From one point of view, the reason that marketers really believe they face these problems uncovered in recent research from Accountability Information Management, Inc. (AIM), a leading B2B research company, is because there is just too much going on. Things get confusing fast, and we often overlook and become overwhelmed, missing what’s right in front of us. In other words, we think we have a problem, but actually, there’s a solution hiding right behind it.
On the other hand, AIM’s recent research found that marketers have overlooked these solutions to three problems repeatedly – perhaps the most important three that all marketers and sales people face: (1) effective communication, (2) time and resource constraints, and (3) tracking/ROI. The solutions, however, do exist within their reach – though not through some outside software entity or new technology. They simply need to be reminded that they exist!
According to the AIM research, marketers said that main problem was communicating effectively — demonstrating their value propositions to customers in a way that builds trust, encourages trial and creates brand awareness.
However, this problem – effective communication of a value proposition – has been a problem all along for marketers, hasn’t it? Volumes have been written about trying to solve it, and yet marketers still struggle with how to do it right.
The solution to this problem lies is within reach of the marketers themselves – and this white paper will demonstrate where and how they can find the solutions for all three problems they say they have.
In the end, discipline, practice and understanding of today’s marketing world is the responsibility of the marketers – whether shaping the internal team or hiring the right resources. Instead of being enamored with new technologies, marketers need to return to basics which have stood not only the test of time for the solutions; they are, as will be pointed out, the way to eliminate these perceived problems.
Why do marketers still feel so powerless when it comes to communicating?
There are a lot of reasons for the struggle to communicate effectively.
People hear what they want to hear. And they see what they want to see. But then, they always have!
The nature of communications is to get the RECEIVER of a message to see and hear what the SENDER is sending. That basic rule never changes. What has changed is the VOLUME of messages being sent.
If you count the nerve connections in the cerebral cortex one per second, you will finish counting 32 million years later. The number of possible ways to arrange these connections is larger than the number of elementary particles in the known universe. Now, memory depends on making these connections connect the way WE want them to connect. When that happens, it’s called “effective communications.” That is when your company achieves top of mind awareness, preference AND response.
But one “message” isn’t going to do that. Effective communication has always been a function of clear messaging AND frequency. Today, because of technology, frequency gets preference and clear messaging suffers.
For example, one marketer from the research said that their customers are “largely ambivalent when it comes to choosing a firm in the professional services industry.” Where do these “mixed feelings” come from? Is it the fault of the marketer being unable to clarify the “value proposition?” Is it the deluge of information the customer receives day in and day out[1]? Or is it the distrust such a large volume of messages brings out?
In other words, when the marketer labels his audience “ambivalent,” is it true or has the marketer failed to communicate or cut through the enormous clutter out there? Even with a “perfect” message, what is the guarantee it can break through the clutter?
Effective Communication has never been easy, but it has always been possible.
Elmer Leterman put it this way: “Lots of things may be wrong [in a sale], but I would venture to guess that above everything else, they [the sales people or in this case, the value proposition being put forth] have never learned how to create a favorable atmosphere for a sale before the act of selling has begun.”
Marketers forget how to create the “favorable atmosphere.”
Sales has always been a bad word. No one likes “to be sold.” And most “messages” being sent are just that: empty sales messages.[2] People like to buy and think that they are in control. But people buy for only two reasons: to protect what they have, or to gain something. That “something” is the value proposition – and it’s the value proposition that has to be communicated effectively.
The value proposition must be put out there and understood by BOTH the buyer and the seller, the sender and the receiver. The problem expressed by the marketers in the AIM research is that they can’t seem to frame that proposition correctly (in a way that builds trust, encourages trial and creates brand awareness). So whose fault is that? Because the reason that failure happens is that the target audience can’t differentiate between value propositions!
Differentiation is Everything
The main issue of communicating effectively in marketing is differentiation.
If you are the marketer sending messages to receivers (buyers), it’s your job to “connect” with what those receivers need and want. The real problem is that there is a big difference between “wanting” and “needing,” and marketers sometimes forget the difference, letting their value propositions fall apart.
I might need a flashlight, but I may or may not want an Aluminum LED flashlight with 220 Lumens in a high-low-flashing mode that’s extendable for a more focused light and runs on 2 AA batteries and is smaller than 6 inches. An effective communication is one that matches what the receiver wants or needs to the message being sent. Timing is also very important to sending messages, perhaps more important than anyone realizes.[3]
What does a value proposition have to do with either wanting or needing?
The definition of “value proposition” is an innovation, service, or feature intended to make a company or product attractive to customers. In the above example, it’s the features and functions around the product or service that begin the differentiation in the eyes of the receiver. However, the receiver must WANT or NEED the product being pitched to begin with. Or the pitch must “entice” the receiver into LEARNING and then WANTING the product (or convincing himself that he needs and/or wants it).[4]
That’s why BENEFITS have always been the preferred way to shape a value proposition. What is the benefit of the flashlight? SECURITY.
Starting Point
Marketers sometimes begin on the wrong premise: that everyone should naturally want what they sell.[5]
The fact is, they don’t. You want certain things, and you need other things. Sometimes you want and need the same thing.
When David Ogilvy wrote this famous headline — “At 60 miles an hour the loudest noise in the new Rolls-Royce comes from the electric clock” — the result was the longest running and most successful ad Rolls-Royce had at the time.
Yet probably one out of one hundred people who read that ad bought a Rolls. However, almost everyone who saw the ad read it. Ogilvy’s ability to shape a value proposition in copy is a lesson marketers forget. The Rolls, after all, is just a car, and a car gets you from point A to point B. Just like a flashlight will produce light. But in Ogilvy language, it wasn’t just a car: it was luxury. And who wants to just drive a car when you can buy luxury? Or “pretend” you’re driving luxury when you’re not!
Therefore, effective value propositions are more about benefits than features and functions.
Value propositions in marketing are the benefits intended to make a company or product attractive to customers. Like Ogilvy’s ticking of the clock.
Value propositions should be the focus for a marketer. More important, however, marketers must understand there is a difference between value-added and added-value propositions if they are going to communicate effectively.
Value Added or Added Value?
John Caslione, a noted businessman and thinker put it this way:
A Value-Added Strategy should not be confused with an Added-Value Sales approach to marketing products and services. While many companies use the terms interchangeably, the difference between the two is significant. It is also essential that companies understand the difference between the two; otherwise Value-Added cannot be used effectively to develop marketing differentiation strategy.[6]
In other words, Value-Added is the key to a successful value proposition that differentiates!
Sometimes, it’s the subtle differentiation that will make or break a strategy. And Caslione tells us that both types of propositions are important; however, Value-Added is far more important than the adding value when it comes to really making differentiation work and communicating successfully.
We believe focusing on just adding value– they simply throw out feature after feature thinking that this is what their audience is looking for – is what frustrates marketers.
Value-Added propositions work better: they entice the audience to NEED or WANT the thing.[7]
Caslione continued:
With “Added-Value,” a company focuses on the same objective as in a “Value-Added” Strategy—improving the customer’s bottom line—but it does so by quantifying the tangible benefits a customer receives from using the actual products and services the supplier sells. In other words, the source of the value delivered by the supplier to the customer, i.e., increased customer revenues, reduced or avoided customer costs has as its source the supplier’s product or service.
So, “added value” is essentially a product’s features and functions. Most companies stopping there make offers and products seem so similar. For example, here are 13 website headlines from a simple Google search for “kitchen remodelers.” Which one compels you to WANT or NEED their services?
- Kitchen Remodeling has never been easier. Financing Available.
- We’re Putting your Dreams to Work. 100% Satisfaction Guaranteed.
- A First Class Kitchen at Every Budget
- Your Project – Your Way
- Exceptional Home Remodeling Services
- The Best Kitchen Remodelers in ________
- Request a Consultation
- Your Kitchen Remodeling Experts
- The smart way to build your next project. We put you in charge.
- Need Inspiration? WE SPECIALIZE IN CREATING MAGNIFICENT CUSTOM SPACES THAT SUIT YOUR LIFESTYLE AND BUDGET IN A ONE-STOP EXPERIENCE.
- REINVENT YOUR KITCHEN
- START YOUR DREAM KITCHEN WITH OUR KITCHEN PLANNER
- GET INSPIRED. Visit our Gallery
None of these companies have thought through their value propositions and, therefore, they sound alike. They prevent the visitor/prospect from immediately differentiating what they do from each other to start the journey toward WANTING or NEEDING.
Put yourself (objectively) into re-reading them and try to figure out the difference.
For example, “Your project…your way.” Why would you hire someone that isn’t going to “take charge” and bring their expertise to bear on the problem? Inspiration? There are plenty of websites to get you inspired (I.e., Houzz offers visual candy for remodeling kitchens).
Therefore, something like “Find out why 9 out of 10 of our customers are now living in their dream kitchens” would work as a more compelling headline on a website. And remember: all websites are advertisements!
These companies failed to think beyond the “added value” they bring to the marketplace and end up wasting the prospect’s time with “vanilla” propositions that prevent the visitor from differentiating their company’s services.
Caslione suggests turning your attention to “value-added” propositions and strategies which are far superior. Here’s what he says:
A Value-Added Strategy helps overcome the issue of product parity by taking the relationship to a higher level. Value-Added Strategies connect the two companies at the organizational level, not the product level. Value-Added is organizationally based value, creating a relationship between supplier and customer through the development of multiple cross-functional department relationships and through the integration of inter-company systems and processes.[8]
Those are a lot of words but that is exactly what Ogilvy did in his Rolls ad: he created, through storytelling, a relationship between the Rolls company and the reader of the ad. Even if you never bought a Rolls, you are going to think about what he wrote in relationship to your own vehicle. Perhaps someday you will buy one because your awareness of a Rolls has changed forever.
Creating Value-added Propositions is hard to do on a website, but something on the website MUST entice the prospect to begin the relationship journey with your company.
If marketers are telling us that “effective communication” is what they really need, then that effectiveness starts with the messages being sent to the marketplace!
There’s a software company that has figured out how to measure the gaps between what a company is saying about itself, and what its customers and prospects are saying about the company using social media posts. In other words, they measure the difference between what the company is sending and what the audience is receiving. They found in certain instances there is a wide gap between what the company thinks it is projecting with what customers are receiving.
Effective Communication always boils down to senders and receivers, but in today’s fast-paced world, you are (for better or worse) both a sender and a receiver. The question is, do you create your value-added proposition and then keep changing it because you start receiving contrary messages? Or do you stick to your strategy because you’ve thought it through and are reaching the people you want to reach?
There is no “time to think” which frustrates many marketers and therefore, they keep changing their messages.[9]
Therefore, communicating your value-added propositions is critical to success. Your messages must match what your audience is looking for or, as in the case of Ogilvy, tell stories that will help the targets understand your value-added propositions.[10]
Service and Unduplicated Knowledge.
Take Interline. Our company has been in business for over 30 years. Our two pillars upon which the company was built haven’t changed in all that time: service and unduplicated knowledge. The demonstration of those pillars (our value-added propositions) is in everything we do through our communications, including this white paper.
Because we sell “intangible” things, we had to figure out early on how to communicate the intangible. How do you communicate “service?” One way is by answering the phone in two rings. When people rushed to automate their answering devices (and still do), Interline has human beings answer (by the way, the amount of robo calls went through the roof since COVID).
My English study background came in handy to clarify these pillars: you can TELL people, or you can SHOW people.
Showing is always more powerful than telling, though you need both (like you need both value-added and added-value propositions).
As the world changed, we changed with it, and our value-added propositions changed, but the pillars remained the same.
Those words we settled on created the opportunity to do both added-value and value-added strategies and have kept us standing all these years. We are a small company, but you will not find a company like ours that has stood the test of time through effective communication in the stories around service and unduplicated knowledge.
What your company must do is formulate your value propositions and then communicate them over and repeatedly.
That’s what effective messaging is all about. You can see this with larger companies, like Kohler. “The Bold Look of Kohler” has been around for decades and continues to reinforce everything about what that company does and says. By consistently communicating that message through added-value and value-added propositions, Kohler competes effectively with everyone in their sphere – and continues to do so even when new competitors arrive on the scene.[11]
The conclusion?
Marketers need the right Value-added proposition communicated over and repeatedly. In other words, they need a cohesive strategy, and as Jim Mattis said in his book, Call Sign Chaos, “Strategy is hard, unless you’re a dilettante. You must think until your head hurts.”
Time and Resource Constraints
The second problem marketers said that they faced in AIM’s research was not having enough time and resources to do what they need to do.
They told AIM that a marketing strategy can only be placed into action if adequate resources are available. Some of the managers interviewed said a lack of either time, knowledge, or funding were obstacles for their marketing goals.
They bemoaned their fate.
Yet, what else is new? Matching time and resources to a strategy has always been the marketers’ plight. That struggle can be boiled down to this question:
Do you bend the strategy to fit the resources, or the resources to fit the strategy?
Some people don’t like compromise. Marketers who complain about not having enough of this or that haven’t realized that it’s not a question of resources: it’s a question of strategy.
If you create a strategy and realize you don’t have the resources, you have two choices: find the resources or change the strategy. If you don’t do one or the other, you will surely fail.
Likewise, if you create a strategy and realize you have too many resources, keeping them will lead to failure. Strategy, in short, is everything.
One of my first bosses in advertising told me when I went in seeking to fire one of my copywriters, “You have to run with the horses you have.”
“But he doesn’t want to write anything but ads,” I said.
“Figure it out,” the boss replied.
My strategy was to change resources to fit the work coming into the shop — 75% of my work at that time was collateral (catalogs, datasheets, PR, etc.) but this copywriter only wanted to write ads which in his mind, was the only type of writing that demonstrated his creativity[12].
Even though I eventually got my way a few months later when we lost a big account (that was the only reason agencies in those days let people go), bending resources to match a strategy is always difficult.
In fact, assessment of resources to match a strategy is what companies must always do. Elon Musk laid off more than 6,000 people at Twitter after taking it over, and the company survives today. He bent the resources to his strategy.
Time/resource constraint is always there. Saying you don’t have enough time or resources is admitting the obvious.
Companies must deal with the reality of what they NEED to do, not what they WANT to do.[13] I remember talking to an engineer one time who said, “Give me enough money and I can put a man on the moon.” The point was (we were discussing the latest technical change management wanted for a product), that there wasn’t enough money resource to do what management wanted. They took a short cut and of course disaster followed the product launch.
Artificial Intelligence
One way to mitigate the resource and time constraints managers expressed in the AIM research is the use of AI. Whether it be management of digital assets, copywriting, content creation, etc., the marketers who participated in the AIM study saw AI as an affordable opportunity to satisfy their problem of time and resources.
However, there is a danger in AI (they don’t call it artificial for nothing).
In What To Do About ChatGPT for Planning Business Strategy, we asked the Chat itself why you shouldn’t use it to collaborate in creating a business strategy. The answer the Chat gave was stunning[14]. The point of my post was that you can’t be limited in the actions you need to take by AI…that AI was a limiting factor. Anticipate, react and adapt remains the only viable business strategy. That strategy was Alexander the Great’s. And he didn’t need a computer or AI to conquer the world.[15]
Because all the talk is AI, people are rushing to use AI without thinking things through, and it will eventually end in tragedy. AI isn’t going to help balance your resources with your strategy. It might save some time, but there will be a price for those savings: it will compromise your ability to execute the strategy by short circuiting the results you end up with. One of AI’s limiting factors is that it is NOT creative. Creativity is the realm of human beings…and when that ends, well, so might the world!
Besides, how many AI-generated emails can you receive before you explode that have opening lines like: “I hope all well at your end” or “I hope all is okay with you.” or “I recently visited your company website after doing a Google search and thought it would be good to connect.” or “Checking back in to see if any staffing needs have arisen since we spoke in June.” (never spoke) or “Pushing this message to the top of your inbox.”
AI can only do so much.
Tracking/ROI
ROI and tracking were the third problem marketers said they faced, or performance metrics. When asked which metrics were most valuable, many cited “cost per lead.” One marketer put it this way; “Our channels cannibalize themselves and thus were hard to track individually.”
Though dated, the illustration from 1885 makes the argument for frequency in advertising – or in any other type of communication a marketer is trying to do. But it also is a basic lesson in ROI.
If you read the 1885 document, ask yourself, how would you track the ROI on that product even in 1885?
Because the same pattern is true today: people must see things many times before messages sink in. In the research AIM conducted, the marketers who were interviewed made several observations which revealed, again, their possible misunderstanding of ROI. Let’s clarify by examining some of their beliefs (in Bold below).
- Awareness is a particularly hard aspect of marketing to track. Awareness is the easiest metric. For example, using the proper tools, you can deploy an email and find out who received it, opened it, clicked in it. Even if you deploy in print, you can build in receiving factors (i.e., exclusive email addresses for more information). Most media outlets have statistics on how many of their audience actively engage with them. Whether you believe them or not is another discussion. There’s also independent research you can conduct to get a “reading.” You can, for example, define “awareness” as “only people who open my email.” You can then measure that against the people who received it and get a number and call it an awareness score. That’s your benchmark, and when you send your next one you can measure against that benchmark to see if you beat it, or it beat you!
- Awareness is harder to track than click-thru or impressions, for example, as there is less solid data to be found. This is explained in the prior bullet – because click-thrus (or HITS) are actionable items, not awareness items. Besides, a click-thru creates an impression! When someone clicks a link in an email and comes to a designated place you’ve set up, that is not just a click-thru: it’s a lead, it’s an awareness generator. Technology exists to tell you who that is if you are inclined to know. Awareness must calculate not only those who click, but those that do not click. Both have something to do with awareness. In addition, finding out what the media outlet knows about its audience involvement (awareness) rate is important.[16]
- Difficulty with metrics is the false or misleading insights that they can provide on their face (i.e., vanity metrics). A number is just a number; the calculation might be wrong, but even then, numbers themselves do not generate the insight. The analysis of the numbers does that. Examination of the numbers within the context of the deployment of the message gives insight. There is always a reason behind a number that was produced by a tactic you are using. Sometimes it takes extra effort, but it is effort worthwhile. For example, response rates dropped during COVID because professionals were working at home – and having their emails sometimes forwarded to their personal email accounts. Concluding that email is no longer viable would have been a miscalculation, which some companies still maintain![17]
- Differences between lead generation (an exercise in quantity) and demand generation (focuses on the operations management side). Marketers love to make up words that confuse issues, and, in this case, there is no difference between lead and demand generation though the AIM participants thought so. Both are adjectives modifying the noun, generation. Every tactic a marketer employes generates something. Zero is a rarity in marketing, and while not impossible (i.e., we’ve seen it and were always able to explain it), the focus should be on the strategy and the value-added proposition, then the tactic. In other words, once you have your message, then and only then do you decide how to deploy it and shape the ROI to tell you how successful that deployment was. Think of it this way: a tactic used to execute a strategy will generate something. It’s up to the marketer to figure out that “something” BEFORE deciding on the tactic. The next section on ROI Basics will help clarify this important topic.
- The finance department viewed awareness unenthusiastically due to the low ROI of the practice. Battling the finance department has always been the marketer’s fight, but what does “low” ROI mean? If knowledge is comparison, saying something is “low” must mean you have a “high” in mind. The next section of this white paper will outline ROI methodology for your consideration. But the bottom line is really that marketing is an investment, and that like all investments, sometimes it goes up, and sometimes it goes down. Finance’s job is to always say things are too costly…that marketing costs too much. The counter argument, however, once you have your metrics is simple: this is what you will lose if you don’t spend that. There has always been a relationship between the spending and the return. No one said it is an easy calculation, but let’s review some of the basics to help you fight the good fight!
ROI Basics
Return on Investment is what ROI stands for, so the questions to ask upfront are, 1)what are you investing, and 2)what do you expect in return? Numbers are ALWAYS involved in ROI. Not feelings.
The answers to what you are investing are simple:
- Time
- Money
How much is your time worth? If time equals money, how much are we willing to spend to get “x” back for that spend?
Under money you can calculate deployment costs, shipping and other costs like advertising. Under money you can and should also factor in creative costs. Direct marketers are experts at developing COGs (Cost of Goods sold) and are always able to calculate with extreme accuracy what mailings would cost. Their early work in this area is really the basis for all ROI calculations. The USPS has a website calculator to help you do this (hint: you don’t have to be mailing to use the calculator). The factors in the calculator (i.e., lists) apply not only to direct mail, but to email and other tactics.
Development costs can include calculating handling incoming phone calls if you are using response vehicles like phone numbers, or website forms to get “information.” If you are directing people to your ecommerce site, you must calculate those costs as well.
As mentioned, ROI isn’t easy, but we’re about to make it easier. Since the people AIM talked to mentioned that the “cost per lead” is the most important metric and a difficult one to calculate, the real question then becomes: how many leads do you need? Or perhaps more accurately, what is a lead?
How Many Leads Are Enough?
We used to (and still do) get this question of how many leads are enough. And our answer always asks first how the person asking defines “lead,” we eventually have the same answer for “how many:” ONE!
If it is the right one. You see, it’s not the QUANTITY but the QUALITY that is the deciding factor in true ROI calculations.
How does a company get to the number that’s right for that company when calculating ROI?
You always start with a Revenue Target for your marketing. The Revenue Target is what you expect to make (expressed in a dollar amount) because of a marketing campaign. If it seems like you are putting the cart before the horse, think about it this way: if you want to make a million dollars, how much would you invest to do that? If you calculate ROI in the way we are about to explain, you will never have to worry about talking to your CFO.
Now there are many factors in calculating a Revenue Target, like average cost for a product, length of time to make a sale, market potentials, etc. But in the end, you always need a number to shoot at! Arriving at that number will help you also figure out the tactics you need to hit the target!
Revenue Targets, Etc.
You have heard of reverse engineering? Start your marketing campaign by deciding how much money you want to make! Don’t worry about HOW (tactics) just yet; but use your knowledge of your product, pricing, and what you have available to calculate a Revenue Target besides other numbers you’ll need.
Let’s start with some definitions and numbers you will help do this.
- Revenue Target (RT) = the goal you set for yourself. No one can tell you what this is; you must “figure it out” yourself. For example, let’s say your net revenue increased in the last quarter by 12%. Do you expect that to happen again? A conservative revenue target” for a marketing campaign might be to increase net revenue by 2%. Multiply your 2% times your net earnings and you get your revenue target! So if your net earnings were $51,200,000, then your Revenue Target might be $1,024,000.
- Win-to-Loss Ratio = the number of “nos” you need to get a “yes.” No one hits 100%. Ask any telemarketer if they know their Win-to-Loss ratio, and if they can’t tell you, they are not a real telemarketer. In any sales situation, experienced salespeople know there are a certain number of “Nos” before you get to the “Yes.” And while you might believe “The Sale Begins when the Customer Says No,”[18] this W/L ratio is important to determining the number of leads you will need to hit your Revenue Target. You might get blank looks when you ask your sales people if they know their win-to-loss ratio. Ask them to figure it out!
- Average Sale (A$) = what your average customer buys from you. This calculation can come from accounting. Depending on the number of customers you have, there will be a range, but the range will produce an average. That average is what you should use in this ROI calculation. Of course, there are different ways to calculate the average (i.e., by throwing out the highest and lowest, etc.). Be as realistic as possible in calculating it, however.
These are the numbers you need to talk intelligently about ROI. The next section will help calculate the W/L ratio, which is very important to the process.
How to Calculate your Win-to-Loss Ratio
- Find out the total number of leads you generated in a year (ignore where they came from for now). If you don’t have that number, don’t panic. Start finding out now! Leads came from a variety of places. Do you count existing companies as a “lead?” Only new customers? The key is to be consistent.
If after your efforts you can’t really tell how many leads you generated in a year, take your total new sales for that year. Divide that by your average sale and you’ll get a best-guess estimate of how many possible leads you may have gotten, assuming you sold every lead. This is not the most accurate way, so start now determining where your leads come from (including having people who answer your phone ask how the person calling found out about you!)
- Find out the total number of new customers you attained (ignore where they came from for now). This answer comes from accounting and is arrived at comparing one year of customers to the other. For example, if you have 1200 customers in 2022 and 1300 in 2023, your total new customers would be 100. Keep in mind that you may have lost customers, too, but for this calculation, we only need “new” ones.
- Use this formula to determine your win to loss ratio:
LEADS ÷ NEW CUSTOMERS = W:L ratio, or the number of “hits” to get a customer
For example, if you generated 800 leads, divide that by the number of new customers you gained (in this exercise we’ll use the above example, and say 100). 800 Leads ÷ 100 new customers = 8.
Your W/L ratio will be 8:1. In other words, It takes 8 “hits” to get one new customer. Or, it takes 7 “Nos” to get one “Yes.”
Likewise, 500 leads and 25 new customers would produce a 20:1 W/L ratio. And so on.
Now it becomes a question of how many customers (new) do you want or need to hit a revenue target? How much are you willing to pay for these customers? How many leads do you need to generate these customers.
People often forget about recurring revenue from existing customers. It’s up to you if you count that or not, but for our purposes, we’re only interested in the incremental volume of new customers.
What is a Lead?
As we answer these questions, it is important to define a “lead.” The definition is often classified by marketers as “hot” or “cold” or “neutral.” But what are they classifying?
Forget those classifications and define a lead for yourself. Is it a person who expresses some interest? Someone who has asked for a quotation or a proposal? What is the sales cycle for your product? Does the “lead” have to be nurtured for a period?
It is certainly not a “name” or a “function.” Clearly defining “lead” will help the marketer’s overall ROI metric and subsequent discussions with the CFO.
Once you have an idea of these initial numbers, you are ready to conduct ROI calculations, which is expressed in the following formula:
(RT ÷ A$) x W:L Ratio = # of Leads Needed
Or Revenue Target divided by W:L Ratio is equal to the # of Leads need to hit the Revenue Target.
Say your Revenue Target is a million dollars. You have calculated what each of your current customers spend with you, and on average, they spend $25,000. The question then becomes, how many new customers do you need who spend that to get to hit your revenue target?
The answer is math as shown in the above formula. Divide your Revenue Target by your Average Sale and multiple by your W/L ratio. Or in this case, $1,000,000 divided by $25,000 is 40 times the W:L Ratio of 20 means you’ll need 800 leads to reach your Revenue Target of a million dollars (assuming they will buy the average sale you have calculated).
Now before you say it’s not that simple, think about all the lead funneling going on, all the promises of filling up your funnel with leads, and more leads. How can anyone make a promise to fill a sales funnel without knowing this math involved?
Are you certain you get emails offering you leads of top Executives? “We can help you reach out to President, VP, Director etc.”
These are just names. A name is not a lead unless it has gone through your qualification process.
This is why perhaps the most important thing you can do in your quest for ROI is to define what is a lead, and what it is not. Marketers asking for a “cost per lead” need to have all these other answers at their fingertips to get and maintain true ROI.
Conclusions
What marketers may or may not want…the problems they face…it all depends on their definitions of the words they use, and the tactics they use. Saying that effective communication is a problem…that time and resource constraints prevent them from achieving their goals…or that measuring ROI is difficult just avoids the truth: that it is within the marketer’s grasp to solve these problems.
Instead of focusing on frequency of messages, perhaps paying more attention to the shaping of the message itself works better. Instead of blaming lack of time or resources for preventing them from reaching their goals, perhaps rethinking the goals and shaping those goals realistically is better. And finally, instead of always being put in a corner by the CFO about spending on intangible measurements like awareness, perhaps it’s better to create metrics that show true ROI (including awareness and how that ties to sales) is better.
Tactics haven’t changed much: exposure of a message to a prospect through some means. The questions are always how many times do you have to expose the message…is the message relevant…and who is the target for the message.
Direct marketers have always known that the list is the most important thing in any communication. Without the right list, your messages fall on deaf ears.
What you are offering is the second most important element of communication. Keep in mind the Ogilvy “ticking of the clock” headline. that ad had 19 other “offers” in it! And each one positioned the product in the prospects mind. Not everyone who read that ad would buy a Rolls as pointed out; but that is the beauty of the Ogilvy method: even if you didn’t you read the ad. Sending messages means you want them to be absorbed. Offers are important to doing that.
Finally, HOW you send your message – the creative – is important, but it’s the least important in the hierarchy. Many agencies say creativity is most important. It’s not. With the right list and offer, you can send messages pretty much anyway you’d like and get results. We have plenty of stories to prove that!
In the end, there is no “magic bullet” for figuring problems out. If there was one, it is really concentrating on the basics. Writing, rewriting and rewriting more until you get the message perfect.
However, one thing is certain: strategy is the most important aspect of marketing. Without strategy, marketers remain rudderless. With it, they can shape and re-shape their tactics and messages to achieve their objectives.
For more information and discussion on these or other topics, please contact us at www.interlinegroup.com, jim@interlinegroup.com. For information on the AIM research and how research can be used to your advantage, contact www.a-i-m.com, patty@a-i-m.com. And to learn about how spiffs can enhance your marketing efforts, contact www.marketnetdiv.com, bernie@marketnetdiv.com.
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[1] According to research, people receive on average 121 emails per day, 32 texts, are exposed to 4,000-10,000 ads per day, make or receive 8 mobile phone calls per day, view just around three hours of TV every single day, spend about 2.5 hours per day on social media, and stream eight hours of content per day. Makes you wonder that if all this is true, when does work take place?
[2] Hop on LinkedIn and look at what companies post. “We’re exhibiting at…” or “Check out our new ….” or “We’re proud to be recognized as…” Do you think your target audience can differentiate between this? Do you think after awhile they even read it?
[3] An old song, “You don’t know what you got until you lose it,” might be paraphrased, “You don’t know what you want until you need it.”
[4] Go to a department store and observe shopping behavior. You will see for yourself individuals looking, touching things they can’t possibly want or need. Others study intently and compare things to each other. Both are “receiving” messages, but to the observer, also “sending” messages. These “messages” must serve to differentiate one product from the other in the minds of these receivers.
[5] The President of a major company who sold plumbing products defined his value proposition in one of our first meetings this way: “Is your building good enough for my product?” Even though at that time the company enjoyed the largest market share with few competitors in that product category, it was a terrible value proposition. It focused on the company, not the customer. It insulted the customer (building owner). Having huge market share sometimes distorts reality. Fast forward 20 years later, and their share had fallen off 30 points, and the field was crowded with competitors, both strong and weak. There were many reasons for this shift, but the root cause was the self-centered value proposition which the company maintained as it watched its share of the market plummet. The lesson? Always, always put the customer first. And if you doubt that, just ask Amazon.
[6] John Caslione is Founder, Managing Director at Aureo Capital Group LLC and President & CEO at GCS Business Capital LLC. A seasoned C-Suite executive, global business strategy expert, entrepreneur, university professor and author, Caslione has executed on-the-ground business strategies in 120 countries on six continents for more than 25 years. He possesses exceptional leadership, communications and negotiations skills to create high-performance global teams and to execute turnarounds with specific expertise in developing high growth strategies, international equity joint ventures and strategic alliances worldwide.
[7] Kevin Roberts was the New York-based Executive Chairman of Saatchi & Saatchi and Head Coach of Publicis Groupe, the world’s third largest communications group. In 2015, he wrote a paper called BRAND LOYALTY RELOADED, where he argued this premise: Take a brand away and people will find a replacement. Take
a Lovemark away, and people will protest. In Roberts’ world, a “lovemark” recognizes that the heart rules the head in decision-making. There is an emotional component to a buying decision that protects against preference attacks from competitors touting new features, deals and designs. True or not, a value-added proposition does the same thing. l
[8] Another good reference for value-added strategies is the W. Chan Kim and Renée Mauborgne book, Blue Ocean Strategy. Kim and Mauborgne argue that traditional competition-based strategies (red ocean strategies) while necessary, are not sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities they also need to create blue oceans. To sustain themselves in the marketplace, practitioners of red ocean strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Blue ocean strategy, on the other hand, is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. Think how Cirque du Soleil redefined “circus” and created a whole “blue ocean” without competition.
[9] Just think what happened to Bud Light. Even though Anheuser-Busch is spending approximately three times more on advertising and marketing compared to last year, U.S. retail store sales were down 26.1% from the previous year in the week ending Jul. 15 and 26.8 % in the week ending Jul. 22. Kevin O’Leary said, “No beer brand has ever lost 25% market share in a matter of hours. It’s so unprecedented that there’s no playbook for this.” Advertising is effective in influencing consumers to buy products, but has limited power to change deeply held beliefs or opinions on core issues. As it turns out, people do really have thoughts and values according to Richard Torrenzano writing in Fortune. In other words, AB’s message got through alright, but it missed the mark entirely and alienated its audience who had already shaped their perceptions of Bud Light. It destroyed in a matter of hours what took decades to build – that value-added relationship between a product and its consumers. (That’s a sad story.)
[10] Caslione put it in a wonderful paper, “Value-Added Strategies: How to Compete Against Price” by using an example of UPS and Siemens. It seems the UPS Global Account Manager had found out Siemens was in the early planning stages of building a new, state-of-the-art manufacturing facility for one of its divisions. As part of this effort, this Siemens division was preparing to contract with a telecommunications consultancy in Europe to write the technical specifications for a tender. Siemens did not have enough telecommunications expertise to create the specifications itself, so it was forced to go outside to a third part telecommunications consultancy. The UPS global manager “offered to provide UPS’s own telecommunications consultants to write the specifications for the tender at no additional charge to Siemens.” It saved Siemens over $600,000 in telecommunications consultancy costs. What did UPS gain? According to Caslione, “They more than doubled their account share within Siemens to more than 80% of Siemens’ business in that division that next year.” This is “value-added” propositions and strategy at work – which always sells AROUND your product and service, and not the product or service at all.
[11] This is why it is important to continually gauge what your customers are saying. Maybe what you think of your product is not what customers are experiencing. So Kohler does demonstrate bold and continues to do so but what happens when it isn’t bold anymore according to their customers? Value propositions need verification, and sometimes, adjustment.
[12] We had an extended discussion once on writing postcards, which in those days were used extensively, and how they must be more creative than an ad because of the space limitations imposed by the card. I couldn’t convince him of that.
[13] Marcus Aurelius writing in Meditations taught us: “Ask yourself at every moment, ‘Is this necessary?’ We need to eliminate unnecessary assumptions as well. To eliminate the unnecessary actions that follow.”
[14] The answer from ChatGPT to my question was this: As an AI language model, I don’t have personal goals or motivations. However, there are some limitations to consider when collaborating with me for work: Limited understanding of the business context: While I have access to a vast amount of information, I don’t have a deep understanding of the specific business context or industry jargon that may be relevant to your work. Lack of creativity: Although I can generate responses to your questions, I don’t have the same level of creativity and critical thinking skills as a human. I can only provide information based on what I have been trained on. Potential errors or biases: While I strive to be as accurate and unbiased as possible, I’m not immune to making errors or reflecting on the biases present in the data I’ve been trained on. Limited ability to act: I can provide information and insights, but I can’t take action or make decisions on behalf of a company or team.
[15] Of course, then you get into arguments about whether what Alexander did was any good, as Victor Davis Hanson argues in IMPRIMIS, Volume 52, No. 7/8, where he said that when Alexander died, he had probably killed over two million people in creating “an everlasting Hellenistic age based on an idea of the brotherhood of man.” Hanson goes on to say, “Alexander never thought of himself as a mere killer. He was an idealistic conqueror.” I don’t know if anyone can know what Alexander did or did not think. But one thing is certain: he followed his strategy and balanced resources to do it.
[16] For example, if you’re after corporate managers for your product and service, and the media outlet only has 56% of them in their audience base, almost half of your messages will go to waste. Even if the outlet segments that 56% for your message, how is your message being delivered? As part of their newsletter? As an exclusive email blast? As a digital ad? All these factors bear on the awareness factors being created. Many outlets also suffer from list fatigue; they pound their lists to the point of numbness, putting your message in jeopardy.
[17] The definition of a vanity metric is an analytics item that can be measured but is not a signifier of real return on investment, such as number of followers, likes, or comments. Yet, why do marketers still care, then, about followers? Has an analysis of followers against your customer file been conducted? How do followers create awareness? Number of followers is just a look; WHO those followers are will tell you volumes about your messages! Besides, because they follow, you can engage them one-on-one and not talk to a universe that isn’t interested in your product or service. There is something to say about that!
[18] Elmer G. Leterman wrote this book (now virtually out of print) called, “The Sale Begins When the Customer Says No.” Translated into 70 languages and sold internationally, Leterman produced more than $58,000,000 in insurance coverage for his clients – in 1930 in the very depths of the depression. He is an American inspiration. After Covid, things changed, probably forever. Keep in mind, too, that when Elmer wrote his book, the world was very different. The good news is that what Elmer says is timeless – and genderless.