Think "Close and Deep" to Maximize Growth

During the Cold War, U.S. Army leaders in Europe faced a disconcerting situation. Their mission was to defend NATO member nations in the event of an attack by the Soviet-led Warsaw Pact. The problem was, U.S./NATO ground forces were greatly outnumbered. During this period, Soviet army doctrine was to throw wave after wave of forces at defenders until they were overcome, and U.S. military leaders weren't confident they could win that kind of war.

To address this problem, the U.S. Army developed a warfighting doctrine that reintroduced the idea of depth to the battlefield. Under this doctrine, U.S./NATO forces would extend the battlefield deep on the enemy's side of the front lines and attack rear-echelon forces, while simultaneously engaging front-line forces. The objective was to break up the enemy's momentum and deplete enemy forces before they can get into the main fight. The principle of fighting close and deep at the same time remains a basic tenet of U.S. Army operational doctrine.

Some of you may be wondering what this brief foray into military history has to do with revenue growth. Quite a bit, actually. To generate consistent revenue growth over an extended period of time, business and marketing leaders must design and execute their activities so as to maximize performance in the present (fighting close), while simultaneously investing in activities and capabilities that will lay the foundation for success in the future (fighting deep).

In many ways, this challenge comes down to a question of resource allocation. Regardless of company size, the available resources are rarely sufficient to enable senior business leaders to do everything they'd like to do. Therefore, resource allocation is an intrinsic part of every significant business decision, and the challenge for senior company leaders is to spend their finite resources on those activities and capabilities that will produce maximum results.

Deciding where and how to invest finite business resources has never been simple or easy, but these decisions have become more complex because today's business leaders have more options and more factors to consider then ever before. Resource allocation decisions are made even more complicated by the need to address both current and longer-term needs. As Jack Welch, the former Chairman and CEO of GE once said, "You've got to eat while you dream. You've got to deliver on short-term commitments, while you develop a long-range strategy and vision and execute it."

Fortunately, there's a good rule of thumb called the "70-20-10 rule" that business leaders can use to address the current vs. future aspect of the resource allocation challenge. The 70-20-10 rule has been used for a variety of business purposes. For example, Google has reportedly used it to manage the innovation process, and Coca Cola has reportedly used a version of the rule to guide marketing investment decisions.

Below is a brief overview of how the 70-20-10 rule can be used to guide resource allocation decisions in marketing. Keep in mind, though, that the rule can also be used for several other kinds of resource allocation decisions.

The 70%

The marketing version of the 70-20-10 rule says that about 70% of your marketing resources should be devoted to capabilities and programs with a proven track record of acceptable performance. These will include marketing channels, techniques, and technologies that your company is currently using successfully.

The 70-20-10 rule does not mean that companies should simply "keep on doing what we're already doing." It means that marketers should evaluate how well their "bread and butter" programs are performing and continue to invest in those that are delivering acceptable results.

The primary goal of these capabilities and programs is to drive incremental performance improvements in the present and over the near-term future.

The 20%

According to the 70-20-10 rule, about 20% of your marketing resources should be invested in "new" but promising capabilities and techniques. This category would typically include channels and techniques that a growing number of other companies are using successfully. In many cases, these channels and techniques will be approaching mainstream adoption.

Investments in this category are not quite as safe as those in the 70% group, but they often relate to capabilities or technologies that will become critical to your success in the near-term future.

The 10%

The remaining 10% of your marketing resources should be invested in truly new capabilities and techniques that have just emerged on the scene. Obviously, these are high-risk investments that aren't likely to produce short-term benefits.

For small and mid-size companies, the investments in this category may consist primarily of learning about the new techniques or capabilities - e.g. sending members of the marketing team to conferences or other educational events. Larger companies may also decide to launch small pilot programs to experiment with a new capability or technique.

Caveats

As with other rules of thumb, marketers should view the 70-20-10 rule as a general guide rather than a precise prescription. The specific percentages in the rule may not be appropriate for every business in every competitive situation. The benefit of the rule is that it leads marketers to give appropriate consideration to both current and future needs and thus increases the odds of successfully producing consistent revenue growth.

Image courtesy of winnifredxoxo via Flickr CC.

Related Articles

How to Identify Revenue Growth Opportunities

How to Address the Growth Challenge

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How to Identify Revenue Growth Opportunities

Driving consistent, profitable revenue growth is one of the most persistent challenges that business and marketing leaders face. The key word in that sentence is "consistent." Many companies can produce substantial revenue growth sporadically or over a short period of time. But it's exceptionally difficult to consistently generate above-average growth over the long term.

In my last post, I wrote that business and marketing leaders must perform two distinct but related tasks to maximize revenue growth:

1. They must identify what growth opportunities are (or can be) available to them and determine which of those growth opportunities are most attractive.
2. They must find the right balance between short-term and long-term growth opportunities.

In this post, I'll focus on how business and marketing leaders can identify growth opportunities. I'll cover balancing short-term and long-term opportunities in my next post.

Structural Sources of Growth

The first step in identifying potential growth opportunities is to understand the dynamics of revenue growth - how it happens or, more accurately, where it originates. There are, in fact, several distinct sources of growth. These structural sources of growth are not dependent on how a company is organized or the types of products or services it sells. Instead, they are based on the business and marketing strategies that a company uses to tap into each source.

This topic has been discussed in management and marketing literature for a long time. In a 1957 article for the Harvard Business Review, Igor Ansoff identified four structural sources of growth and four related types of growth strategies:

1. Sales of existing products in existing markets (market penetration strategy)
2. Sales of existing products in new markets (market development strategy)
3. Sales of new products in existing markets (product development strategy)
4. Sales of new products in new markets (diversification strategy)

In a 2004 article in the Harvard Business Review, Michael Treacy and Jim Sims identified five structural sources of growth:

1. Continuing sales to existing customers (base retention)
2. Sales won from the competition (market share gain)
3. New sales in an expanding market (market positioning)
4. Sales from expanding into related markets (adjacent market expansion)
5. Sales from expanding into new, unrelated lines of business (diversification)

I've used both of these models when working with clients to frame our discussions about how to grow. But over the years, I've expanded on these models to create a more detailed framework of the alternative ways to generate growth. The current version of my framework is shown in the diagram at the top of this post.

This framework is a good tool for stimulating your thinking about how to grow your business and for identifying the growth opportunities that are (or can be) available to your business. When using this framework, it's important to keep several things in mind.

First, the good news is that these structural sources of growth are always present, at least to some degree. Their existence isn't dependent on the market conditions a company is facing at a particular moment in time. However, the volume of revenue that a company can obtain from each source is greatly influenced by the market and competitive environment. So the framework identifies potential sources of revenue growth, but it doesn't tell you about the relative attractiveness of those sources. To perform that evaluation, you'll need to use traditional market and competitive analysis tools and techniques.

Second, no single source of growth is likely to provide all the revenue you need to reach your growth objective.

And third, each source of growth has distinctive attributes and dynamics. So you'll need a specific strategy and game plan for each source of growth you choose to pursue.

In my next post, I'll discuss the importance of balancing short-term and long-term growth opportunities.

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How to Address the Growth Challenge

Growth is to a business organization what oxygen is to a living organism. It is the life force of the organization. For decades, sustained profitable growth has been the linchpin of long-term business prosperity. Profitable growth creates a virtuous cycle of forces that supports and drives business success. When a company stops growing, these same forces begin to run in reverse, creating a vicious cycle that makes success difficult to achieve.

My first post of 2019 asked the question:  "Have Marketers Fully Embraced the Growth Challenge?" Back in January, I answered that question this way:

"The recent research indicates that leading business growth is more of an aspirational goal than a current reality for most marketers. Overall, the studies show that most marketing leaders are still relying on conventional marketing communications tools to drive growth, and they remain much less involved in other business activities that have a significant impact on growth."

Research published this year indicates that my conclusion is still largely accurate. For example, in the February 2019 edition of The CMO Survey, respondents identified driving growth as the top challenge for marketing leaders. Yet only 43.4% of the respondents reported that the marketing function leads revenue growth in their organization. In the August 2019 edition of the survey, the percentage of respondents saying that marketing leads revenue growth dropped to 36.0%.

(Note:  The CMO Survey began asking this question in August 2016. Since then, the percentage of respondents reporting that marketing leads revenue growth has ranged from a low of 29.0% to a high of 43.4%.)

This fall, the CMO Council published a strategic brief that discussed the importance of growth and the major issues surrounding growth. The brief also discussed some steps that companies need to take to successfully address the growth imperative.

How to Achieve Transformational Growth described the issues surrounding growth in emphatic terms:

"For many companies, growth is the driving force that brings it all together. Yet questions loom:  Where do you find it? How do you inspire it? What hinders it? How do you invest in it? Who within the organization orchestrates and owns it?"

The CMO Council observed that many companies are addressing the growth challenge by creating new C-level positions to lead growth initiatives. The brief noted that:

• According to research by Singular, more than 21% of brands with at least $50 million in advertising spend now have chief growth officers (CGOs).
• More than 6,000 executives profiled on LinkedIn have the CGO title.
• 15,000 executives on LinkedIn report being the chief revenue officer (CRO) for their company.
• 28,000 of the executives say they are chief commercial officers (CCOs).

The CMO Council discusses three keys to maximizing growth:

1. Align the functional areas of the organization that play critical roles in driving growth. This will include marketing, sales, product, customer experience, technology, and analytics.
2. Create a growth culture. Nurture inclusiveness and encourage input from all organizational levels.
3. Set a growth agenda that identifies attractive growth opportunities and builds a sound strategy for exploiting those opportunities.

Regardless of whether growth is led by the CEO, CMO, CGO, CRO, or CCO, companies face two distinct but related tasks when addressing the growth challenge. First, they need to identify what growth opportunities are (or can be) available to them and which of those opportunities are most attractive. And second, they need to balance short-term and long-term growth opportunities.

I'll be discussing both of these issues in upcoming posts.

Image courtesy of Mike Lawrence (CreditDebitPro.com) via Flickr CC.

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Why Your Marketing Content Should Be "Job Focused"

The first step to designing an effective marketing strategy and creating compelling marketing content is to understand what your potential customers are trying to accomplish when they purchase products or services like those you provide. In most cases, people don't buy a product or service because they want that product or service itself. More often, what they really want is what the product or service will help them accomplish.

Theodore Levitt, the legendary professor of marketing at the Harvard Business School, captured this idea in a memorable way when he often reminded his students that, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole."

In The Innovator's Solution, Clayton Christensen and Michael Raynor built on Professor Levitt's idea to describe what is called the jobs-to-be-done framework. The basic idea of this framework is that when people become aware of a "job" they need to get done, they look for a product or service they can "hire" to perform the job.

Christensen and Raynor argue that this is how customers "experience life." Their thought processes begin with an awareness that they need to get something done, and then they seek to hire something or someone to to the job as effectively, conveniently, and inexpensively as possible.

What Milkshakes Can Teach Us About Marketing

Christensen and Raynor also provided a memorable example of hiring a product to get a job done. In their case study, a fast-food restaurant chain wanted to increase sales of milkshakes, and it commissioned market research to determine how to accomplish this goal. The most surprising finding of the research was that almost half of the milkshakes were purchased in the early morning. The milkshakes were usually the only item purchased, and they were rarely consumed at the restaurant.

Digging a little deeper, the researchers found that most of the morning milkshake customers were people on their way to work. Many of them faced a long commute, and they needed something to make the drive more interesting. Also, they were in a hurry, they were usually wearing their business clothes, and they only had one hand free.

These customers sometimes "hired" other foods to fill their morning needs, but most of the alternatives had significant disadvantages. Bagels left crumbs on their clothes, and breakfast sandwiches made their hands and the steering wheel greasy. It wasn't so much that these customers "liked" milkshakes more than bagels or breakfast sandwiches, but milkshakes were simply better than those alternatives at performing the job the customers needed to get done.

The Magic of Job-Focused Marketing

The jobs-to-be-done framework is often used to guide the process of developing new products or services, but it also has implications for marketing. What it tells us is that one key to effective marketing is to focus the majority of our marketing messages and content on the jobs our potential buyers need to get done.

To create compelling "job-focused" messages and content, marketers need to thoroughly understand the jobs their potential customers are trying to get done, including:

• What the specific jobs are
• Why the jobs are important
• What happens if the jobs don't get done
• How potential buyers are trying to perform the jobs - what tools and processes they are using
• What is preventing them from getting the jobs done effectively and efficiently - the limitations and shortcomings of their existing tools and processes

As marketers, it's easy for us to forget that most potential buyers aren't really interested in our products or services per se. What they are (or can become) interested in is what those products or services can help them accomplish. Our products or services are simply the means to an end, and it's critical to keep this in mind when planning our marketing efforts. 

To use Professor Levitt's metaphor, our marketing strategy and our marketing content should be more about quarter-inch holes than quarter-inch drills.

Image courtesy of GotCredit (www.gotcredit.com) via Flickr CC.

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B2B Highlights From the August CMO Survey

The findings of the August edition of The CMO Survey by Duke University's Fuqua School of Business, the American Marketing Association, and Deloitte were published a few days ago. The latest results are based on responses from 341 marketing leaders at U.S. B2B and B2C companies. Sixty-four percent of the respondents were affiliated with B2B companies, and 95% were VP-level or above.

The CMO Survey is conducted semi-annually, and it's a valuable resource for capturing the views of U.S. marketing leaders about the overall economic and competitive environment, and about major trends in marketing. In addition to overall results, survey findings are reported by four economic sectors - B2B product companies, B2B services companies, B2C product companies, and B2C services companies.

In this post, I'll review a few of the major findings in the August 2019 edition of the survey. Unless otherwise indicated, the results discussed in this post are based exclusively on the responses of B2B marketers.

Marketing Spending

On average, marketing expenses amount to 9.8% of total company revenues across all survey respondents, up from 7.3% in the August 2018 survey. The percentages were slightly lower for B2B companies - 8.6% for B2B product companies, and 8.7% for B2B services companies.

Survey respondents were optimistic about the growth of marketing budgets in the near-term future. On average, respondents from B2B product companies expect their marketing budgets to increase by 7.1% in the next 12 months. For B2B services companies, the average expected increase is 10.1%.

Paid Media Spending Allocation

The survey asked participants to indicate how their spending on paid media is allocated across seven specific channels and a "Paid Other" category. The following table shows the mean allocation for respondents from B2B product companies and B2B services companies:

What stands out to me in these findings is the size of the "Paid Other" category. B2B product companies are devoting nearly 40% of their total paid media spending to the "other" category, while B2B services companies are devoting nearly half of their spending to that category. According to the survey report, when participants were asked to clarify which "Paid Other" media they meant, the respondents most frequently identified trade shows, sponsorships, and direct mail.

Social Media Marketing

One of the more fascinating topics addressed by The CMO Survey is social media marketing. For the past several years, survey respondents have been consistently predicting that their spending on social media marketing will increase substantially. In the latest survey, respondents from B2B product companies predicted that their social media spending will more than double in five years. Respondents from B2B services companies predicted a spending increase of about 83% in five years.

Survey respondents have also consistently said that the use of social media is not making a significant contribution to company performance. The survey has been asking participants to rate the contribution of social media marketing on a seven-point scale, where 1=not at all, and 7=very highly.

In the latest survey, the mean overall score was only 3.3, and that score has remained almost unchanged since 2016. Among respondents from B2B product companies, the mean score was just 3.05, and for respondents from B2B services companies, the mean score was 3.48.

On the face of it, these results don't seem to be logical. Why would marketing leaders substantially increase spending on an activity that is not making a significant contribution to company performance?

One possibility is that actual spending on social media marketing has not increased as rapidly as survey respondents were forecasting. An analysis in an earlier edition of the survey indicates that this has been true in the recent past, and I think it's likely still true today. Therefore, I would argue that spending on social media marketing will not increase as rapidly or by as much as respondents in the August survey have predicted.

Top image source:  The CMO Survey (www.cmosurvey.org).

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Marketing Myopia Revisited

(The following is a post I published more than six years ago. Given the recent focus on marketing's responsibility for managing customer experiences and driving growth, the topic is as relevant and timely today as it was in the fall of 2012.)

The Original Post

In 1960, Theodore Levitt wrote a landmark article for the Harvard Business Review titled "Marketing Myopia." When it was republished in 2004, HBR editors said the article "introduced the most influential marketing idea of the past half century."

Levitt's central argument was that companies will cease to grow if they define their business too narrowly - in terms of specific products or services, rather than in terms of customer needs. In a quintessential passage from the article, Levitt explained the decline of railroads in terms that have become part of the business lexicon:

"The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones), but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business."

The "disease" that Levitt wrote about is still with us, but now, some marketers are also afflicted with another kind of myopia. This new strain of marketing myopia is characterized by an almost exclusive focus on marketing communications and the technologies that support them. As practiced in many companies today, marketing means marketing communications and not much more.

Marketing communications are certainly important, but marketing also has other responsibilities that are essential for business success.

For more than four decades, the term marketing mix has been used to describe the operational aspects of the marketing function. The term became popular in the 1960's after Neil H. Borden published an article in the Journal of Advertising Research titled "The Concept of the Marketing Mix." Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotion, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that we know today as the 4P's of marketing - product, price, place, and promotion.

The point of this brief history lesson is that marketing has long had a mandate that is broader than marketing communications (promotion). Companies can suffer when marketing ignores these broader responsibilities because, of all the major business functions, marketing is (or should be) the best suited to relate a company to its external competitive environment.

So, if you're a marketer, give these ideas some thought:

• Marketing is about communicating your company's value proposition, but it must also be about determining what those value propositions will be.
• Marketing is about communicating the important features and attributes of your company's products or services, but it must also be about determining what features and attributes your products/services need in order to be attractive to buyers.
• Marketing is about communicating your company's price-value equation, but it must also be about determining what your company's pricing strategy will be.

Marketing communications will always be a critical part of the marketing function. But marketers need to keep the other aspects of marketing in mind in order to avoid a bad case of marketing myopia.

A Brief Update

Since my original post was published in 2012, numerous research studies have reported that many marketing leaders believe they are (or soon will be) primarily responsible for managing end-to-end customer experiences. Recent studies have also shown that a growing number of marketing leaders now believe they are primarily responsible for driving business growth, and that other senior executives largely agree with that view.

It seems clear, therefore, that marketing leaders recognize that the scope of marketing's responsibilities needs to expand. It's also clear, however, that this particular transformation in marketing is still a work in progress. For example, in the February 2019 edition of The CMO Survey, only 42.4% of respondents said that marketing is leading customer experience efforts in their organization, and only 43.4% reported that marketing is leading revenue growth efforts.

Earlier this year, I published a series of posts discussing the growth challenge facing marketers, and exploring what marketers need to do to effectively drive growth. You can read more about this vital topic here:

• Have Marketers Fully Embraced the Growth Challenge?
• Both Market and Customer Expertise are Needed to Drive Growth
• Focus on "High-Yield Behaviors" to Drive Revenue Growth

Marketing myopia may be less prevalent today than it was six years ago. The big challenge now is to translate the improved "vision" into tangible actions.

Image courtesy of Rob via Flickr CC.

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Don't Rely Too Much on Marketing Best Practices

More than two decades ago, Michael Porter warned about the dangers of relying on benchmarking and "best practices" to produce business success. In a landmark article in the Harvard Business Review, Porter drew a sharp distinction between operational effectiveness - which often involves identifying and implementing best practices - and real business strategy.

Porter argued that competing primarily on the basis of operational effectiveness is usually a recipe for disaster. He wrote:  "The more benchmarking companies do, the more they look alike . . . As rivals imitate one another's improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win."

Four years after Porter's article, Philipp Nattermann made a similar argument in an article for the McKinsey Quarterly. In this article, Nattermann contended that benchmarking and the use of best practices are important ways to improve operational efficiency, but they are not tools for strategic decision making. He wrote that business leaders rely too much on benchmarking and best practices because:

". . . they don't understand that benchmarking is simply an operational tool. Instead, they all want to occupy the point on the strategic landscape they their most successful competitor has staked out. Soon other competitors can be seen herding, lemminglike, around that best practice company's product, pricing, and channel strategies. Products and services become increasingly commoditized and margins tumble as more and more incumbents compete for smaller and smaller segments of customers and industry resources."

Despite the risks associated with best practices, business leaders continue to regard the identification and implementation of best practices as one of the most powerful management tools at their disposal. And it's not difficult to understand why the use of best practices remains so popular. It seems immanently reasonable to identify the practices of successful, high-performing companies and then emulate those practices.

The Allure of Marketing Best Practices

Marketers can become particularly enamored with best practices. After all, marketing success is difficult to achieve and even harder to sustain because the marketing landscape is always changing, and because it's incredibly hard to predict what marketing methods, channels, and message formats will appeal to potential customers. In these circumstances, it shouldn't be surprising that marketers are attracted to "proven" best practices.

Marketing best practices are often portrayed as effective and reliable tools for achieving marketing success, but the reality is more nuanced. Marketing best practices can be helpful when they are understood correctly and used appropriately, but it's easy for marketers to become enthralled with the promised benefits of best practices, and forget their limitations.

Widespread Use Decreases Effectiveness

One of the most paradoxical characteristics of marketing best practices is that the more widely they are used, the less effective they tend to become. A marketing best practice can derive its effectiveness from several sources. It can be effective because it's based on sound business principles, or because it resonates with how potential customers make decisions, or because it effectively leverages the capabilities of a particular medium of communication.

But marketing best practices are also highly effective - at least for a while -  because they are distinctive. When a best practice is new, it tends to be used by a relatively small number of companies. Therefore, the practice stands out in the marketplace and captures the attention of potential customers. But as more and more companies implement the practice, it loses some of the distinctiveness that made it highly effective. Content marketing is a good example of a marketing best practice that is now more challenging because it is so widely used.

The bottom line is, identifying and implementing marketing best practices may lead to a temporary improvement in marketing results, but it won't deliver superior marketing performance over the long term. Superior long-term marketing performance requires an effective marketing strategy and the use of marketing methods and tactics that will make your company distinctive in the marketplace.

Image courtesy of Paul Mison via Flickr CC.

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Focus on "High-Yield Behaviors" to Drive Revenue Growth

In my previous two posts, I've discussed the expanding role of marketing in driving business growth. Recent research shows that many marketing leaders now believe they are primarily responsible for leading growth efforts in their organization, and that CEOs and other senior executives share this belief.

The recent research also shows, however that leading growth is more of an aspirational goal than a current reality for most marketers. Overall, the studies suggest that most marketing leaders are still relying primarily on conventional marketing communication tactics and tools to drive growth.

Against this backdrop, a book published last fall by the American Marketing Association describes an interesting and arguably novel approach to identifying and exploiting growth opportunities. The Organic Growth Playbook by Bernard J. Jaworski and Robert S. Lurie is the first in a series of seven books to be published by the AMA that will address complex, challenging, and difficult-to-solve marketing problems.

The basic premise of The Organic Growth Playbook is that the conventional approach to marketing - which is based largely on attempting to differentiate a product or service in the minds of potential buyers - isn't a reliable way to drive consistent organic revenue growth for most companies. The authors contend that in addition to product positioning and differentiation, marketers should focus on identifying the specific behaviors of potential buyers that have a disproportionate impact on the ultimate purchase decision, and then work to persuade prospects to engage in those behaviors.

The first step in the process described in The Organic Growth Playbook is to map the buying process waterfall. This step provides the essential foundation for the rest of the process, and in addition, the insights produced by mapping the buying process waterfall constitute one of the main components of the market expertise that I discussed in my last post.

Mapping the buying process waterfall is a two-step process. The first step is to identify all of the activities that are performed by any of the potential buyers in a given market from the time they become aware of a need they may need to address until a solution is purchased (or not purchased). These activities are arranged sequentially, with the earliest activities at the top of the map, and later activities - including the ultimate purchase decision - at the bottom. Activities that potential buyers use for a similar purpose, and that happen at about the same time - are grouped by their position or stage in the buying process.

The second step is to identify the frequency with which each activity in the buying process occurs. This step is critical because it enables the marketing team to measure the flow of potential buyers through the buying process and identify what paths different types of buyers tend to take.

The book's authors argue that in most buying processes across most industries, there are one or two critical buyer behaviors that have a decisive impact on the final purchase decision. The authors call these activities "high-yield behaviors," and they become the focal point of marketing and sales efforts.

The following diagram presents a greatly oversimplified version of a buying process waterfall map:

In this diagram a high-yield behavior (Target Behavior X) is shown at the top, and the ultimate purchase decisions are shown at the bottom. The diagram also shows the percentages of buyers who made each purchase decision segmented by whether or not they engaged in Target Behavior X. As the diagram shows:

• Potential buyers who engage in Target Behavior X are twice as likely to purchase the company's product (60% vs. 30%); and
• Potential buyers who engage in Target Behavior X are only half as likely to exit the buying process without making a purchase (20% vs. 40%).

In this example, Target Behavior X has a significant impact on the company's ability to earn more sales and generate revenue growth. Therefore, a focal point of the company's marketing and sales efforts should be to persuade more potential buyers to engage in the desired behavior. And because this type of analysis considers all of the potential buyers in a given market, it can enable marketing and sales leaders to uncover growth opportunities they had not previously considered.

Top illustration courtesy of Bernard Goldbach via Flickr CC.

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Both Market and Customer Expertise are Needed to Drive Growth

Marketing has always been associated with revenue generation and growth, but a rising number of marketing leaders now contend that business growth is the raison d'etre of the marketing function. Recent research shows that many marketing leaders believe they have become primarily responsible for driving growth in their organization, and that this belief is shared by CEOs and other senior executives.

Despite this view, however, the recent research also suggests that most marketers have not moved beyond conventional marketing tactics in their efforts to drive growth. For example, in a recent survey of CMOs and other senior marketing leaders by the CMO Council and Deloitte, more than 40% of the respondents said they were working on brand shaping and campaign execution activities, but only 6% said they were actively involved in growing revenue across all business activities.

If both senior marketing leaders and other C-suite executives see the need for marketing to play broader role in growth, why have so few CMOs taken up the challenge? Many CMOs want to be growth leaders, but haven't been given the formal authority to play that role. In these circumstances, they key is to build credibility with the CEO and other members of the senior leadership team and thereby earn the right to exert influence over company-wide growth initiatives.

Some industry commentators have argued that the most effective way to expand the impact of marketing on growth is to focus on customer insights. A recent article in the Deloitte Review urged CMOs to "relentlessly pursue customer expertise" and use that expertise to gain influence with other business functions. The authors contend that marketing leaders should develop expertise about the entire customer journey (including those parts owned by other business functions) and then leverage that expertise to build partnerships with other company leaders to improve customer experiences.

Both Customer and Market Expertise are Necessary

Developing expertise about the customer journey is obviously a critical part of marketing's job, but it's not the whole job. In order to identify and effectively exploit all growth opportunities, marketing leaders need to develop market expertise as well as customer expertise.

Market expertise includes customer insights, but it's broader in several ways. As the term implies, the primary objective of market expertise is to understand the economic and competitive characteristics of the market in which the company operates. Developing market expertise requires marketing leaders to perform an analysis of several factors, some of which are:

• What is the size of the market?
• How fast is the overall market growing? Are some segments of the market growing significantly faster than others?
• Who are the major competitors in the market? Is the market fragmented, or is it dominated by a few large competitors?
• How profitable is the overall market? Are some market or customer segments significantly more profitable than others?
• Is the market composed of a large number of small customers or a relatively small number of larger customers?
• How easy or difficult is it for new competitors to enter the market?
• Is the market vulnerable to substitute products and/or services?

This list is far from complete, but it provides an indication of the kinds of issues that marketing leaders should be analyzing on a regular basis.

Focus on Critical Buyer Behaviors

Market expertise also requires a clear understanding of the behaviors of potential buyers. The recent emphasis on delivering outstanding customer experiences has elevated the importance of understanding how and where customers and prospects interact with the business and what they are trying to accomplish during those interactions. Customer insights like these can be used to improve customer experiences, which will contribute to growth.

These insights are important, but growth-oriented marketers also need to understand the behaviors of potential buyers who do not become customers. More specifically, marketers need to identify whether potential buyers who become customers engage in different behaviors (or certain behaviors more frequently) than potential buyers who do not become customers. In many cases, these behavioral differences will reveal where marketers can have a major impact on business growth.

In my next post, I'll discuss how identifying and quantifying the behaviors of potential buyers can help marketers identify untapped growth opportunities.

Illustration courtesy of OTA Photos (tradingacademy.com) via Flickr CC.

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Have Marketers Fully Embraced the Growth Challenge?

The role of marketing was a major topic of conversation last year, and there is a widespread belief that marketing's scope of responsibility has expanded. In the August 2018 edition of The CMO Survey, eight out of ten (79.6%) of the survey respondents said that the role of marketing in their organization had broadened over the past five years.

Marketing's responsibility for orchestrating customer experiences has been widely discussed for several years. More recently, industry commentators and practicing marketers have become focused on the role of marketing in driving business growth.

In a recent survey of over 200 CMOs and senior VPs of marketing by the CMO Council and Deloitte, 27% of respondents said that the CMO is primarily responsible for the growth strategies and revenue generation for their organization. The CEO came in second at 22%.

Marketing leaders also believe that other senior business leaders expect them to play a leading role in growth. When participants in the CMO Council/Deloitte survey were asked what level of expectation there is among senior executives and board members for marketing to be a growth driver, 35% of respondents put the expectation level at high, and 33% said senior company leaders think growth is the primary mandate of marketing.

Some will argue, of course, that this is nothing new. After all, it's fair to say that growth has always been the "prime directive" of marketing. What's new is that marketing and other business leaders now believe that marketing needs to expand the tools it uses to drive revenue growth.

So as we begin a new year, it's appropriate to ask two basic questions about the expanded role of marketing. First, to what extent have marketing leaders embraced the growth challenge and adjusted their activities to play a larger role in growth? And second, what should be the role of marketing in driving growth, and what do marketing leaders need to do to fulfill that role?

Where Do We Stand Today?

The recent research indicates that leading business growth is more of an aspirational goal than a current reality for most marketers. Overall, the studies show that most marketing leaders are still relying on conventional marketing communications tools to drive growth, and they remain much less involved in other business activities that have a significant impact on growth.

For example, in the latest edition of The CMO Survey, senior marketing leaders from B2B and B2C companies were asked to identify the activities or functions that marketing is primarily responsible for in their company. The top four activities identified by survey respondents were:

• Brand (91.4% of respondents)
• Digital marketing (82.7%)
• Social media (82.7%)
• Advertising (79.6%)

Other activities identified by more than 50% of survey respondents included promotion (71.6%), positioning (71.6%), public relations (69.1%), and marketing analytics (68.5%)

In contrast, only 40.1% of respondents indicated that marketing is primarily responsible for revenue growth, and even fewer respondents indicated that marketing has primary responsibility for market entry strategy (38.9%), new products (34.0%), and market selection (26.8%).

The CMO Council/Deloitte survey referenced earlier paints a similar picture. That research found that many marketing leaders have identified some steps they need to take in order to drive growth, which include developing strategies and plans to improve revenue and gain market share. The research also found, however, that most marketers are falling back into their "brand comfort zone." The survey report states:

When asked what the role of marketing is specific to growth, only 6 percent of respondents say they are driving routes to revenue across all facets of the business globally, only 4 percent are providing sales intelligence and key account insight support, and only 13 percent are working to retain and grow customer relationships through improved customer experiences. Instead, many marketers are defining and shaping the brand (44 percent) and executing campaigns to attract customers and predispose prospects (42 percent). . . Overall, despite the clear intention to drive revenue, brand and campaign win out in action. . ."

These survey findings suggest that most marketing leaders have not moved significantly beyond "conventional" marketing tools and tactics in their efforts to drive business growth. So what is the "right" role of marketing in business growth, and what steps should marketing leaders take first to fulfill that role? I'll address this question in my next post.

Top image courtesy of ccpixs.com (Creative Commons License).

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Research Says B2B Buyers Want Strategic Partners

For decades, the basic approach to B2B marketing and sales has been to identify a prospect's "pain points," and then demonstrate how your product or service can alleviate the pain. New research now suggests that many buyers look beyond immediate pain and take a more strategic approach to B2B buying.

A recent study by the Aberdeen Group (in collaboration with PJA Advertising and Marketing) indicates that B2B buyers are looking for vendors who can help them achieve strategic company goals, improve competitive differentiation, and identify new growth opportunities. The What Do B2B Buyers Want? report is based on a survey of over 250 B2B buyers from a range of industries and company sizes.

When survey participants were asked to select two factors (from a list of nine) that play a role in their buying decisions, the three most frequently chosen factors were:

1. Total cost of ownership (45% of respondents)
2. How the vendor/solution supports our company's goals (42%)
3. Efficiency gains (ROI) (40%) 

When survey participants were asked what other factors they consider when they make buying decisions, 68.2% of respondents said the vendor can help sharpen our competitive differentiation, and over half (55.7%) said the vendor can help me identify new possibilities and avenues for revenue.

Viewed together, these survey responses make two points. First, B2B buyers are still focused on cost and ROI, and those economic factors remain at the core of B2B buying decisions. And second, many of the buyers in this survey panel appear to be taking a more strategic approach to buying decisions, once basic financial criteria are satisfied. 

It's noteworthy that when survey participants were asked how they usually know when they need to buy something, over two-thirds (67.2%) of the respondents said, "When our business strategy calls for it."

The Aberdeen study also found that B2B buyers are looking for vendors who can help them think through the business issues they are facing, and who are willing to challenge their current business practices. When survey participants were asked if they are more likely to work with a vendor who challenges they way they currently do business, almost two-thirds (65.4%) of the respondents answered, "Yes." So, the Aberdeen research provides support for the approach to B2B marketing and sales advocated by CEB in The Challenger Sale.

The Aberdeen study could be good news for B2B marketing and sales professionals, if the survey findings reflect the attitudes of a significant number of B2B buyers. The traditional "pain-solution" approach has a serious limitation because, at any given point in time, most potential buyers are not experiencing enough pain to take action. The Aberdeen research indicates that some business buyers are willing to look beyond the absence of immediate pain and consider longer-term strategic issues.

Illustration courtesy of Naval Surface Warriors via Flickr CC.

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Debunking a Myth About Millennial B2B Buyers

In 2015, Millennials became the largest generational cohort in the US population and the largest generation in the US labor force. Research studies by the IBM Institute for Business Value, Google/Millward Brown Digital, Sacunas (now Merit), and SnapApp/Heinz Marketing have shown that Millennials are now playing significant roles in B2B purchase decisions. So it seems clear that we are in the early stages of a generational shift in B2B buying.

This generational shift raises an important issue for leaders of B2B companies:  Do the attitudes, preferences, and behaviors of Millennial B2B buyers require a different approach to marketing and sales? 

The popular view among industry pundits is that Millennial buyers have distinctive characteristics which require different marketing and sales methods and tactics. One recent research report emphatically stated that "the Millennial buyer is impacting the entire buying journey and the old marketing and sales tactics won't work."

In reality, many of the claims made about the attributes of Millennials are greatly oversimplified or just plain wrong. The global research firm Ipsos recently characterized Millennials as "the most carelessly described group we've ever looked at." In a detailed analysis of Millennial attitudes and behaviors published earlier this year, Ipsos wrote, "Myths and misunderstandings [about Millennials] abound, with bad research jumping to general conclusions based on shallow caricatures about a group that makes up 23% of the population."

Most researchers define the Millennial generation as individuals born from about 1981 through about 1997. The two other generational cohorts relevant to B2B marketing and sales professionals are Generation X and Baby Boomers. Generation X is typically defined as individuals born from 1965 through 1980, and the Baby Boom generation is defined as individuals born from 1946 through 1964.

Clearly, B2B marketing and sales professionals must recognize that Millennials have become active participants in the B2B buying process, and they must be prepared to engage Millennial buyers on their terms. But recent research has shown that Millennial B2B buyers are more like their Gen X and Baby Boomer counterparts than is usually recognized. To develop and implement effective strategies and programs, marketing and sales leaders must be able to separate Millennial myths from Millennial realities.

Millennial Myth vs. Millennial Reality

One of the most pervasive myths about Millennial B2B buyers is that they are digital addicts who prefer to do everything online. According to this myth, Millennials access and consume information primarily, if not exclusively, via digital channels, and they tend to view other means of communication with a certain degree of disdain.

Like many myths, this one has a basis in reality. Millennials are the first generation to grow up surrounded by digital technologies. Many Millennials have been using digital technologies since they were children or young teenagers. Gen X-ers and Baby Boomers, on the other hand, largely began using digital technologies in their everyday lives as adults. So, it's probably accurate to say that, on average, Millennials are more comfortable and more proficient with some digital technologies than older generations.

But there is strong evidence that the "comfort and proficiency gap" has narrowed significantly. For example, the research by Ipsos found that large majorities of all three generational cohorts access the internet on a daily or almost daily basis, and that Gen X-ers are almost as likely as Millennials to use a smartphone to go online. Ipsos did find that Millennials spend considerably more time online on their smartphones than older generations, which indicates that the comfort gap hasn't disappeared completely.

The Ipsos research demonstrates that members of all generations are now relying on digital technologies to obtain information and communicate. This isn't something that's unique to Millennials. The similarities between Millennials and Generation X are particularly relevant for B2B marketing and sales professionals because most of today's B2B buyers will be found in these two generational cohorts.

Research also shows that Millennial B2B buyers, like older buyers, rely on non-digital sources of information to support buying decisions. In a recent survey of B2B buyers by the IBM Institute for Business Value, study participants were asked what sources of information they are most likely to turn to when researching a vendor's products or services. The following table shows how nine sources of information (digital and non-digital) were ranked by respondents in each of the three generational cohorts:

As this table shows, the three research sources most preferred by Millennial buyers are all non-digital. In the study report, IBM suggested that one possible explanation for this somewhat surprising result is that Millennial respondents view online research as routine, and that they were focusing on sources of information that could provide richer insights about what it would be like to work with a particular vendor.

Ipsos addressed a similar issue in its research and found that the distinctive attribute of Millennials is that they typically draw on a broader and more varied pool of information resources than older generations. Millennials tend to seek out more sources of information, and they seem to be more comfortable than older generations at integrating information from multiple sources.

Two Key Takeaways

To sum things up, the idea that Millennial B2B buyers are digital addicts who prefer to do everything online is a myth. The evidence just doesn't support it.

The available evidence does provide two key takeaways for B2B marketing and sales professionals.

• First, it's critical for B2B companies to provide marketing and sales content and messaging in digital form and to leverage digital channels to engage potential buyers. But this isn't only because Millennials are now active participants in B2B buying decisions. The reality is, buyers of all ages now rely extensively on digital content and digital communication channels.
• And second, it's vital to remember that Millennial B2B buyers want to interact with a potential vendor in non-digital ways. Millennials may be "digital natives," but at some stages of the buying journey, they value person-to-person interactions.

Top image courtesy of ITU Pictures via Flickr CC.

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How Will You Grow in 2018?

With the fourth quarter of 2017 now underway, many B2B companies have already started their planning for 2018. Over the next several weeks, senior company leaders will be evaluating how their business is currently performing and setting goals for the coming year. Some of those goals will inevitably relate to revenue growth, and one thing is clear:  Marketing leaders are squarely on the growth hotseat.

In a 2016 global survey of CEO's and CMO's by Accenture Strategy, 50% of the CEO's said their CMO is primarily responsible for driving disruptive growth in their organization. About a third of the CEO's also said that the CMO is the first to go when growth targets aren't met.

To set realistic growth objectives for 2018, and to implement marketing programs that will effectively support those objectives, marketing leaders must have a clearly-defined revenue growth strategy. One critical - but often overlooked - step in developing a sound revenue growth strategy is identifying where growth will come from. Specifically, marketing leaders need to answer three basic questions during their planning process:

1. What are the structural sources of revenue growth in our business?
2. How much growth is each source currently producing?
3. How much growth can we realistically expect to generate from each source next year?

I described the most common structural sources of revenue growth in an earlier post, so I won't repeat that discussion here. The following diagram depicts the sources of growth that exist in most companies:

How Much Growth is Each Source Currently Producing?

In this post, I'll discuss how to answer Questions 2 and 3. When I work with clients on business or marketing strategy projects, I use sales data from the client's ERP/accounting system to answer the second question. Here's a simplified example of how the analysis works.

Suppose that your company had total sales of $110 million for the 12 months ending on September 30, 2017. In this example, I'll call this 12-month period "2017." You had total sales of $100 million for the 12 months that ended on September 30, 2016. We'll call this 12-month period "2016." So, your company grew sales by $10 million during 2017.

For this example, let's suppose that your company did not acquire another business or introduce any new types of products in 2017. During 2017, your company did begin selling in a new geographic market. Under these circumstances, your primary sources of revenue growth in 2017 were base retention, increased sales to existing customers, sales to new customers in existing markets, and sales to new customers in new markets.

To quantify how much revenue growth each of these sources produced, you would use "sales by customer" data from your ERP/accounting system.

Base retention (revenue churn) - To measure the impact of revenue churn, identify the customers who bought from you in 2016, but did not buy from you in 2017. The total sales made to these customers in 2016 is the amount of revenue that was "lost" in 2017 due to revenue churn. For this example, let's say the amount of lost revenue was $1 million.

Increased sales to existing customers - Identify the customers who bought from you in both 2017 and 2016, and compare the 2017 total to the 2016 total. For this example, let's say that sales to existing customers increased by $3 million in 2017.

Sales to new customers in existing markets - Identify the customers who  bought from you in 2017 but did not buy from you in 2016. Then eliminate those customers who are based in the geographic market that you entered in 2017. The sales made to the remaining customers are sales to new customers in existing markets. Let's say this source accounted for $5 million of the 2017 revenue growth.

Sales to new customers in new markets - This is the total 2017 sales made to customers in the geographic market that you entered in 2017. Let's say this amount was $3 million.

The table below summarizes the results of this analysis and shows where growth in 2017 came from:

How Much Growth Can We Generate from Each Source in 2018?

Once you know where your current growth came from, you can use these insights to set more realistic and achievable growth objectives for the coming year. The key is to analyze why the current growth happened.

In our hypothetical company, for example, sales to new customers in existing markets produced $5 million, or 50%, of the total sales growth in 2017. One possible explanation for this growth is that the overall market for the company's products or services expanded in 2017. In other words, the growth may have resulted from being in "the right market at the right time." It's also possible that this growth occurred because the company took customers from competitors and increased its market share.

Either way, the important questions is:  How much future growth can the existing markets provide? If the existing markets still have substantial growth potential, the company will probably want to focus a significant amount of demand generation efforts on acquiring more new customers in these existing markets.

On the other hand, if those existing markets do not have significant future growth potential, the company will need a different strategy to drive growth. It may, for example, want to focus more demand generation efforts on acquiring new customers in the geographic market it first entered in 2017, or it may need to consider expanding into new geographic markets.

This type of analysis should be done for each source of revenue that contributed to current growth and for any new sources that are expected to contribute next year. Once this analysis is completed, you should set revenue targets for 2018 for each source of revenue that applies to your company. And once these revenue targets have been established, marketing leaders can begin to design marketing programs to achieve those objectives.

Top image courtesy of ccPixs.com via Flickr CC.

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Why You Need to Be Careful With One Feature of the New Demand Waterfall

The new SiriusDecisions Demand Unit Waterfall has received lots of accolades since its introduction this spring, and the accolades are richly deserved. But one of the new demand stages should be labeled Use With Caution.

In May, SiriusDecisions unveiled the latest iteration of it venerable Demand Waterfall with great fanfare. SiriusDecisions calls the new version the Demand Unit Waterfall, and it's depicted in the following diagram:

Source:  SiriusDecisions

The first version of the Demand Waterfall was introduced in 2006, and over the past decade, thousands of B2B companies have used the waterfall model to track and manage their demand generation efforts. So it shouldn't be surprising that the introduction of the Demand Unit Waterfall has generated quite a bit of interest in the B2B marketing world. Here's a small sample of the reactions from pundits and practitioners:

• What's The Impact Of The New Demand Unit Waterfall? Hear From 30 B2B Experts (Demand Gen Report)
• How We've Implemented (Parts of) The Demand Unit Waterfall for ABM (Tony Yang, Mintigo)
• Diving into the new SiriusDecisions Demand Unit Waterfall (John Steinert, MarTech Today)
• SiriusDecisions:  The New Demand Unit Waterfall (John Common, Intelligent Demand)

For an in-depth discussion of the new Demand Unit Waterfall, I recommend that you watch the recording of this SiriusDecisions webinar.

The early reaction to the Demand Unit Waterfall has been overwhelmingly positive, and I agree with those who say that it more accurately reflects the realities of B2B demand generation.

• By focusing on demand units, the new waterfall recognizes that most B2B buying decisions are made by groups of people, not by individuals.
• By eliminating the waterfall stages that focused on the sources of individual leads and on the "ownership" of demand generation activities, the new waterfall implicitly recognizes that demand generation has become a team sport that involves marketing, business development, and sales throughout the whole process.

Use Caution With "Active Demand"

My biggest reservation about the new Demand Unit Waterfall is the possible implications of the Active Demand stage. SiriusDecisions defines Active Demand as the demand units that are showing evidence of acute need or buying intention. In other words, Active Demand refers to demand units that are currently "in-market" for the type of solution you sell.

SiriusDecisions analysts are suggesting that companies should focus their outbound demand generation activities on in-market prospects. Not surprisingly, this is the approach also advocated by many providers of B2B predictive analytics software.

This approach may work for some types of B2B companies, but it won't work for all. Here's why.

The identification of in-market prospects relies heavily on the use of intent data, which is data regarding the online behaviors of potential buyers. Intent data - particularly third-party intent data - can be valuable for some types of B2B companies, but it can be almost useless for others. To learn more about the limitations of intent data, take a look at this post by Jingcong Zhao at the Marketo blog, this post by Todd Berkowitz at the Gartner blog, and this white paper by Infer.

The bottom line is, business and marketing leaders should be cautious about relying on their ability to accurately identify in-market buyers. And they should be particularly cautious about focusing all - or even most - of their marketing efforts on such buyers. I've discussed this issue in two earlier posts. If you'd like to see my view on this issue, take a look at Why B2B Marketers Need to Care About "Casual Learning" and Why Marketers Shouldn't Go All In on In-Market Buyers.

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Cracking the Code on Revenue Growth

Marketing leaders are increasingly on the hook for growth, and to meet this demand, they must understand how growth happens and where it originates. This post describes the wellsprings of revenue growth that any company can tap.

Today more than ever, marketing leaders are expected to develop strategies and execute programs that will drive revenue growth. In a 2016 global survey of 535 CEOs and 847 CMOs by Accenture Strategy, 50% of the CEOs said their CMO is primarily responsible for driving disruptive growth in their organization. CMOs were ranked ahead of all other C-level executives, including the CEO, the chief strategy officer, and the chief sales officer.

But this responsibility comes with a downside. About a third of the CEOs said the CMO is the first to go when growth targets aren't met.

Since marketing leaders are clearly on the growth hotseat, it's critical for them to understand the dynamics of revenue growth - how it happens or, more accurately, where it originates. There are, in fact, several distinct sources or wellsprings of revenue growth. These structural sources of growth are not dependent on the way a company is organized or on the types of products or services it sells. Instead, they are based on the business and marketing strategies that a company uses to tap into each source.

As you might expect, this topic has been discussed in management and marketing circles for a long time. In a 1957 article for the Harvard Business Review, Igor Ansoff identified four structural sources of revenue growth and four related types of growth strategies:

1. Sales of existing products in existing markets (market penetration strategy)
2. Sales of existing products in new markets (market development strategy)
3. Sales of new products in existing markets (product development strategy)
4. Sales of new products in new markets (diversification strategy)

In a 2004 article in the Harvard Business Review, Michael Treacy and Jim Sims identified five structural sources of revenue growth:

1. Continuing sales to existing customers (base retention)
2. Sales won from the competition (market share gain)
3. New sales in an expanding market (market positioning)
4. Sales from expanding into related markets (adjacent market expansion)
5. Sales from expanding into new, unrelated lines of business (diversification)

Both of these models are insightful, and I've used both when working with clients on business and marketing strategy projects to frame our discussions about how to grow. But over the years, I've expanded on these models to create a more detailed framework of the alternative ways to generate growth. The current version of my framework is depicted in the following diagram:

This framework can be a good tool for stimulating your thinking about how to grow your business. When using the framework, however, it's important to keep a couple of things in mind. First, no single source of growth is likely to provide all of the revenue you need to reach your growth objective. And second, you'll need a distinct game plan to extract the maximum volume of revenue for each source of revenue you choose to pursue.

Producing consistent revenue growth is always a difficult challenge. The good news is that these structural sources of growth are always present. Their existence isn't dependent on the market conditions a company is facing at a particular moment in time, although the volume of revenue that a company can get from each source is greatly influenced by the market and competitive environment. The job of business and marketing leaders is to combine these sources of growth to fit their unique situation.

Illustration courtesy of Paul Lancaster via Flickr CC.

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Marketing Best Practices Need Warning Labels

Business leaders of all kinds regard the identification and implementation of best practices as one of the most powerful management tools at their disposal. And why shouldn't they? It seems immanently reasonable to identify the practices of high-performing companies and then emulate those practices.

Marketing leaders are particularly enamored with best practices. After all, marketing success is difficult to achieve and even harder to sustain because the marketing landscape is always changing, and because it's incredibly hard to predict what marketing messages and methods will win the hearts and minds of potential customers. In these circumstances, it shouldn't be surprising that marketers are so fond of "proven" best practices.

Marketing best practices are often portrayed as effective and reliable tools for achieving marketing success, but the reality is somewhat more complicated. Best practices can be helpful when they are understood correctly and used appropriately. However, it's very easy for marketers to become enthralled with the purported benefits of best practices, and to forget about their limitations.

These days, many of the products we buy come with warning labels which highlight the bad things that can happen if we use the product incorrectly. Maybe marketing best practices should come with a set of warnings to remind marketers of their potential "dangers." I can think of several warnings that could be appropriate, but here are three that are particularly important.

Not Comprehensive

"WARNING:  Marketing success results from the interplay of numerous activities and conditions, not all of which are addressed in these best practices. Therefore, these practices may produce less-than-expected results if other factors required for success are absent."

Most marketing best practices are accompanied by an implicit or explicit claim:  Use these practices and your marketing performance will significantly improve. But here's the problem. Most collections of best practices relate to one aspect of marketing, while marketing success usually results from the combined effects of numerous factors, many of which the best practices don't address. Therefore, best practices never provide a truly comprehensive "formula" that will guarantee large-scale improvement in marketing performance.

And even if you assembled a comprehensive list of the marketing best practices that are relevant to your business, you still wouldn't have the magic formula because marketing success is affected by factors that are beyond the scope and control of marketing. These factors include activities in other areas of the business, economic conditions, the actions of competitors, and the unpredictable responses of potential customers. The bottom line is that best practices may be necessary for improving marketing performance, but they aren't sufficient to guarantee marketing success.

Widespread Use Reduces Effectiveness

"WARNING:  The widespread adoption and use of these best practices will reduce their effectiveness."

One of the most paradoxical characteristics of marketing best practices is that the more widely they are used, the less effective they become. Marketing best practices derive their effectiveness from several sources. A practice can be effective because it is based on sound business principles, or because it resonates with how potential customers make decisions, or because it leverages the capabilities of a particular medium of communication.

But best practices are also highly effective because they are usually exceptional. When a best practice is new, it tends to be used by a relatively small number of companies. Therefore, the practice stands out in the marketplace and more effectively captures the attention of potential customers. The distinctiveness also serves to differentiate the company using the practice from its competitors.

Unfortunately, as more and more companies adopt and use a best practice, it loses the distinctiveness that made it highly effective. Content marketing is a great example of a marketing practice that is now more challenging because it is so widely used.

Based on Hindsight

"WARNING:  These best practices have been identified by evaluating past results, and they may be less effective in the future. Past performance is not a reliable indicator of future results."

Best practices are always based on hindsight. We don't identify a principle or technique as a best practice until we have a fairly significant track record of performance. But as we all know, the marketing environment is constantly evolving. New technologies are appearing at a breathtaking pace, and many of those technologies enable marketing practices that were previously unheard of. Meanwhile, customer expectations are also rapidly changing.

Under these circumstances, marketers should view all best practices as "temporary" and always be alert for developments that may require a change of marketing methods or techniques. It's an overstatement to say that all best practices are obsolete by the time they are recognized as "best." But it's equally wrong to assume that today's best practices will remain unchanged for very long.

Use With Caution

Marketing best practices can help you improve marketing performance and achieve marketing success. But they must be used with caution.

Image courtesy of Travis Wise via Flickr CC.

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