by Jim Lenskold
Six Steps to Drive Breakthrough Marketing With ROI Insight
Profitable growth is a key business priority for every business. Marketing must be prepared not just to handle the demands for steady growth but also to respond to the occasional call for more aggressive growth. Marketing ROI brings the framework for financial analysis and measurements to help guide strategic and tactical decisions toward greater profit contribution. ROI analysis is used to improve marketing effectiveness, trim back unprofitable initiatives, and re-allocate marketing budgets. But how can we best apply these techniques to achieve aggressive growth objectives?
Presented here are six steps that will lead you down the right path. These steps are not complex or unfamiliar to most marketers. The most significant lesson here is to shift the mindset of both the marketing team responsible for planning and the management team seeking aggressive growth.
First let’s give thought to how marketing organizations might typically respond to the challenge to drive 20% or more revenue growth.
- When management asks for an aggressive plan, chances are they will get one. But just one. It will be pulled together using the best insights and experience available, showing how the available budget will reach the right customers with the right message through the right channels. There are rarely any doubts expressed or risks identified; confidence is one of the keys to success. The only limitation is that this may or may not be the plan that can deliver the targeted growth.
- The plan is launched and total revenue is tracked, but potentially not directly attributable to the marketing campaign. The execution may be refined along the way based on performance against the goal without insight into what is or is not working.
- In many cases, ROI analytics are not in place so the discipline to achieve aggressive growth objectives profitably may not be part of the planning process. Over-spending to achieve the targeted growth and driving revenue for less profitable products and services may leave you with revenue growth that his minimal impact on the bottom line.
Let’s look at the six steps for applying ROI to improve your success in generating aggressive growth, profitably.
1. Identify the Greatest Sources of Growth
Marketing profitability is driven by a) the value of the sales generated, b) the likelihood of converting the prospects targeted into incremental sales, and c) the cost to generate that sale. It’s clear that targeting high value and high potential segments will have the greatest impact on profitability. The initial analysis must identify the potential source of this aggressive growth in terms of acquiring, retaining or growing customers as well as determine how to reach and influence the most profitable segments. Can your marketing drive small impacts on high value customers or is it dependent on driving volumes of low value customers?
Another analysis critical to identifying the source of growth is to determine how this new marketing initiative is going to out-perform previous marketing initiatives. This comes from understanding the customer buying funnel, which progresses from unaware prospects to profitable customers. Is your plan designed to just increase the volume of marketing activity with the expectation that the funnel will grow proportionately across every stage of that customer funnel? Or can you get more strategic and identify key stages of the buying funnel that need improvement, especially those toward the later stages of the funnel? At a minimum, you want to ensure your plan is integrated enough to drive sales activity and not just early funnel metrics such as consideration, responses or leads.
2. Develop and Quantify Multiple Paths to Victory
You first want to develop a set of diverse plans and quantify the expected impact through the funnel stages from the change in customer behaviors and perceptions, to sales activity, revenue generation, and profit. Even using your best assumptions, this process will help quantify and compare alternatives. You’ll want to eliminate those initiatives with a low probability of success and concentrate on the few initiatives that are viable.
When driving significant growth, it is likely that you will be pushing into the unknown with some of these initiatives. Instead of betting all of your success on one marketing initiative, look for the opportunity to pursue multiple paths to victory. The greatest barrier to this is likely to be the “do it fast” environment that prioritizes speed over accuracy.
3. Define Key Metrics for Course Correction
The step of quantifying your assumptions through each funnel stage provides added value in defining the key metrics that will serve as “leading indicators.” Tracking and measurements should be designed to capture funnel progression to identify the “leakage” points where potential customers fail to progress to the next stage in the buying process. Drill-down analyses are essential to guide marketing adjustments based on determining that the impact varies by target segments.
If marketing is not making impact on these key metrics early on, we want to identify this early enough to make course corrections in our plan. This may include shifting targets or tactics, addressing specific performance gaps, or eliminating some of the strategies being tested.
4. Launch Broad, Small & Smart
Pursuing multiple initiatives at the launch requires setting up market test environments that are small scale and structured to provide reliable comparisons. We want to start with a broad range of diverse strategies and then narrow our efforts to just the best performers.
When pursuing aggressive growth, it is important to focus on generating impact first and then refining profitability. This is possible when launching on a small scale before going to the full scale effort since the budget amounts are limited. It is easier to take a marketing initiative that is generating a positive impact and refine the tactics to improve profitability than to try to adjust the tactics on a marketing initiative that is not generating sufficient impact. Prioritize your efforts on effectiveness first, then efficiency, to ensure a positive ROI.
5. Move Fast On Leading Indicators
Testing diverse strategies requires a trade off of accuracy over speed so we want to improve the accuracy as soon as possible to get the best initiative out on a larger scale. With larger marketing initiatives that build with time, we need good leading indicators to support prompt decisions instead of waiting for the full buying cycle to show revenue impact. These leading indicators are drawn from the key funnel metrics identified in the planning stage. Leading indicators are not perfect predictors of incremental sales activity so be smart in your assessment. Seek to eliminate the initiatives that are off track and not likely to achieve expected outcomes. For those initiatives that are achieving performance at or above expectations, determine if there is one clear winner or reason to keep more than one approach active on a larger scale. In either case, act quickly to apply your new insights and get the full-scale launch underway.
6. Continue Variations to Hedge Against the Unexpected
Because leading indicators are not always predictive of final outcomes, you want to continue to incorporate as much learning and alternative options as you move forward with the launch. In some cases, you can put 90% of your budget behind the most promising strategy and leave 10% for variations that may unlock more profitable opportunities. This not only allows you to improve upon your marketing, but may provide the insight necessary to change marketing direction if the primary marketing initiative is failing to deliver the expected results.
You can see that these steps are designed to improve success rates during an aggressive growth effort. Of course, building critical knowledge and unlocking the secrets to profitable growth is much more effective and efficient if done prior to receiving that executive mission. Testing diverse strategies, understanding funnel performance, defining key metrics, and running ROI analysis are all critical for building high performance marketing organizations.