.
Keep in mind that your value proposition is written for the people you’re targeting to do business with. It’s crucial that your value propositions focus on what the buyer needs, not on what you, the seller, care about. In the tech industry, I call this “bits and bytes value” propositions.
Weak value propositions emphasize features and functionality rather than the benefits and value that buyers are seeking. Benefits are the advantages the product offers. The value is how those benefits support the buyer’s underlying goals.
The best value propositions zero in on your niche and the buyer’s must-solve problem. To do that, value propositions must be loaded with specifics. At minimum, a value proposition contains these three things:
- Who benefits from your products
- How you help customers overcome challenges and meet their goals
- Why your product or approach is different and better than anyone else’s
Let’s examine a great value proposition so you can compare it to your own: “We empower K-12 teachers to help students become active learners. Our easy-to-use, video-based learning tools boost student engagement fivefold. We’re the only video solution that adapts to a student’s specific learning challenges.” This is a great value proposition because the buyer knows the following:
- Who the customers are: K-12 schools
- What the company provides: video-based learning
- What the competitive differentiator is: The company tells us why it’s better than the competition: It’s easy to use, and it adapts to the needs of different students.
- What benefits to expect: Students become active learners.
- How we can measure this: Engagement increases fivefold.
Part 4: The Buyer’s Journey
The buyer’s journey, sometimes called the purchase journey, can also be used to great effect in driving key performance indicators (KPIs). There are four phases of the buyer’s journey, and we’ll explore a bit about how it works.
SMK: Figure 1 shows the four phases of the buyer’s journey: (1) discover, (2) consider, (3) evaluate, and (4) purchase. The discover phase is really all about education. The consider phase is when the customer is starting to think about solutions. The evaluate phase is when the customer is evaluating specific solutions and working their way to purchase. If you’ve got a gap in content at any one of these stages, you’re going to be zapping the velocity out of any high-velocity sales and marketing model because the content needs to be where the buyers are (not where you hope them to be).
When you can slice and dice data around this buyer’s journey with proprietary information, this often results in great reports and insights. Your organization is communicating information that nobody in the world has, which feeds lead generation. And it also feeds webinars, blogs, and social media. Further, it gives a storyline to sales reps, and that can then be formulated into models that enable sales reps to communicate based on where that individual buyer is in their journey.
At the highest level, organizations use the purchase phase to focus on how the customer can get the most out of their investment. This enables an upsell to create greater value for the customer and reveals how well the company understands customer needs. Taking a close look at marketing content, CMOs should be able to answer the following questions: How well does our content within the buyer’s journey lead buyers to move from one phase to the other and ultimately to
the purchase phase? Does our content help us tell a convincing content story, which in many organizations is what they would call campaigns?
Part 5: Strategic Marketing KPIs
KPIs can be used to monitor and manage the performance of HVDM initiatives.
MLF: In your book, you describe strategic marketing KPIs that can help companies to manage and monitor the performance and results from HVDM. Based on your experience, can you describe an example?
SMK: Many companies struggle with measuring their digital demand generation performance, which means they’re completely lost when it comes to optimizing and accelerating revenue.
In my experience, this happens because they either focus on too few metrics or the wrong ones. They might keep track of the events they’ve been running, how many people attend their
webinars, how many press releases they send out, and how many articles they placed. All of this fails to provide a clear picture of marketing’s performance. Instead, you need to hold your chief marketing officer accountable for focusing on the right data and metrics as well as connecting the dots to business performance. While the KPIs you choose to track might vary from campaign to campaign, there are several essential KPIs to track at each part of the buyer’s journey, from discovery through to purchase. Here are a few of the key metrics to track in the discover/educate; consider; evaluate; purchase funnel described in my book and in Figure 1.
- Number of net new inquiries: This is the net number of people who respond to digital marketing content for the first time. I like to divide these by source. Remember, the sales team needs qualified leads, not inquiries.
- Digital ad click-through rates: Digital ad click-through rate is the number of clicks an ad receives divided by the number of times it’s shown. This measures how well ads (and their placement) perform.
- Website traffic: Website traffic is the number of new and total visitors. To make HVDM successful, try to make sure traffic increases every quarter.
- Website bounce rate: Bounce rate tracks the percentage of visitors who leave after viewing only one page. Visitors who bounce rarely become leads, so this number should be as low as possible.
- Visitor-to-lead conversion rate (CVR): Visitor-to-lead CVR indicates the proportion of website visitors who convert to leads. This metric is one of the strongest indicators of how well a website generates demand.
- Total leads by source: The following are examples of lead sources.
- Advertising (paid media)
- Specific display ad campaigns
Once you have all this data, you can identify exactly which channels produce the most and the highest-quality leads and invest more in the highest-producing channels.
Marketing owns these results:
- Leads generated: the number of new leads that marketing generated.
- Cost per lead: total marketing spending divided by number of new leads.
- Lead-to-opportunity and customer ratios: the rate at which leads are being converted into opportunities and customers.
- Marketing-sourced pipeline: the amount of pipeline marketing has sourced.
- Marketing-sourced revenue: the amount of money marketing has sourced.
- Customer acquisition cost: the amount of money it costs to acquire a new customer, which includes both marketing and sales spending.
- Marketing ROI: the overall return on investment from marketing activities.
Sales owns these results:
- Total revenue: total revenue (new, upsell, and cross-sell).
- Sales- and channel-sourced pipeline: the amount of pipeline sales or channel sources.
- Sales- and channel-sourced revenue: the amount of revenue sales or channel sources.
- Sales growth: the increase or decrease in revenue from two different time periods.
- Sales closing ratio: the rate at which sales converts leads to customers.
- Average sales cycle: the number of days it takes on average to convert a lead into a customer.
- Average revenue per account: the average dollar amount per closed deal, which is often compared against CAC to determine whether the average customer can generate enough revenue to cover the cost of acquiring them.
Both sales and marketing own this result:
- Customer lifetime value: the potential value that a customer provides your business, which is often compared against CAC.
- Lead to sales-accepted lead and opportunity CVR: This is the percentage of leads that convert to sales-accepted leads as well as opportunities. It’s one of the best ways to determine lead quality and whether the lead scoring is accurate.
- Total number and dollar value of opportunities: This metric focuses on how many sales-qualified leads become an opportunity or how many prospects are likely to buy. Keep track of how much money you would make if you closed every opportunity.
- Pipeline coverage vs. revenue goal: This measures the ratio of the dollar value of opportunities in the pipeline to an upcoming revenue target. It’s a great way to see if you’re on track to meet your goals. Since you won’t close every opportunity, I’ve found that the only way to consistently hit revenue targets is if your open pipeline is at three or four times higher than the current goal.
- Lead-to-opportunity velocity: The time (expressed in days) it takes a lead to convert to an opportunity.
- Actual revenue vs. revenue goal: This is the most important metric. It will show if your efforts have been successful.
- New customers added: This shows whether you’re increasing your customer base or relying on upsells and renewals to drive revenue.
- Opportunity-to-deal CVR: This indicates the closing rate of the sales team. A low number could mean sales isn’t doing enough to close deals, or it could indicate that marketing hasn’t generated good enough leads. Or both.
- Opportunity-to-deal velocity: The amount of time (expressed in days) it takes for an opportunity to convert into a deal.
- End-to-end CVR and velocity: Often referred to as win rate, this is calculated by determining the total number of leads that convert into customers. Velocity measures the amount of time (expressed in days) it takes for a lead to convert into a deal
- CAC: CAC is calculated by dividing all the costs spent on acquiring customers (marketing and sales expenses) by the number of customers acquired in a given period. The lower the CAC, the higher the profit.I recommend that CFOs have access to a KPI dashboard (often in Tableau) that enables them to view the key metrics at a glance.
Part 6: Summary and Action Plan for CFOs
Here are three takeaways for CFOs and finance organizations based on the discussion in this article:
- Evaluate whether you have the right content to attract buyers. Buyers use online content to make purchase decisions. Have your CMO map your company’s content (i.e., white papers, free tools, etc.) to each stage in the buyer’s journey and discuss effectiveness such as downloads and contribution to lead generation. If you’re missing content, suggest sending examples of great content that you see online and engage your best and brightest across several functions by challenging each of them to come up with their best idea for content that they believe your buyers would covet.
- Compare and evaluate your value proposition to the example in this article. Does your value proposition clearly and concisely articulate: who your idea buyer is, what your company provides, how it helps buyers overcome challenges and meet their goals, how your company is differentiated, and the primary benefits/value to expect?
- Get crystal clear about quarterly goals and KPIs with your CMO and chief revenue officer (CRO), including which teams own what KPI (see KPI Ownership).
CFOs have a great opportunity to use the HVDM framework to measure the effectiveness, efficiency, and ROI of marketing; to position HVDM as part of the overall strategy of an organization and engage with CMOs; and to develop KPIs that will help the organization to create long-term sustainable value.
This article is part of the Creating Greater Long-Term Sustainable Value series in Strategic Finance launched by the October 2018 article “Creating Greater Long-Term Sustainable Value,” by Mark L. Frigo, with Dominic Barton.
Mark L. Frigo, Ph.D., CMA, CPA, is cofounder of the Center for Strategy, Execution and Valuation and the Strategic Risk Management Lab in the Kellstadt Graduate School of Business at DePaul University and the Ezerski Endowed Chair of Strategy and Leadership Emeritus in the Driehaus College of Business at DePaul. His research in strategic risk management is used by executive teams and boards of directors worldwide. You can reach Mark at firstname.lastname@example.org.
Steven Mark Kahan is the author of High-Velocity Digital Marketing and Be a Startup Superstar. He can be reached at www.stevenmarkkahan.com.