B2B ROI: Marketing is Not a Candy Machine

"What is your expected return on investment for the next campaign?" This question is common and easy to ask, but it is also one of the most challenging to answer. Determining financial return on investment (ROI) within the context of a long sales cycle has largely been a failure. Becoming financially accountable is possible – but B2B marketing departments will need more advanced quantitative tools.

How should companies measure the financial value of marketing expenditure? For some ordinary company expenses, such as capital equipment, ROI is a common measure of value. Never before have there been more spreadsheets and dashboards available to slice and dice any facet of marketing. With information so available, it has never been more justifiable to treat marketing like an ordinary expense and ask for an ROI similar to the type that applies to the purchase of new equipment.

B2B Marketing is Not a Candy Machine

Yet attempts to measure meaningful financial ROI in a B2B marketing context using methods applied to capital expenditures have largely failed. They have failed because the assumptions underlying ROI calculations do not apply to the majority of B2B marketing situations.ROI calculations assume that a marketing program is a simple, unambiguous transaction. Such a transaction works like this: If I put quarters into a candy machine and push a button, a candy bar pops out. The investment (quarters) and the return (candy) are clearly and immediately connected.

Simple math can measure simple marketing. If I send mail piece X, I get 100 orders. If I send mail piece Y, I get 200 orders. Therefore, I should invest in Y. Because I know the cost of the mail programs (investment) and the resulting value (return), I can calculate ROI.If the only marketing activity conducted was the mail piece, then an ROI calculation would be simple arithmetic.

However, B2B marketing within the context of a long and complex sale is not simple. It is a multifaceted set of influences that is applied against quickly changing human buying behaviors. IDC research shows that it takes an average of 19 months to create a new B2B customer and includes multiple touches.

Compare our single direct-mail example with an actual marketing process that involves as many as 25 different media types over nearly two years. What role did ads play in getting the buyer to respond to either mail campaign? What about the sales call campaign that coincidentally occurred about the same time?

GUIDANCE: Don't attempt to calculate simple B2B ROI. Simple ROI fails to measure B2B marketing value because B2B marketing value results from the accumulation of effects over time. Other types of success measures will be useful at measuring tactical programs, but financial ROI using data collected at this level cannot be accurate.

First Step: Get a handle on your "I" (Investment)

The fact that simple ROI fails to measure marketing value does not mean that businesses are forever doomed to wonder despondently about the value of their marketing investment. However, progress requires more data and more advanced quantitative tools.

One hurdle is the lack of basic financial data within marketing departments. IDC consistently sees that many tech marketing departments have a poor understanding of their "investment," or "I," much less an ability to then determine the "return," or "R."

GUIDANCE: Do start by measuring your "I" (investments). Track marketing investments carefully over time and seek to control these expenses. Each year, IDC produces a Marketing Performance Matrix based on our annual Tech Marketing Benchmark survey identifying best practitioners in marketing operational excellence. In collaboration with these best-in-class companies, we've identified the operational behavior and performance indicators most useful for investment control and other important practices. Tech marketers can participate (for free) in IDC's this survey and receive a complimentary copy of the aggregate results to see how their company compares. Contact Joe Ferrantino (jferrantino@idc.com) if you are interested in participating.

Next Step: Analytics are required to start down the "R" path

The candy machine example described previously is a model for an ultrasimple, "coin operated" buying process. A more complex process, such as B2B buying, has many more steps and requires a more sophisticated model. Although B2B buying is not neat and linear a well-thought-out, multi-stage, pipeline is a reasonable proxy.

By capturing lots of behavioral data at touch points along the way, marketers can describe buyers' progress from step to step toward a purchase. Important metrics include conversion (how many buyers from early stages progress to the later stages?), velocity (how fast do buyers progress through the stages?), and volume (will the amount that buyers intend to buy satisfy the need for revenue?).

Clusters of data-producing programs then become the levers and knobs that a company uses to nudge buyers from stage to stage. B2B companies with data learn quickly about the interdependency of marketing and sales in nudging buyers through the pipeline. IDC research shows that the average large tech company invests $40K - $70K USD in marketing for each sales person. This ratio may change in the future as more companies exploit the leverage between the two functions.

Once an organization has collected enough data to model a reasonably accurate customer creation pipeline, business intelligence and analytics tools can be applied to tease out the contribution of various marketing program components to movement between pipeline stages. Combinations of different programs can be tested for their ability to increase conversion and speed velocity, thus creating a pipeline that delivers the required revenue at a continually lower cost.

GUIDANCE: Do invest in a data-driven, buyer-centric, customer creation process that links programs to a smarter pipeline, which in turn links to revenue. Simple ROI calculations do not work for complex processes. To start down the path towards a reasonable answer to the financial ROI question, invest in a more sophisticated customer creation process model, lots of data, and analytics..

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Why "Job" is a 4 Letter Word and "Work" Shouldn't Be

We all know that you spell work using the 4 letters w-o-r-k and we’ve all heard the phrase, “work is a four letter word,” referring to the fact that it’s something most of us have to do vs. something that we actually want to do.

But I’m going to suggest, instead, that the word “work” is just fine; rather, “job” is my four letter word. Because a job is something that you do to minimal standards:

• You arrive at your job no later than a certain time
• You leave no earlier than a certain time
• You perform certain tasks or fulfill certain responsibilities
• Or you complete a certain tasks or a certain number of tasks during your shift

Do you see? "Jobs" are all about simply meeting standard expectations, pursuing “good enough” instead of something more fulfilling.

In fact, most written job descriptions are full of nothing BUT minimal expectations.

You’ll show up on time, you’ll do these tasks, you’ll meet these minimal measures, and you’ll answer to these people. What’s more, most of these job descriptions are based on minimal expectations, because they aren’t written with over-achievers in mind, at all.

In fact, the way that most job descriptions are worded makes them sound as though they were written with the presumption that without these written minimal standards, an employee wouldn’t even try to work up to the mark. They’re written as though they assume that any employee would try to do the least amount of work possible on any given day if these lists of responsibilities weren’t provided for them.

Not exactly the basis for an inspiring, mutually beneficial relationship. 

There’s nothing particularly fulfilling about meeting minimal standards as an employee.  And the other side of the equation is just as bad, because there’s nothing about an employer-employee agreement for meeting minimal standards in exchange for pay that lends itself to continuous improvement and the pursuit of excellence, the pursuit of extra-ordinary.

Here’s what I propose instead, from both sides of the employee/employer relationship: don’t work your job. Instead, no matter what your job, set out to work your calling.

So what’s the difference? A job is something you can do (a competence) and probably something you have to do for financial reasons; but your calling is something you want to do -- and the two are not necessarily mutually exclusive.

Many times people think of callings as grand vocations, the reason that people become doctors or ministers or public servants. But those aren’t callings, those are jobs, roles that people are drawn to because they are called to help and heal, to spread a message that is bigger than themselves, to give assistance to people who can’t help themselves, etc. In other words, their calling is facilitated by the role they chose to use to fulfill it.

No matter what your job is, you can still work your calling. Think of your calling as those things you most love doing, those things that give you the most personal satisfaction, those things that stimulate your creativity and passion. And no matter what your job, work your calling.

This might require that you revisit the terms of your employment and negotiate with your boss to modify your job in ways that will allow this. It might even require that you seek a new role within your organization or outside of it. If you are an individual who has proven themselves not only against the minimal standards of your job description but as someone who is willing to exceed them, your employer may be open to the idea.

If you are an employer, you should grab onto this concept as well. If you write employment terms in traditional job descriptions and manage and measure your employees by a set of minimal standards, that’s what you’ll receive in return – employees who return the minimum of what you expect.

If you really want to get more from your employees, provide the means by which that can happen!

You have to be willing to take a chance on people. Demonstrate that you trust your staff to not only do what is expected, but that you trust them to work from their passions to do more. Help your employees discover their passions and strengths and then work creatively to craft roles by which they can exercise them. And reward and acknowledge people in return for the investment that they make with their passions – the contributions that come from their hearts and souls.

Can you imagine working for a company like this? Can you imagine running your company like this, and all of the places that it could take your business?

“Do not stop thinking of life as an adventure. You have no security unless you can live bravely, excitingly, and imaginatively; unless you can choose a challenge instead of a competence.”

Eleanor Roosevelt (1884–1962) American humanitarian and UN diplomat

***

Elizabeth Kraus is the author of 365 Days of Marketing.
If you want to build a business which provides the maximum when it comes to customer and employee satisfaction and loyalty as well as profitability, change the way that you  understand and use marketing.  365 Days of Marketing is available on amazon.com or save $5 off the list price when you use the Code USH9VPJG and purchase on my site at 12monthsofmarketing.net.

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Greece: Buy The Rumor, Sell The News?

The market is slightly lower in early trading despite rumors circulating that a deal has been made between Greece politicians on the austerity measures. I have to wonder if we will see the classic buy the rumor, sell the news reaction. By that I mean that the market has been running higher on the perception that a Greek deal was in the works. Now that we might actually have an official deal, the market could be ready to take a breather.

There was another large handful of earnings reports last night and this morning. Stocks trading higher after reporting earnings include: ALXN, V, AKAM, SCSS, and PM. Stocks trading lower on earnings reports are CSCO, NWSA, PRU, and PEP to name a few.

In economic news, weekly jobless claims fell to 358,000. This was an improvement vs. last week's tally of 370,000.

Asian markets were mixed overnight. A key inflation reading in China came in above expectations. Europe's markets were slightly higher on Greek rumors, and the euro is also higher.

Commodities are getting a boost from the weaker dollar today. Oil prices are higher near $99.60, gold prices are up to $1750, and copper and silver prices are higher also.

The 10-year yield is rallying further, now up to 2.04%. And the VIX is 3% higher so far to 18.70.

Trading comment: Interesting action in AAPL lately. I'm not sure why the steady flow of funds into the stock. Of course, AAPL has been undervalued on a PE basis for a long time. So it could be that investors are suddenly willing to give it its due and a higher multiple to boot. I don't like the recent parabolic action in the stock. Maybe that's just the nightmares I still have about YHOO in 2000. But I would like to see AAPL make a more constructive base, or at least show an ascent on the chart that isn't so steep. I bet that's the first time you ever heard a money manager complain about making money, huh?

KAM Advisors has long positions in: AAPL, ALXN, SCSS, PM

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Positive Earnings Reactions Continue To Outpace Negative Reactions

The market is slightly higher in early trading. For the first morning in awhile, there were no headlines out of Greece about progress or delays in its debt settlement talks.

Asian markets were higher overnight, led by China after the govt. raised gasoline prices and also provided support to the real estate market by instructing lenders to accommodate first time homebuyers.

In earnings news, positive reactions to earnings reports continue to outpace negative ones. Among the stocks rising after reporting are: TWX, DIS, CVS, AGU, IR, and the big ones of the day - RL and BWLD. Stocks declining after earnings include S, PNRA, and OPEN.

The euro is roughly flat this morning, and commodities are mixed. Oil prices are higher to $99.60, nearing the $100 level again. Gold prices are slightly lower nearing $1740. Silver prices are also lower, but copper prices are getting a boost.

The 10-year yield is rising further to 1.99%. The 2.00% level has acted like a magnet since early November. The VIX is flattish near the 17.60 level.

Trading comment: The stairstep higher action continues in the market. Those waiting for a pullback continue to be frustrated. This year is shaping up so far to be a year where it is proving more profitable to focus on individual stocks rather than the major indexes. I am focusing on those stocks that continue to show leadership and work their way to new highs. Also, stocks that have posted strong earnings and reacted positively should continue to act well. I think chasing laggards here in hopes of them playing catch up is a prescription for underperformance.

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Bernanke: Right on Taxes

For one time in a row Fed head Ben Bernanke got the story right. No, it wasn’t King Dollar. It was taxes.

Testifying before members of the Senate Budget Committee today, Bernanke referred to the scheduled repeal of the Bush tax cuts. He said, “If no action is taken by January 2013, there will be a very sharp change in the fiscal stance of the United States government.”

Now, lest we give him too much credit, Bernanke was kind of making a Keynesian point. Why? Because he said in his “fiscal stance” argument that sharp spending cuts would also damage recovery. But at least he made his tax-hike opposition clear. And at least he opposes higher tax rates, which would in fact damage the economy.

He could have gone further. The Wall Street Journal is reporting that President Obama’s budget for 2013 will propose higher tax rates on the rich. Additionally, Obamacare in 2013 will raise the payroll tax 3.9 percent, and apply that to investment taxes such as capital gains and dividends.

Bernanke didn’t comment either on Obama’s millionaire-tax proposal or the Obamacare tax hike. But you can be sure investors and entrepreneurs are well aware of it.

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The Doctor is In! Symptoms, Diagnosis and The Leadership Cure for Your Business

One of the questions that I ask clients when working on brand identification is, “If the brand of your business were a person and walked into the room, what words would you describe it?” The point of the question is to help identify what type of brand personality the organization has and how they want their customers and prospects to perceive them.

But the same type of exercise can be helpful in other diagnostic ways, as well. For instance, when something’s not right with your body and you go to see a doctor, they don’t cut you open to find out what’s wrong; instead, they diagnose your symptoms.

We can do some of the same things when it comes to your business. For instance, show me an organization characterized by:

• lack of shared vision
• power struggles and in-fighting
• lack of clear objectives
• disjointed efforts and stop-and-start initiatives

And I will show you an organization suffering from a power vacuum. It may have a titular leader but it lacks the clarity that is provided in an organization with strong leadership.

Without strong leadership to provide clear objectives, authentic shared values and a commitment to the mission and vision of an organization, this business is likely to develop power silos – departments that war with one another over resources and priorities and turf.

What’s more, without clear objectives and a commitment to mission, vision and shared values, these organizations lack the ability to establish measures, which leaves them few objective ways to hold any of its members accountable.

In this type of organization, a few power-mongers fight fiercely for dominance. And as a result, meanwhile, most employees experience frustration and discouragement. Eventually they become disengaged and apathetic when it comes to the good of the organization; after all, it’s every man for himself here, isn’t it?

And we haven’t even mentioned the customer yet, have we?

Without a commitment to the customer, which leads to the development of the mission, vision and shared values of an organization, which then leads to the development of the strategies that will be employed to meet them in the form of clear and measurable objectives, how can you hope to succeed?

More?

Show me an organization characterized by:

• uninspired, boring, repetitive behaviors
• severe adherence to policies
• inability to solve problems or identify areas for growth
• a propensity to shift blame and C.Y.A. (cover your - well, you know)

And I’ll show you a business led (or at least managed) by someone whose ego is squarely in the way. While this person may have a clear vision and even good values, they don’t bother sharing them. Instead, they manage by decree, wondering why they are not blindly followed into the fray.

As opposed to the first type of company diagnosed, this business doesn’t suffer from a lack of accountability, in fact, there’s so much accountability that its employees are terrified to step out of line or even to step up and solve problems for customers. Staff quickly learn that it’s a mistake to speak out or make suggestions.

In this organization, employees have no meaningful way to contribute and creativity? Forgeddaboutit! Once they’ve learned their place, these employees become fearful and discouraged, then bored, then completely disengaged. No wonder they don’t care!

And we haven’t even mentioned the customer yet, have we?

Your business needs – and your customers and your employees deserve – to have good leadership, in order to succeed.

And in order to provide good leadership, you have to stop focusing on all the wrong things. 

Making peace between warring managers. Balancing competing organizational priorities. Telling yourself that your business is awesome, that your employees set you apart and that your customers love you.

To become successful and build a truly great company, you need to get back to what must be the heartbeat of your organization, and that is the customer.

In a customer centric organization, there exists a strong customer-centered vision and mission. Every role from the top down in this organization exists to fulfill the mission and vision of the organization for the customer (what you will do) and to do so from a core of authentic, shared values (how you will do it).

In a customer centric organization, every employee is clear on why the role they play is important to the fulfillment of the mission and vision of the organization. And every employee is empowered, so that they can invest themselves by making a real difference by solving problems that matter to people, be them customers or co-workers.

Good leaders inspire vision and set direction. They keep the mission and vision of the organization in front of themselves at all times and lead by example. It is not the opinions and desires of turf-warring managers, the sales force, the controller or any other individual – including themselves – that determine company strategy and policy; but rather, the final determinant in every decision-making process is the mission, vision and shared values of the organization. When in doubt, this company errs on the side of doing what is best for the customer, every time.

***

Elizabeth Kraus is the author of 365 Days of Marketing.
If you want to build a business which provides the maximum when it comes to customer and employee satisfaction and loyalty as well as profitability, change the way that you  understand and use marketing.  365 Days of Marketing is available on amazon.com or save $5 off the list price when you use the Code USH9VPJG and purchase on my site at 12monthsofmarketing.net.

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Will Dip Buyers Continue To Surface?

Lately it seems like every dip we've seen in the market has been quickly bought by folks looking to get more invested and put money to work in equities. With the market down slightly again this morning the question is will dip buyers continue to show up?

Earnings reports continue to garner positive reactions for the most part. The list of stocks moving higher after reporting includes: KO, SWI, HAR, PRGO, TDG, CSTR, APC, and YUM. A couple of stocks lower on their earnings reports are EMR and GSK.

Asian markets were lower overnight, led by a 1.7% loss in China. Europe's markets are also lower this morning amid continued delays in Greece's acceptance of austerity measures.

The euro is getting a bounce though, with the dollar lower. This is boosting commodities. Oil prices are back above $98 and gold prices are higher near $1735.

The 10-year yield is getting a nice bounce to 1.97%, poking just above its overhead 50-day average. For reference, the January highs were 2.09%. As for the VIX, it was higher earlier on but has since given up its earlier gains and is flat near $17.70.

Trading comment: Buy the dip remains the mantra that has worked so far this year. Investor sentiment continues to grow more bullish, but the indicators I follow are still far from levels that would indicate bullishness has reached extreme levels of too much complacency. Over the last few year, fund flows have been heavily tilted towards bond funds. It could be that we are beginning to see a reallocation out of some of those safety funds into investor allocations that are once again beginning to favor the growth side of the equation more. I know we are having those discussions at our firm, so it wouldn't surprise me to hear its going on at a lot of other firms as well.

KAM Advisors has long positions in EMR, KO, SWI, GLD, YUM

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