CMOs Struggling with ROI

As a direct marketing practitioner, I was tempted to write that CEOs and CMOs are finally catching up.

Catching up to what, you may ask.

They are realizing that strategically driven direct marketers had it right all along. It's not just about demand generation, positioning or branding as important as these all are. But that these were never the goal of marketing, but rather strategies to achieving the ultimate goal -- ROI.

For decades agencies and their clients thought that if they focused on demand generation, that sales would automatically follow. In the background, direct marketers were seen as second class citizens who were concerned only about short term sales. Except perhaps for a few such as David Ogilvy who undertood better the value of the direct marketing discipline. Rodney Dangerfield reflected the reality of the direct marketer's plight when he said, "I don't get no respect"!

But lo and behold came the digital age, where the customer rules. And every marketing expenditure must be measured based on its ability to yield profitable revenue within a financially acceptable timeframe.

Instead of soft quantification for millions of dollars spent on awareness advertising, CMOs must now give hard justification for their budgets.

Those days of anecdotal evidence are gone forever. And CMOs everywhere are still adjusting to a world direct marketers have championed for decades.

In what I consider to be the best research on this subject, IBM conducted a study in 2011 that aimed for 1,000 participants. In this Global Chief Marketing Officer Study, more than 1,700 CMOs from 64 countries spoke face to face with IBM Interviewers for an hour. Here is a brief analysis of the results as I see it.

Determining ROI the number 1 issue facing CMOs today

"Most CMOs are struggling in one vital respect — return on investment (ROI). Our research shows the measures used to evaluate marketing are changing. Nearly two-thirds of CMOs think return on marketing investment will be the primary measure of their effectiveness by 2015. But proving that value is difficult. Even among the most successful enterprises, half of all CMOs feel insufficiently prepared to provide hard numbers".

Let's be honest. In the past, most CMOs were not required to provide hard evidence that their strategies were working in the form of monthly or weekly ROI reports. But with increasing pressures brought on by the global economy, an increasing flood of competitors facilitated by digital media and a slow growth economy, organizations are keeping a tighter rein on their marketing expenses.

CMOs must now focus on deeper knowledge of customer behavior and not just markets

Many direct marketers become frustrated with agency educated CMOs who rely on market reports rather than a deep understanding of the behaviors exhibited by their own customers.

"One reason most organizations struggle to get the customer insights they need is that they still focus on understanding markets rather than individuals. At least 80 percent of CMOs rely on traditional sources of information such as market research and competitive benchmarking to make strategic decisions. Similarly, more than 60 percent rely on sales, campaign analysis and the like."

In the new world, CMOs must get a better handle on where buyers look for information, move from channel to channel and ultimately reach the buying decision.

It is no longer enough to know how segments make the purchase decision, but how each individual customer makes a purchase. This knowledge forms the foundation of the CRM strategy by customizing the message, selecting the preferred channel for repurchase and other steps each customer uses to purchase your product instead of a competitor's.

CMOs finally understand the need to marry up with IT

If you have read other posts on this blog, you know that direct marketers consider the relational customer database as the core of any significant marketing program.

Without it, any analysis of ROI tied to specific channels or testing are impossible. In fact, the ROI analysis relies wholly on the quality and quantity of the CMOs understanding of individual customers.

"The data explosion tops the list of headaches. More than 70 percent of the CMOs who think it's important say they aren't fully prepared to deal with its impact".

As one CMO stated: "I don't see how we can go forward without embedding IT into marketing."

Gearing up the staff to handle the analysis needed to run a state-of-the-art marketing team

Marketing demands more now than just great creative concepts and flawless media execution. More than ever, customer insight comes more from understanding behavior than primary research.

As direct marketers have said for some time, what customers do and what they say often prove to be dramatically different.

In the new world, data driven marketing makes companies more competitive. It also makes customer driven CMOs invaluable to the company because they understand customers better than any one else in the organization.

Pertinent and accurate knowledge of customer behavior requires a different skill set from the traditional marketing group.

Now marketing teams need analysts and digital experts who possess marketing know-how.

CMOs grapple with this question. What is best? Marketers who have an understanding of digital or digital technicians who have some knowledge of marketing.

My contention is that you should be open to both options.

"Likewise, nearly two-thirds believe they will need to change the mix of skills within the marketing function and enhance its analytics capabilities. A telecommunications CMO in China summed up the general view when he noted, "Re-thinking our skills mix within the marketing function and aligning with IT are priorities for us."

The bottom line

CMOs must move from soft results analysis to hard ROI evaluation criteria as quickly as possible. They must also find a way to shore up their own skills in database marketing, analytics and CRM. Then integrate these concepts into the company's DNA starting with the CEO and then moving over to IT and operations for proper tracking and corporate wide implementation.

3 Top Marketing Barriers to a Company’s Prosperity

If you run or participate in your company’s direct marketing campaigns, look for these major areas of opportunity.

1. Poor understanding of the company’s customer and prospecting databases

The lifeblood of a company’s future income rests in the quality of their relational database. Yet many CMOs, and CEOs rarely master their understanding of their database.

Why? Because they don’t view it as critical to the company’s future.Companies often miss the train by allowing these barriers to go on unckecked

How can you project your longer-term sales potential or ability to grow your business without knowing the size and share of wallet your database represents?

Ask these questions to see if you are in danger of losing major selling opportunities.

- How many names represent your target market?

- How much does this market fluctuate from month to month?

- What is your percentage of penetration in terms of one time versus multiple sales?

If your marketing team does not know the answers to these basic questions, then you are not maximizing your selling opportunities.

2. Little to no testing in multichannel activities

Why is this critical?

Your target market universe is limited regardless of the type of business you are in. You can expand internationally to grow your business. But ultimately you will run out of prospects (or circulation).

So what can you do when creaming sales off the top no longer works?

This leaves you with several options such as creating new products that allow you to maintain your margins. But most direct marketers know that the most profitable key strategy lies in increasing your penetration.

This means selling deeper into your prospect databases and increasing repeat sales with existing customers.

Increasing the advertising budget represents the most common way to penetrate your market. But direct marketers have found a better way to do this.

Test various channel combinations to increase market penetration. We call this multichannel marketing.

Many companies can do this without increasing their budgets.

For example, support direct mail lead generation by overlaying outbound telemarketing. This often increasing lead response from .5% to 3-5% on those names selected to receive a follow-up call.

Increase website visits by sending direct mail to qualified prospects and email to existing customers. Create a special landing page that rewards those who click through with a special offer.

The multimedia combinations are endless and testable. When properly tested, multichannel efforts yield lower costs per sale than single channel campaigns.

3. Companies throw up response barriers when they don’t put the customer first

You could spend your entire marketing career addressing this one area alone.

What causes companies to raise sales barriers?

I think this is a symptom of focusing on internal problems rather than an outward focus on the customer.

Your first question when looking at your selling processes should never be “How can we make this process easier for the company?” But rather “How can we make this process easier and more convenient for the customer?”

You will get every excuse under the sun to making the application process three page affair rather than one half of a page because this is legally required. Never mind that the lawyer is trying to protect himself as much as he is trying to protect the company.

Challenge every statement. Show how competitors skip these overkill requirements. Make it clear that operational decisions that reduce response or customer sales need to be backed up to the hilt. Don’t accept “No” for an answer.

Push for your customers because the bureaucracy is looking out for itself and not the customer.As the marketer, you are above all else the customer’s advocate.

Another excuse you will hear is “Our systems cannot handle this yet?”

Wait a minute. The company has been in business for 55 years and our systems still can’t handle this! Again, challenge the bureaucracy. If you don’t, your company begins to look like a stagnant monolith.

And we have plenty of those already. Just take a look at any government entity.

If you’re sending emails to prospects, make sure that any form within the email is fillable so they don’t have to print it out, sign it and then fax it. Eliminate these scales barriers.

In fact, let them click through to a landing page that they can respond to immediately. If they need to purchase, offer them every major credit card available. If they need to sign something, set up the page for a digital signature.

When a customer calls in desiring a quote or to buy something, make sure the operator can pull up the full customer/prospect file. Don’t make the customer repeat information you should already know (except for security questions, of course).

Remember, meet your customer’s expectations and respect their time more than your own by never asking the same questions twice. And this includes forwarding a customer’s call to another department.

Don’t irritate the customer by going through the security questions again and again.

The worst offense of all is to put prospects or customers through the torture of multiple options when making a call. Customers will punish companies that treat them this way. If you can’t answer your phone calls and offer a live person early in the process, then you should simply go out of business.

In the end… All three of the areas revolve around treating your customer as if the company’s prosperity, and very survival depended upon it. Remember. If you aren’t watching out for your customers, then nobody else in the company will.

CMO Success Hinges on the Company’s Marketing Culture

Marketing success is a corporate venture rather than a solo role carried by the CMO. The CEO, CFO, the board and every employee in the organization exist to make the company a successful selling machine.

Lately I’ve read reports that celebrate the fact that CMO tenures are increasing to a little better than two years (as if 28 months was something to brag about). The question is why?

One report suggests that the CMOs are “increasing their alignment with their C-suite peers,“ hence the increase in tenure. That is balderdash!

The more likely scenario: the economy is improving and CMOs are getting a reprieve.

I think external factors and the companies themselves affect CMO tenures more than the CMOs.

This leads me to the conclusion that CMOs must strive to ally themselves with great marketing companies if they want to improve their tenures well beyond where it is now. What do I mean by that?

Great marketing companies‘ cultures support the hypothesis that marketing success is a corporate venture rather than a solo role carried by the CMO. Only then is true CMO success achievable.

The Apples of the world are rare. It is clear that every one in the organization is there to serve the customer from CEO, Tim Cook all the way down the line. And their sales results and customer service ratings clearly reflect this as one of Apple’s prime missions.

As a marketer, I long for more opportunities to associate myself with such forward looking enterprises. And truly successful CMOS go to great lengths to find them and work for them.

The CEO and all company leaders in such organizations understand what Peter Drucker said long ago: “Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."

The bottom line: no CMO can succeed in his mission until it becomes everybody’s mission in the company he works for.

Warning! Two-Dimensional Marketing Thinking Does Not Work

It has taken me a long time to come to this point. But it is clear that some company leaders and CMOs cannot think three dimensionally. Why is this dangerous?

If you can only see one step ahead or backward, then you will loose.

Most of you probably remember the old Star Trek television series in the late 60s. The genius, Mr. Spark, used to play three-dimensional chess. Here he was, a genius who trained his mind to think beyond single board chess. He visualized complex chess moves on a single board made many times more complex as each move impacted two other chess boards simultaneously.

If Spark could only anticipate an oponent's move on a single board, then he would loose the game.

In the same way, today's marketer must move beyond two-dimensional thinking and look at the interconnectivity of all marketing initiatives.

The graphic below symbolizes marketing as a whole. For simplicity, the visual displays only a few marketing activities and how they interconnect to form the whole as a three-dimensional pyramid.

Let's think about how these few activities interrelate.

For example, the graphic shows CRM as a key activity. But CRM requires a robust database that automates all prospect and customer contacts such as email, direct mail, phone follow up and so forth. So an incomplete or inaccurate database adversely affects the results of CRM.

At the same time, a decentralized tracking system that fails to record all customer and lead activity on the database emasculates back end marketing evaluation and CRM initiatives.

And breakthrough creative work dies because a decentralized tracking system fails to identify the cost per lead, cost per sales or cost per customer numbers that identify great or failed creative executions.

Even a strong database with good tracking looses steam if the lists are not cleaned prior to mailings for list enhancement, outbound telemarketing, email or direct mail activities.

My take. Marketing requires a fluid mind that understands the interrelationships between marketing activities and how even one weak link will kill the most brilliant of marketing programs.

Another take. Having worked with hundreds of marketers and marketing planners over the years, I have come to the conclusion that creativity and three-dimensional thinking separates strategists from tacticians. No amount of education or training creates a strategist. You either have the gift or you don't.