(PLUS...5 QUESTIONS TO GET YOU STARTED)
By Aaron Ross Owens, Bonfire Strategy Director
My wife and I just celebrated six years of marriage last month. I’m incredibly lucky that she hasn’t figured out just how lopsided our marriage is—I’ll never tire of being asked, “How did YOU score her!?” And like many couples, juggling two kids, several moves, medical adventures, and (theoretically) college and retirement savings over those years has led to some…let’s say “passionate” conversations around money. Naturally, there are competing priorities, differences in models passed on from childhood, and gaps in risk tolerance, all butting up against good ol’ inconvenient financial realities.
But my most passionate financial conversations haven’t happened at home with my wife… They’ve happened at work with my colleagues. And, because we’re humans at work, too, the debates are often rooted in the same underlying issues: competing priorities, differences in models passed on from previous companies (or leaders), and gaps in risk tolerance, all butting up against good ol’ inconvenient financial realities.
Of course, the numbers are much bigger at work, so there is more financial incentive to invest in getting the analysis right. While emotions still drive the conversation, showing that you have optimized marketing spend and being able to PROVE performance will make your job easier.
The “quantification” challenge
While corporate spend might be on the rise (according to many economic projections), that trend doesn’t necessarily translate to higher marketing budgets. And as more companies move toward performance-driven aspirations—with mottos like, “If you don’t measure it, you can’t manage it”—you’re competing against budget requests from other departments that are backed by reams of reports and analyses. Initiatives like Six Sigma have pushed operations teams to quantify nearly everything in an organization, allowing them to say, “An $X investment here will result in a $Y boost to the bottom line in Z months.”
Meanwhile, your requests are interpreted (fairly or not) as “An $X investment here will…make things look prettier and will make people feel good about us more…probably.” Not quite as convincing. Especially when you’ve likely seen a decrease in the effectiveness of marketing dollars. Perhaps you’re like many companies today, spending more on marketing than you were five years ago, but with market share and margins that keep getting beat up by the cool and agile new kid on the block. For an executive, it’s not a big leap to say, “More money for marketing hasn’t moved us forward, so I might as well put money somewhere I know it will help.”
But there IS a way out of that trap and into smart marketing budgets that you can actually justify. And it involves asking yourself five budgeting questions—questions that will transform not just the way you spend, but also the way you perform in a commoditized sea of competitors.
Before we dive into these questions, though, it’s important to understand why your current dollars aren’t producing the same results they once did.
Why are your marketing dollars falling flat?
Startups and insurgent brands are able to disrupt old markets with marketing budgets so small that they would be rounding errors for the budgets of their entrenched competition. Their ability to carve out market share in just a few years, for pennies on your dollar, is only possible because they look for the biggest levers available to them. Specifically, they only invest dollars where they can prove they get a fast return.
So what are the levers they are pulling? Here are a few standouts… (Remember to use our introspective budget questions to examine just how your investments compare.)
Highly leveraged workforces
There is value in building a full-time team of specialized professionals who are all experts in their own marketing niches. But when you hire fixed resources, they can’t always be called upon to execute a new strategy or tackle a different challenge. By leveraging freelancers and agencies, however, you are able to quickly move your dollars around to fund your highest-priority initiatives without needing to “go back to the well.” (Read more about how to run a marketing team of one.)
Budget Question #1: Which FTEs do you have budgeted in 2018 that might be better invested in on-demand support that is perfect for the job every time?
Marketing automation platforms (Pardot, Marketo, SharpSpring, HubSpot, etc.) aren’t silver bullets. They’re not like virus protection where you just install the product and you’re covered. You have to be consistent and aligned in your implementation and ongoing use of the platform. But any company serious about growth and quantifying and optimizing marketing investments must have a marketing automation platform in place.
If you haven’t implemented a marketing automation platform, then carve out $9,000 – $30,000 in 2018 and get one going. And if you have a marketing budget over $150k, you’ll almost surely make that up in optimized marketing spend next year. (For a little help finding the right tool, check out our helpful marketing automation guide.)
If you already have your marketing automation platform in place, start by investing some resources in ensuring your lead qualification is fully aligned with your sales team. Then focus on ensuring that you are tracking the results of every campaign:
- which leads are sourced from which channels,
- which channels are producing revenue at the lowest marketing cost per dollar of revenue,
- which campaigns are most effective in reaching target audiences, etc.
These questions take time and patience to answer, but once you can answer them with confidence, your executive team will have a hard time ignoring your budget requests.
Budget Question #2: What is the effectiveness of your marketing automation platform, and what are the next steps in moving it toward being a self-paid asset on your marketing team?
Large established brands are often surprised by just how powerful targeted social ads can be in reaching their EXACT right prospects, building a powerful new lead source virtually overnight. The smaller aggressive competition is using social ads because they allow them a very affordable, measurable, and fast way to reach the people (i.e. your clients) they need to engage.
If you are a consumer brand, focus on Instagram and Facebook. If you are a B2B brand, focus on LinkedIn and Facebook. (But don’t get too married to a platform… There is gold to mine on each.)
On top of attracting cold leads using targeted social ads, incorporate some retargeting ads in your mix. This is when someone lands on your website and then starts seeing ads all over the internet calling them to take action back on your website (i.e. “Don’t forget to register” after visiting your webinar page or “Discount on widgets ending tomorrow” after abandoning their shopping cart). A good retargeting campaign can increase conversions by up to 300% in some cases, even with only a fraction of the total digital ad budget.
Budget Question #3: What percentage of money budgeted toward traditional paid ads (print, physical signs, banner ads, etc.) or toward direct mail can you reallocate to targeted social ads?
Now you might be asking, “What should I actually advertise on those social ads?” That brings us to…
You’ve been hearing about the importance of content marketing for years now. But the tired old strategy of pumping out tons of content across every channel several times a week is expensive and broken. There is long-term value in consistent good content (SEO, lead nurturing, etc.), but you’ll get better lead generation results by focusing on high-velocity content that quickly turns cold traffic into warm leads.
I have two questions that will determine the true value of your existing content:
- How are you converting visitors to your mailing list? (Your content will help people find and trust you, so make sure you are converting visitors to subscribers. A great conversion rate for organic traffic on content pages is between 2-3%.)
- What is the trust velocity of your content? (For instance, a blog post helps to earn a few “trust points” from the visitor; whereas an eBook can earn much more trust by proving that you know exactly how to solve the prospect’s pain…and a webinar does even more, even faster.)
On that second point, you should focus on developing a few high-velocity premium content pieces that can take a lead from cold to qualified (or darn close) in a single session. In our experience, webinars are the absolute most effective content for doing exactly this. When coupled with an effective lead nurturing campaign that puts the rest of your content to work and an automated process for initial sales follow-up (all using your marketing automation platform), webinars can become truly deadly to your competition.
Budget Question #4: Where can you shift your content investments to earn greater velocity?
If you are producing two blog posts per week, peel away one of those a week and produce a great webinar every month or two. If you’re only producing one or two blog posts per month, then ditch your blog altogether (I know… I’ll upset some content purists out there… I’m okay with that because I only care about results), and invest in a great webinar every quarter.
What should you be measuring?
Okay, now that you have some new levers to pull, what should you be measuring and reporting to your executive team? I’m going to go against the grain here (yes, again). I’ve worked closely with some of the most hard-nosed executive teams, boards of directors, private equity portfolio managers, etc., and I’ve never met a single serious (non-marketing) executive who cared two nickels about things like audience exposure, web visits, or even costs per lead.
There is one metric that always gets wide eyes (and looser purse strings) from senior executives: additional revenue per dollar of marketing investment. They want to hear you say, “For every $X spent on marketing, we earn $Y in revenue.”
One crazy example makes this truth super clear. I was once hired to run strategic communications for an energy company whose private equity owners wanted to eliminate the already-paltry marketing budget of $185k (about 0.05% of their $400M in revenue). They had been chipping away at the marketing budget for years and were frustrated that their growth had stagnated to almost nothing (even shrinking some years). It fell on our team's shoulders to help convince the board that our team should keep some of our marketing budget (they had suggested we keep half if we could convince them).
We dove deep and were able to calculate exactly what it cost us to get a new customer under the “old way of doing business.” Then we built a new strategy based on the proven ROI of various marketing channels. Finally, we got really gutsy… We actually asked for MORE money instead of proposing to take less. We figured we were dead men walking anyway, so why not.
And it worked! Because we could confidently say, “For every dollar invested in marketing, you’ll get $X in new annual recurring revenue,” we walked out of that meeting with a commitment from our board to give us $1.8M the following year…10x the previous budget (and 20x what they were originally suggesting we might be able to keep). Then the next year, we nearly doubled the investment again to $3M.
And it paid off for the company, too. In both of those two years, we were the fastest-growing natural gas utility in the U.S., and our valuation doubled in that same period. Admittedly, our marketing wasn’t the only driver of that huge valuation jump, but it played a major role. So our private equity owners made huge gains by selling the (now) growth-optimized company—at a record-setting EBITDA multiple—for $1.9B (mostly in cash) at the end of those two years.
The lesson? It’s your job to help your senior leaders identify opportunities to invest in marketing instead of spend on marketing. And the best way to do that is to show them that for every $X spent on marketing, they add $Y in revenue. Everything else is just noise to them (yet, useful for you as you optimize this bottom-line metric, so don’t ignore the other metrics… Just don’t worry about reporting them up).
Budget Question #5: By systematizing your marketing operation, how much money will the company earn for each $1 invested in marketing?
By focusing on all of the different levers discussed above, you’ll have everything you need to determine this metric AND optimize it.
If you made it to this point of the post and are looking for a proven method for answering these five budget questions, connect with us and let us walk you through best practices on marketing budgets. Take advantage of our scar tissue and save yourself the stress.
About the Author
Aaron Owens is the Strategy Director for Bonfire Effect. His strategies have helped double and triple growth rates for companies across energy, tech, government services, health and wellness, and manufacturing.