What's Required for Effective Demand Generation

CSO Insights (a division of Miller Heiman Group) recently published its 2018-2019 Sales Performance Report. This report describes the findings of the 2018-2019 sales performance survey, which generated responses from nearly 900 global sales leaders.

Sixty-one percent of the respondents were either executive managers or senior sales managers, and respondents represented 23 industries. Half of the respondents (50.8%) were located in North America, and the balance were based in EMEA, APAC, and Latin America.

The CSO Insights study focused specifically on the performance of the sales function, but the survey findings provide valuable insights for everyone involved with B2B demand generation. That's because many of the factors that characterize successful sales performance also apply to the other business functions that play important roles in demand generation.

The Defining Attributes of High Performance

CSO Insights identified three defining attributes of high-performing sales organizations. The study found that respondents from top-performing organizations were more likely than other respondents:

• To say their company has a customer-centric culture
• To report they have a high level of alignment between their sales process and customers' decision-making journey
• To say they are confident in the ability of their sales reps to provide valuable insights and perspectives to potential buyers

These characteristics can be extended and applied to the other business functions involved in demand generation. For example, a marketing organization that excels at demand generation is more likely to:

• Be part of a company with a customer-centric culture
• Align its programs and messaging with the customer buying journey
• Create and use content that provides valuable insights to potential buyers

The authors of the survey report acknowledge this point when they write:  "Looking at all three of these characteristics together shows that . . . [high-performing] organizations are embracing 'customer experience' as a broad concept, of which sales process and salespeople are just one piece."

Lead Generation Needs Significant Improvement

The CSO Insights research highlights several areas where better cross-functional collaboration is needed to improve demand generation performance. One of those areas is lead generation. Survey respondents identified improving lead generation as one of their four primary objectives for the coming 12 months, and they also identified the inability to generate enough qualified leads as the second most significant barrier to achieving demand generation success.

Unfortunately, the CSO Insights report reveals a distressing lack of alignment between sales and marketing when it comes to lead generation. For example, only 29.5% of the survey respondents said their sales and marketing teams have an agreed upon, formal definition of who is a legitimate sales lead. And the level of lead definition alignment between sales and marketing has actually gotten worse since 2014, as the following chart shows.

The low level of sales-marketing alignment also shows up in lead nurturing. Only 33.9% of the survey respondents said their sales and marketing teams have an agreed upon, formal process for nurturing leads. Another 30.8% said they have an informal process - whatever that means.

The CSO Insights research provides more compelling evidence that effective B2B demand generation requires a coordinated effort by both sales and marketing, and that sales-marketing alignment is still very much a work-in-progress.

Top Image Source:  CSO Insights (a Division of Miller Heiman Group).

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Where Customer Experience Stands in 2019

Two recently-published reports paint a decidedly mixed picture of the current state of customer experience (CX) management. Most business leaders now recognize that providing great customer experiences is a critical source of competitive advantage and a primary driver of business performance. So these two reports provide an important snapshot of how far companies have come in their efforts to improve customer experiences.

Forrester's Predictions 2019

In its Predictions 2019 report, Forrester observed that CX performance has been flat for three consecutive years. The report stated that in Forrester's Customer Experience Index research, ". . . few businesses made real gains, most continue to plateau, and some fell back."

Forrester also noted that 89% of surveyed CX professionals do not believe that the ROI of customer experience is well established in their companies. As a result, Forrester predicts that 20% of companies will abandon strategic CX initiatives in 2019 and turn to price reductions to secure short-term gains.

Forrester's report describes the outlook for customer experience management in 2019 in somewhat pessimistic terms:  "There is a strategic and structural mismatch between what CX needs to do and what CX is allowed to do or is capable of doing. 2019 will see that mismatch continue to play out."

The 2019 Global Customer Experience Benchmarking Report

The 2019 Global Customer Experience Benchmarking Report by Dimension Data provides detailed insights about the state of CX around the world. This report was based on a global survey of customer experience professionals that produced 1,114 responses. Respondents were located in 59 countries across the Americas, Asia Pacific, Europe, Australia and New Zealand, and the Middle East and Africa.

I found the overall tone of this report to be fairly pessimistic, but when I reviewed the specific survey findings, I thought they painted a somewhat more optimistic - or at least a more balanced - picture.

For example, there is a broad consensus about the importance of customer experience. Almost nine out of ten of the survey respondents (88.3%) said their organization views customer experience as a competitive differentiator.

The research also found that most companies have a defined customer experience strategy, although only a small minority of companies are measuring the ROI of their CX efforts.

• 36.3% of the respondents said they have a "high level" CX strategy that is aligned to brand positioning
• 30.9% said a CX strategy exists and is recognized as crucial to organizational strategy
• 13.3% said a clear CX strategy exists and its ROI/value is defined and measured
• Only 19.5% of the respondents said they have no formal CX strategy

More than three out of four of the survey respondents (76.7%) indicated they were fairly or very satisfied with their current customer experience capabilities, although only 10.3% said they were very satisfied. Perhaps more important, more than three-fourths of the respondents (77.1%) said their customers would rate their company's CX capabilities as 6 or higher on a 10-point scale (where 0 = poor, and 10 = excellent).

The Dimension Data research also revealed some additional areas of concern. For example, 29.5% of respondents said customer experience is seen as relevant in some business functions only, and that there is no organization-wide ownership of CX. Another 23.9% said CX is owned by individual business functions that are supported by a central CX team.

As I noted earlier, most respondents to this survey said they have some form of a company-wide CX strategy. So it appears that many companies are still leaving the execution of that strategy to individual business functions. This approach can easily produce CX efforts that are not tightly coordinated, and it can also result in customer experiences that are not completely consistent.

Overall, the Dimension Data research indicates that many companies have made substantial progress on CX, but it also shows that more work is needed to deliver consistently great customer experiences.

Image courtesy of frontriver 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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ABM Supports (But Doesn't Create) Better Sales-Marketing Alignment

Some pundits contend that account-based marketing will create better alignment between marketing and sales. In reality, ABM can be a catalyst for improving sales-marketing alignment, but it won't cause such improved alignment to magically materialize. The adoption of ABM will quickly uncover weaknesses in the relationship between your marketing and sales teams, and that's a good thing. Here's why.

One of the key requirements for successful account-based marketing is coordinated efforts by business functions that have historically operated more or less independently. The need for teamwork routinely involves marketing, business development, and sales, and when ABM is used to expand relationships with existing customers, it will also extend to the customer success/customer service functions.

To reap the maximum benefits from ABM, marketing, business development, and sales must jointly develop an engagement plan for each target account. This account plan will usually span several weeks to several months, and will likely include activities by all three functions that must be closely coordinated. In addition, these business functions must be ready to make on-the-fly adjustments to the account plan based on actual buyer responses and changing business conditions at each account.

Therefore, successful ABM requires multiple business functions to work collaboratively on an ongoing basis. This level of coordination is challenging for many companies because it represents a major change in how they have traditionally engaged and managed sales leads.

In many B2B companies, the demand generation process involves a series of "hand-offs" from one business function to another. In essence, the process assumes that marketing, business development, and sales will engage potential buyers sequentially. The metaphor often used is a relay race in which each member of the relay team runs for a specified distance, and then passes the baton to the next runner.

The relay race approach has never been the best way to manage demand generation, and it is particularly problematic when used with ABM. The adoption of ABM has an effect that is similar to reducing the work-in-process inventories in a manufacturing process.

ABM "Lowers the Water Level"

In the discipline of lean manufacturing, inventory is one of the seven primary sources of waste, and most lean practitioners are always looking for ways to reduce inventory levels. To explain one role that inventories play, lean experts use a "rocks in the river" analogy.

In this analogy, inventory is like the water level in a river. As long as the water level is high enough, boats on the river will easily float over any rocks in the stream bed. The high water level makes the rocks invisible and also eliminates the danger they would otherwise pose for boats navigating the river. But if the water level is lowered, the rocks become visible, and the danger they pose becomes clear.

Lean experts say that inventory in a manufacturing system often conceals problems in the manufacturing process. High inventory levels also alleviate the immediate pain caused by the problems, but at a high cost. When inventory levels are lowered, the real problems become visible, and the ramifications of those problems become apparent. So in lean manufacturing, reducing inventories ("lowering the water level") not only eliminates waste, it also points company managers to the real problems that need to be solved.

The adoption of account-based marketing works in a similar way. Because successful ABM demands an unprecedented level of collaboration and coordination across multiple business functions, any lack of collaboration or coordination will quickly become visible. And this will enable company leaders to address the specific problems that are holding back the success of their ABM program.

The bottom line is, ABM can be a catalyst for improving the relationship between marketing, sales, and other business functions because it will make weaknesses in those relationships visible and addressable.

Image courtesy of monikomad via Flickr CC.

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Marketers Are Embracing Advanced Marketing Measurement

Demand Gen Report's 2018 Marketing Measurement & Attribution Benchmark Survey makes one point abundantly clear:  Measuring marketing performance is both a top priority and a major challenge for most B2B marketers.

Eighty-seven percent of the survey respondents said that measuring marketing performance is a growing priority for their company, but more than half (54%) also said their ability to measure and analyze marketing performance needs improvement or is poor/inadequate.

The widespread interest in measuring marketing performance indicates that the demand for performance measurement software is poised to grow substantially. In a September 2018 report, Forrester Research said that marketers spent about $1.09 billion on marketing measurement solutions in 2017, and the firm estimates that spending on such solutions will reach $2.1 billion by 2023.

The Demand Gen research also revealed what is motivating marketers to improve their measurement capabilities. When survey participants were asked what is increasing their need for deeper metrics, the top two drivers identified were:

• The desire to show marketing's impact on pipeline and revenue (70% of respondents)
• The push to show ROI from all marketing investments (60%)

As these results show, the key motivations for improving marketing measurement capabilities are to demonstrate the economic value that marketing creates for the business and to optimize the mix of marketing programs based on economic performance.

Both of these objectives require the use of financial metrics, and this makes marketing measurement more challenging. The heart of the challenge is attribution, which is the process of assigning revenue and costs to marketing programs. 

There are three robust methods for attributing revenue to, and measuring the financial impact of, advertising and marketing programs. Two of these methods - marketing mix modeling (MMM) and multi-touch attribution (MTA) - have been in use for several years. The newest and most sophisticated method is unified marketing measurement (UMM).

Marketing Mix Modeling

Marketing mix modeling involves the use of advanced statistical techniques to estimate the impact of advertising and marketing activities on incremental sales and/or other desired outcomes. Marketing mix models are usually based on many months of historical information about sales and marketing/advertising spending across both digital and offline channels. MMM also incorporates factors such as weather, competitive activity, seasonality, and overall economic conditions.

MMM is a top-down approach that estimates the impact of distinct marketing programs and channels on incremental revenue. These models do not evaluate the actions of individual prospects or customers. Because MMM is backward-looking and doesn't consider the actions and responses of individual people, it doesn't provide the timeliness or level of detailed information that are required to support tactical marketing decisions.

Multi-Touch Attribution

Unlike MMM, multi-touch attribution is a bottom-up approach that analyzes information about the actions and behaviors of individual prospects and customers. Ideally, this data will include every exposure that an individual has had to a marketer's messages and his or her responses (or lack thereof) to those messages.

Most MTA solutions focus exclusively or primarily on estimating the financial impact of digital marketing activities, and their ability to capture the impact of offline marketing activities is limited. Therefore, MTA solutions can overstate the amount of revenue attributable to digital marketing programs. MTA solutions can also be inaccurate because they don't usually account for a baseline of revenue that would exist without any marketing efforts.

Most robust MTA solutions use advanced statistical techniques and computer algorithms to assign revenue to marketing activities, rather than relying on simplistic pre-set "rules" (such as first-touch, last-touch, etc.) that often produce wildly inaccurate results.

Unified Marketing Measurement

Given the inherent limitations of MMM and MTA, a growing number of companies have begun using a method known as unified marketing measurement that leverages the strengths and eliminates the weaknesses of MMM and MTA. UMM solutions are capable of measuring the impact of both digital and offline marketing activities, and they combine a top-down and bottom-up approach. In its report, Forrester estimated that UMM solutions now account for 28% of the measurement solution market. 

What About Cost?

These advanced marketing measurement solutions aren't exactly cheap. In a report published last year, Gartner estimated that companies pay from $100,000 to $250,000 on average for a one year MMM or MTA solution. And the cost can be much higher. 

Notwithstanding the cost, advanced marketing measurement solutions can be a smart investment for many companies. In its report, Forrester noted that these solutions often enable a 15% improvement in marketing ROI, and that overall spending on marketing measurement represents only 0.2% of total marketing spending.

Illustration courtesy of Kari Bluff via Flickr CC.

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Salesforce Study Identifies Major Marketing Trends

Salesforce recently published the fifth edition of its State of Marketing report. The new report is based on a survey that was fielded between August 13th and September 23rd of last year, and produced 4,101 responses from marketing leaders (manager or higher). Survey respondents were from North America, Latin America, Asia-Pacific, and Europe.

The authors of the report observed that today's marketers are facing far different challenges from their predecessors. These new challenges are driven by high customer expectations for overall experiences that match their expectations for product quality. This observation isn't particularly surprising, given that the importance of customer experience has been widely discussed for several years.

The Salesforce survey identified four major trends in marketing.

Marketing Becomes the Orchestrator of Customer Experiences
Providing exceptional end-to-end customer experiences is inherently cross-functional, but marketing is well positioned to function as the hub of customer experience efforts. Nearly half (45%) of the survey respondents said that marketing is leading customer experience initiatives across the business at their company.

This finding is nearly identical with the August 2018 edition of The CMO Survey, in which 45.7% of respondents reported that marketing leads customer experience efforts.The Salesforce survey also found that marketers are forging connections with sales, commerce, and service teams in order to deliver better end-to-end customer experiences.

New Realities Elevate the Importance of Data Unification
It's not news that the effective use of data is critical for marketing success. The Salesforce research found that marketers are using more sources of data to gain a deeper understanding of customer needs, preferences, and behaviors.

According to the survey, the median number of data sources used by marketing organizations will increase from 12 in 2018 to 15 this year. However, more work is needed to unify those data sources. Only 47% of survey respondents said they have a completely unified view of customer data sources.

Marketers Remain Committed to Personalization
The Salesforce survey revealed that marketers' belief in the power of personalization remains strong. More than eight out of ten of the survey respondents said that personalization produces major or moderate improvements in brand building, lead generation, customer retention, customer acquisition, and customer advocacy.

The survey also found that the use of artificial intelligence to power personalization is growing. Twenty-nine percent of respondents in the latest survey reported using AI, up from 20% in 2017. Marketers also appear to be focused on trust and privacy issues. Fifty-one percent of respondents said they are more mindful about balancing personalization and privacy than they were two years ago.

Marketers Strive for Real Time Engagement
Lastly, the Salesforce research found that engaging customers in real time has become marketers' top priority and their biggest challenge. Fifty-two percent of survey respondents said they now engage customers in real time across one or more marketing channels. It also appears that marketers are making their engagements more responsive and dynamic. Fifty-two percent of the survey respondents said they adapt marketing strategy and tactics based on customer interactions.

The annual State of Marketing survey by Salesforce provides an important snapshot of the attitudes and practices of global marketers. I suspect that the new Digital Trends Survey by Econsultancy will address some of the same issues, and it will be interesting to compare the findings of these two studies.

Image source:  Salesforce

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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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