ANA School of Marketing: Marketing Accountability

The Elasticity of Sales Enablement

In the present results-NOW environment, marketers (particularly B2B and high-tech) are shifting resources from marketing programs to provide sales with the right materials, tools, and training to unleash the power of the imbedded marketing ideas. The concept is usually referred to as “sales enablement”.

The hard reality is that, in the short term, there is only so much sales enablement one can achieve. Magic sell sheets do not turn mediocre sales reps into revenue superheroes. Online demo tools don’t revolutionize categories or spark unprecedented demand. Those sorts of changes come about through:

1. Sound sales management process.

2. Comp structures aligned to incent the “right” behaviors.

3. Methodical, continuous training based on observed effective practices.

4. Regular “pruning” of the bottom 25% of performers (and a few nearer the top who neglect the means for the end).

Those familiar with the concept of “elasticity” understand that there are limits to just how much improvement we can achieve with sales enablement in any 3, 6, or even possibly 12 month horizon. So pressed for better results NOW, sales enablement may be more of a feel-good response than an effective one.

If you want some ideas on how to get a better handle on the level of “elasticity” of your sales force, look here.

When times are tough and horizons are shorter, we all want to help as much as we can. But let’s not mistake hope for judgment when reallocating resources from marketing programs to sales enablement.

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Pat LaPointeis Managing Partner at MarketingNPV– specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal available free online.

Measurement Is Not the Same As Accountability

By Jonathan Knowles

Marketers have a dangerous habit of confusing measurement with accountability.  We assume that every request for the justification of marketing investment needs to be answered in terms of ROI.

In my experience, the issue of marketing accountability revolves around three issues:

• Relevance: explaining where and how marketing adds value to the business
• Alignment: proving that marketers are focused on the success of the business, not just the size of their budget or health of the brand
• Rigor: developing a fact-based, disciplined approach to marketing strategy and execution (to include relevant forms of measurement)

Until marketers demonstrate these qualities, their colleagues in Finance will continue to ask the ROI question (which is their way of asking “can I trust you to spend the company’s money wisely?”).  Once marketers demonstrate these qualities, the requests for ROI tend to disappear. 

Jonathan Knowles is the CEO of Type 2 Consulting and author of “Vulcans, Earthlings and Marketing ROI”.

Managing the Value of Your Business: Beware of Lopsided Strategies

By Don Sexton, Ph.D.

The value of a business depends on its future not its past.

You can find huge numbers of books that discuss how to determine the value of a business.   Many of these approaches are based on analyzing various financial ratios but such approaches tend to look backwards.  

If you want to know how to manage the value of your business, you need to look forward and understand where your customer value and your costs are headed.

An organization’s financial success depends on how well they manage the value that their customers receive and the costs of providing that value. Some management gurus have suggested generic strategies where you focus primarily on either value or costs. Such generic strategies often produce lop-sided strategies that simply don’t work.

If you try to maximize customers’ “delight” then your costs may soar. If you keep cutting costs (a real temptation these days), you may well destroy customer value. Customer value and costs must be managed together not separately.

To maximize the value of your business, you need to measure and manage what I call customer value added - the difference between customer value and costs. 

Southwest Airlines succeeds because they arguably have the highest customer value added in the airline industry – very high customer ratings and the lowest costs.  Zappos succeeds with very high customer value added – they provide high value to their customers, such as free and fast shipping and a liberal return policy.  Even though providing that value increases costs, the value to their customers increases even more.

As explained in my new book, to know where the value of your business is going, look at both your customer value and your costs.

How Do You Know if it’s Time to Spend MORE?

By Pat LaPointe:

In times like these, budgeting and resource allocation decisions tend to get made fast and furious, with little time for clear thinking. Unfortunately, it’s exactly these times when some real discipline is required to both make smart decisions and  build credibility with the rest of the senior management team. So if you’re thinking about recommending that your firm should be spending MORE on marketing right now, STOP. Consider a few arguments someone could raise against this approach:

If you’re thinking “let’s spend more now to gain share”…

Headline-grabbing stories of marketing heroes who have taken this approach tend to emphasize the few who have succeeded and gloss over the vast majority who have  squandered more by throwing money into an economic hurricane. While the logic in support of spending may be strong, the fact is that there’s not much empirical data to prove the merits of this strategy beyond a reasonable doubt. Many “studies” have been done, but none have derived their conclusions from strategic samples which account for the primary risk factors, nor have any identified a high-probability “formula” for success. In fact, the margin of error between success and failure is a razor’s edge. The payoff can be big, but it’s a roll of the dice against pretty long odds.

If you’re thinking “we’ve got to keep up our spend to maintain our share of voice”…

Be careful. Matching competitive levels of spend (or making decisions on the basis of “share of voice”) is most often seen by CEOs and CFOs as foolish logic. How do you know the competitor isn’t making an irrational decision? What do you know about the effectiveness of your spending versus theirs? How much ground would you really lose if they outspent you by a substantial amount? If you don’t have specific answers to these questions, relying on anecdotal evidence won’t help. It may get you the spend levels you’re requesting in the near term, but if it doesn’t work out, the memory of your recommendations will stain your credibility for years to come.

When times get tough, buyers re-evaluate the value propositions of what they buy. They make tradeoffs on the basis of what is or isn’t “necessary” any more. Shouting louder (or in more places) is unlikely to break through newly-erected austerity walls.

To make a sound case for spending more, tune into what the CEO is looking for… leverage. They want to find places to squeeze more profitability out of the business. To help, focus your thinking around:

• the relative strength of your value proposition, channel power, and response efficiencies versus your competitors.

• your assumptions about customer profitability and prospect switchability as buyers cut back.

• your price elasticity to find out where the traditional patterns may collapse or where opportunities may emerge.

• the relevance, clarity, and distinctiveness of your message strategy, and your ability to defend it from copycat claims.

And make sure to check with finance to see if the company’s balance sheet is strong enough to handle higher levels of risk exposure during revenue-stressed periods. If it’s not, the whole question of spending more is moot.

If your comparative strengths seem to offer an opportunity, then increasing spend may just be a smart idea. But even so you have to anticipate that competitors aren’t just going to let you walk away with their customers or their revenues. And that may just leave you both with higher costs in times of lower sales. In technical parlance, this is known as a “career-limiting outcome”.

Pat LaPointe is Managing Partner at MarketingNPV– specialty consultants on marketing measurement and metrics, and publishers of MarketingNPV Journal available free online.

What Finance wants from Marketing (and it is not ROI)

By Jonathan Knowles

Marketers have a poor record of responding effectively to questions about marketing accountability from their business colleagues (especially those in Finance).

Too often our response has been to look for a “silver bullet” – a single financial metric that we hope will provide the definitive proof of marketing’s value to the organization.  Our collective obsession with ROI and with brand valuation are classic symptoms of this “silver bullet syndrome.”

As a former Finance person, I am bemused by marketers’ response.  Accountability does not equate to a single financial number.  Accountability is about providing a compelling argument for how marketing is adding value to the business.

In my experience, there are three truths that it is helpful for marketers to understand about their colleagues in Finance:

• First, the business case for marketing is not intuitively obvious to anyone who believes (as most Finance people do) that humans act on the basis of rational economic maximization;
• Second, Finance people are most comfortable when they are asked to fund a strategy (a coherent, mutually reinforcing set of actions) rather than a single tactic;
• Third, Finance people consider the main drivers of financial value to be profit, growth and risk – ROI is measure of short-term efficiency.

The third point highlights the tragic irony of the current situation – marketers’ embrace of ROI as the “silver bullet” of marketing accountability has actually reinforced Finance’s impression that Marketing is as a tactical, short-term discipline.

I have found that the most effective approach to engaging in a discussion about marketing accountability is to address the three truths above by providing the following:

• Evidence for the extent to which the customer purchase decision is driven by factors other than simply functionality and price (this establishes the strategic role of marketing in generating customer value);
• Presentation of a cohesive “go to market” strategy for delivering customer value across the full range of possible sources (including product functionality, purchase convenience, service quality, perceived value – not just communications);
• Identification of the business metrics on which I expect the impact of this “go to market” strategy to be most powerfully observed.

When approached this way, I have found that the potentially confrontational debate about accountability is transformed into an insightful discussion about how the company creates value for its customers and shareholders.

Jonathan Knowles is the CEO of Type 2 Consulting and author of Vulcans, Earthlings and Marketing ROI (2008).