3 Parts of ‘Smart’ Marketing

I find myself pondering all of the things I’ve learned in my career about what’s smart, and what’s not so smart about marketing today. The following are three “parts” of marketing strategies that never fail for brands big and small, as well as in all industries.

smart marketingWith this month’s release of my new book — “Marketing for Dummies,” a new edition that focuses on the digital era — I find myself pondering all of the things I’ve learned in my career about what’s smart, and what’s not so smart about marketing today. The following are three “parts” of marketing strategies that never fail for brands big and small, as well as in all industries.

It’s Not About Creative

Thinking that the more clever or shocking your advertising is, the more your sales will go up is a trap that many big brands fall into. Take a look at the Super Bowl ad phenomenon.

GoDaddy historically does the worst, most tasteless ads every year. Yet they have experienced consistent growth each year and are at a pace to grow 20 percent. On the flip side, Budweiser always has the most heart-warming, talked-about ads with its horses and puppies, and quite often earns the coveted “most-liked ad” in the USA listings the day after. Yet, as pointed out in an article in Money.com, during their roll of Super Bowl ad success, sales have been going down along with their dominance in the beer category.

The takeaway here is clear: Creative entertains and builds name recall, but not necessarily sales results. If you are okay to entertain with your ads and not worry about the impact on sales, then go hire a creative team who can create a mini-movie in 30 seconds. If you need advertising to drive sales, ROI and profitability, like most businesses, then put your resources into the next three parts. Not saying creative is not important, but it should not be what drives your marketing strategy. What should drive it is a product of the knowledge you have about what inspires, moves, motivates and engages your customers — consciously and unconsciously.

Consumers disliked GoDaddy's Super Bowl ad in 2015.
Consumers disliked GoDaddy’s Super Bowl ad in 2015.

Empathy Is the Foundation

The definition of empathy is: the ability to understand and share the feelings of another. Now more than ever, understanding consumers’ and what moves them to engage, trust and assign loyalty is critical for acquisition and retention. CRM and data analytics platforms and so many more programs help us understand how and why consumers make choices so we can build highly relevant content to deploy across channels used daily by those we want to reach most.

Yet, if our communications focus only on what we learn from “data” about their transactions, we fall short. We need to understand what drives consumers emotionally and psychologically to engage. What are the feelings that influence their ability to trust and what actions create positive feelings toward brands? As I’ve written in many columns and throughout my book, these feelings that drive consumers toward our brands are much deeper than the satisfaction with our products or services. They are the feelings associated with what drives human nature: a sense of belonging, respect, value and altruism toward common causes.

Your communications and marketing content needs to be rooted in “empathy” of shared feelings and mutual understanding. With all of the research about consumers’ values and their support for companies that engage in sincere CSR programs, it’s not hard to get a glimpse of the feelings that move sales today.

Survival Is in Our DNA

After years of studying human psychology and how it drives choice and behavior, this single fundamental element of human nature stands out the most: We are wired for survival, just like any species is, and all of our thoughts and actions follow suit.

Survival relates not just to our physical well-being, but to every aspect of our lives. Consciously, and more so unconsciously, our need to survive socially, professionally, and emotionally is part of the big and small choices we make daily. Shopping for a dress for the company holiday party is not just about what makes you look good, it’s about projecting the image you believe will help you look powerful, sophisticated, and smart in order to maintain your current position or ready you for a new one that is better and enhances your professional and financial position.

When you can create personalized communications, or mass communications around key personas for your customer groups, you hit the emotional chords that get customers to engage and start a journey with your brand to see if it will lead them to a stronger position in the areas of life that matter most to them: social, professional, emotional, financial and more.

Conclusion

While there are many more than three parts of survival for brands marketing products and services in today’s dynamic and complex market environments, these three fundamentals are part of any “smart” marketing plan. No matter what level you are in your marketing career, you will “dummy” down your short- and long-term results if you don’t apply empathy, address the survival DNA, and keep your creative or marketing content relevant to these two drivers.

The Value of Soft Metrics

In the past decade, marketers and the ecosystem that surrounds them have focused intensely, investing heavily in making direct connections between marketing spend and specific, attributable results. That’s a good thing, and the accountability of digital efforts has largely driven its growth. But we lose valuable nuance when we disregard all that is not accurately and completely quantifiable.

Business meeting, reviewing dataIn the past decade, marketers and the ecosystem that surrounds them have focused intensely, investing heavily in making direct connections between marketing spend and specific, attributable results. That’s a good thing, and the accountability of digital efforts has largely driven its growth. But we lose valuable nuance when we disregard all that is not accurately and completely quantifiable. There is clearly still a relevant and worthwhile tale to be told by customer actions that are not tied to specific marketing triggers. That tale can inform and enhance budgetary and other marketing decision making if we are smart enough to listen.

Soft Metrics: A Matter of Definition

Some of this debate over hard vs soft metrics is a matter of definition. We can take cues from audience actions in a geography that has been receiving marketing spend to determine whether that spend achieves lift over control geographies that were ignored. Is that a hard metric if it does not tie the specific spend to the specific outcome by channel, by campaign, by message, by offer, by customer?

Soft metrics are often those that demonstrate intent or interest but may not be ultimately quantifiable down to the buyer, the sale or other valued conversion. Often they are generalized effects like a rise in site traffic that can be tracked but may not tie to direct conversions or customers. Other types of soft metrics are those that can’t be tracked reliably at all – like many offline ad expenditures. But we have to stop and remember that it doesn’t make them valueless just because we can’t place a value on them.

Soft metrics are still critical because they often establish behaviors that signal intent. Sometimes, for instance with highly considered purchases, the soft metrics can be personally identifiable or at least allow for customizable content delivery even if the individual is not identified. This supports additional follow ups and identifies those most relevant for particular messaging or offers. Setting the stage, if you will, for that measurable conversion down the line.

Make Sure You Have the Full Picture

For brick and mortar retailers, restaurants, CPG marketers and others, the drive to reveal the path from online messaging to offline conversion has been powerful. But tracking the results of online messaging or experiences to foot traffic or in-store sales is a tricky and incomplete effort. We often don’t know if the least traceable efforts are the most or least impactful. Most important, however, is the sum impact of all the efforts. Looking at all the insights available – both hard and soft – will give you the best picture to trend over time and use to make decisions.

Hard metrics have their own limits. We may think of them as an absolute straight line in a controlled environment but that is an illusion. First, there are limits on the accuracy of tracking across channels and platforms and even the smartest marketers still struggle to establish clean data with baselines and trends that are reliable. Secondly, it’s not clean. We can’t discern a myriad non-traceable influences like some competitive actions, or offline influences like first person recommendations – even a consumer’s mood. Macro effects that can be expressed by things like sales rises are most often the result of many, many efforts. Some are in are control and trackable and some are not.

The best marketers can do is measure what we have available and take into account all the information at our disposal – whether it is hard or soft. Information is never complete. A marketer’s job is to use the information at hand to understand consumer needs and reactions to certain stimuli to the best of

their ability. That means making use of everything at their disposal, weighting it for confidence and relevancy. Consider the hard data just the tip of the iceberg and ignore the rest at your peril.

The Battle Between Macro and Micro Marketers

Reading first-quarter reports from a variety of companies, not surprisingly, everything was focused on the “macro” numbers. The totals. Total sales and revenue, total costs, total number of employees, total ROI. That’s what the analysts and shareholders say they want to see. Don’t bother them with “micro” details: These just get in the way of the “big picture” and anyway, it is about time for lunch.

marketers battleReading first-quarter reports from a variety of companies, not surprisingly, everything was focused on the “macro” numbers. The totals. Total sales and revenue, total costs, total number of employees, total ROI. That’s what the analysts and shareholders say they want to see. Don’t bother them with “micro” details: These just get in the way of the “big picture” and anyway, it is about time for lunch.

There is no question that the big picture is important. But all macros are the sum of lots of little micros; and especially, the health of data-driven marketing businesses is determined by the optimization of each of these micro details. When they are summed together, they produce averages. And it is no secret that average is the most dangerous word in all of marketing — especially our data-driven kind.

Imagine 10 men sitting at a bar having a beer. The net worth of five of them is $250,000 and the net worth of the other five is $350,000. It is easy to calculate that $300,000 is the average net worth of the men in the bar. But now another thirsty fellow comes into the bar and orders a beer. His name is Bill Gates and his net worth is measured in billions. Now what’s the average net worth of the men in the bar?

It is perhaps a silly example, but if you are a marketing professional, you know that in working to define the income range of your target audience, the distorted figure you get when Mr. Gates’s net worth is averaged with those of the other men in the bar, it makes the “average” totally useless from a marketing point of view.

Like so many other things in today’s increasingly digital world, fortunately fewer and fewer marketing professionals are talking about average when they have a cornucopia of metrics that invite us to look at each specific person. The end of average is upon us, and we shall not be sorry to see it go.

And yet, even when we operate at a micro level, valuing each action or combination of actions, we can sometimes overlook the proverbial forest for the trees.

Especially if we have a big success, one of the easiest things in the world is to become complacent about it. That’s the direct opposite of “optimization.” Let’s call it lazy minimization.

Recently, a client, working to develop just how much marketing money he could afford to spend in each available medium and the optimum mix, challenged one of the golden rules I had laid down for the use of the Allowable Cost per Order (ACPO) model — never spend more than the ACPO.

The ACPO Methodology is explained in detail in the e-book “Profiting from the Magic of MarketingMetrics,” available from Target Marketing. For a free, short “How to Calculate the ACPO” presentation, just email “ACPO, Please” to pjrosenwald@gmail.com.

Turning away from his computer screen, he posed a very simple question, one that I should have asked myself years ago: “If you never spend more than the ACPO, are you optimizing your profit, or are you just playing it safe?”

While there is certainly nothing wrong with being “safe,” it is hardly the way to drive maximum growth.

When we ranged the different media cells from the lowest cost per order (CPO) to the highest and concentrated on the effect on the cumulative profit, we received a compelling message that our historic focus on not allowing the ACPO to be exceeded was detrimental to profit. I’m still kicking myself for not having asked and answered that question years ago.

Peter's ACPO chart

It’s all in the numbers. Had we eliminated all CPO cells higher than the ACPO of $265, we would have had 707 fewer sales and, therefore, less market share — a shortfall of 35 percent. But we would have spent $248,313 — a savings of $323,337, or 43 percent. That had always struck me as the best strategy.

But in asking the “optimum profit” question, my colleague had opened the door to a whole new way of seeing. Because, as you can easily see in the illustration, the optimum cumulative profit of $429,508 comes with the 13th cell at a CPO of $441, compared to the ACPO of $265. If optimum profit is really the name of the game, which it usually should be, then cutting off at the ACPO would be the wrong strategy.

We see this kind of aggressive thinking more and more and it is exciting. What we see less of, especially in SMBs, is a willingness to grasp the fact that however well things are going today, they could be improved if only management would abandon complacency with the “good” and focus on making it “better.” If only they would insist on getting inside the big macro numbers and look at the micros.

In today’s world, if the aggressive collection and use of the right micro data isn’t part of the core business case of an entrepreneurial company, something vital is missing.

Endit …

Why ‘Adjacent Possibilities’ Are More Profitable Than Bright Shiny Objects

Identifying “adjacent possibilities” in your organization’s products and services has the potential to create something new, without the risk of chasing far-flung shiny object ideas with questionable ROI. I was recently introduced to the power of adjacent possibilities by …

Illustration of cloud network with multiple nodes and connectionsIdentifying “adjacent possibilities” in your organization’s products and services has the potential to create something new, without the risk of chasing far-flung shiny object ideas with questionable ROI. I was recently introduced to the power of adjacent possibilities by long-time friend and colleague, Nick Usborne, at an American Writers and Artists Web Intensive workshop where we were both speakers.

The premise of an adjacent possibility is that something new can be created from two existing and adjacent ideas. For example: chocolate and peanut butter. Separated for years, then combined to become a hot seller in Reece’s peanut butter cups.

Another example: laptops and smartphones. An adjacent possibility was the creation of the tablet — larger than a smartphone, but smaller than a laptop. Now tablets are everywhere.

For background about adjacent possibilities, it’s useful to quote “Finding Your Next Big (Adjacent) Idea” from the Harvard Business Review that says:

The idea of adjacent possibilities started with evolutionary biologist Stuart Kauffman, who used it to explain how such powerful biological innovations as sight and flight came into being. More recently, Steven Johnson, in “Where Good Ideas Come From,” showed that it’s also applicable to science, culture, and technology. The core of the idea: People arrive at the best new ideas when they combine prior (adjacent) ideas in new ways. Most combinations fail; a few succeed spectacularly.

Many organizations are obsessed with seeking the newest big product innovation. And that’s good. Disruptive technologies and products have power.

But a singular focus on completely new products or services, without considering adjacent possibilities of existing products, is also a risk. Why? Because a competitor may swoop in by identifying an adjacent possibility that’s been overlooked, and succeed with a new product by stealing smart.

Adjacent possibility tips that Nick suggested include:

  • Look inside your organization to see where you may have adjacent possibilities in current products where an outgrowth won’t involve a risky leap forward.
  • You don’t have to be the best at any one thing. Just be pretty good at two or three things you can combine.
  • If you don’t have two or three things to combine, connect with one or two other people (or organizations) who have adjacent skills.

In a world of adjacent possibilities, you can take the pressure off, and create big successes.

How to Select the Right Lead Generation Media Mix

Most B-to-B lead generation campaigns involve multiple touches via multiple media channels. But how do you decide which media are optimal, and more to the point, how they work together to generate a qualified lead?

Closing the Funnel: How Marketers Use Data and Attribution to Deliver Better Leads and Enable SalesMost B-to-B lead generation campaigns involve multiple touches via multiple media channels. But how do you decide which media are optimal, and more to the point, how they work together to generate a qualified lead?

It’s an iterative process. The first step is to establish with the sales team their monthly (or weekly, or quarterly) requirements for the number of qualified leads per rep — or by product, or by territory, or whatever is needed. Then, plan carefully the media mix that will feed the machine.

The media mix is a function of several variables, which you need to research:

  • The ROI each medium can deliver, based on your company’s experience and industry benchmarks.
  • The medium’s availability. Some media channels are scheduled intermittently. Consider when the trade shows and conferences in your industry are scheduled throughout the year. Other media may be only intermittently profitable. Content syndication, for example, is priced all over the place. Can you get enough leads from this channel to satisfy your requirements?
  • The campaign’s time horizon. Digital media are faster to produce than direct mail. Business events can take months of planning before a lead emerges.
  • Lead flow requirements. For example, sales may need more leads in the first and fourth quarters.
  • Your business objectives. Are there particular geographies or industry targets you need to reach?
  • Media effectiveness. Media come and go, in terms of their power to attract business buyers. Thank goodness there are new and exciting B-to-B media arriving on the scene regularly.

Enter your research data into a spreadsheet, and play around with it as an iterative planning tool. The table here presents a simple hypothetical example of how this can work.

Calculating Costs Per Lead by MediumYou can expand this spreadsheet to include other key variables, like timing, geographic territory requirements and your ROI hurdle rates.

You are likely to end up with some very inexpensive leads in your mix, and that’s a blessing. The unfortunate thing is that, typically, these leads are unlikely to be enough to meet your revenue targets or support your sales force’s quota. So you’ll need to select several options — ranking them by ROI, availability and your lead flow criteria — to come up with the optimal mix.

Multiple media working together generate better results than single media, with one big proviso: The messages must be consistent across media. An inconsistent message can cause confusion and erode the value of your brand.

Pulling this off is not always easy, especially in larger companies. You have to coordinate functional silos with their own managers, vocabularies, cultures, budgets and objectives. This requires tenacity, a focus on the customer experience, and support from senior management. But the payoff is colossal. All outbound contacts with customers, whether they are customer service messages or even billing-related messages, can potentially be harnessed for the lead effort.

A simple technique is to put the company URL on all messages received by customers. The same principle applies to customer touch points that are less obviously part of marketing communications, like packaging and invoices — any point where the customer comes in contact with the product or service. Be sure you have a gated offer prominently positioned on the home page.

Similarly, some ongoing marketing communications channels can be designed to support lead generation. To stimulate your thinking:

  • Ensure that all brand-awareness advertising includes an offer, a call to action and a response device.
  • Include a white paper offer, with response instructions, such as an 800 number or a web form URL, in your press releases.
  • When executives give speeches, invite your customers and prospects to attend.

Lead generation can harness all kinds of media channels, if you give it some thought and planning.

A version of this article appeared in Biznology, the digital marketing blog.

Direct Mail: Why A/B Test?

This is a very common question our clients ask, especially the smaller ones. They need to know if they should be A/B testing. The easy answer is “yes.”

This is a very common question that our clients ask, especially the smaller ones. They need to know if an A/B test is something they should do. The easy answer is “yes,” because it allows you to try out different offers to see which ones work best.

Stressed, anxious person biting finger nails.If you don’t know what is working, how can you increase your ROI? Not to mention that, when you are using only one offer, what if it’s a bad one? What money are you leaving on the table by not A/B testing? Usually, the main reason people don’t want to test is because they think it will be complicated. That really is not the issue. You can create a very simple test and still gather valuable insight to apply to future direct mail projects.

Here are some ways to test your next direct mail campaign:

  • Simple test: In this test, everything about the mail pieces are exactly the same except for one element, which is usually the offer, but really you can test anything you want. You then take your mail list and split it in half, so half your list goes to one version and the other half to the second version. After you get all your responses back, it should be easy to tell which version had a better response. If you don’t have the time to collect your responses, talk to your mail provider, they can help you.
  • Control Group test: In this test, you will use a piece that you have mailed before and one test piece. You can use entirely different pieces. Decide what it is you want to test — usually design, color and images are tested in a control setting. You will split your list in half and see which one gets the better response. This works great if you are considering a new format and want to see how well it is received.
  • Complex test: In this test, you will be testing at multiple levels. This takes a lot of planning and strategy. You can test so many things — such as breaking your list of people up into like groups based on purchase history or demographics, and then creating multiple versions for each group to see what works best with each one. You can also test types of response methods from mobile texts, phone numbers, URL’s, QR Codes, reply cards and more.

One of the great results with testing is what you learn each time. It is extremely important to add this information to your database so you have it available for future testing. The more you know about your prospects and customers, the better your direct mail offers will be. Basically, A/B testing is a waste of time if you are not tracking your results. So let’s look at ways to do that.

Here are some ways to track direct mail results:

  • Unique phone number: Create a special phone number for each campaign.
  • Unique URL: Create a special landing page URL for each campaign.
  • Unique coupon code: Create a special code for people to use at purchase for each campaign.
  • Unique short code: Create a special texting short code for each campaign.

Now that you have tracking information, you can analyze it to create reports. You want to know which version had the best response, the most spend, who responded to what, and so on. The most important thing to know is what your ROI was on each version. Some things we do cost more money than others, so knowing if spending more gets you more money is vital otherwise you could just be wasting your money.

Have you tried testing? What has worked best for you?

How Much Should You Pay for a Sales Lead?

When planning a B-to-B lead generation program, you need to deliver leads to your sales team at an affordable price. A neat way to determine in advance how much you can spend on a lead is to calculate the Allowable Cost per Lead.

LeadsWhen planning a B-to-B lead generation program, you need to deliver leads to your sales team at an affordable price. A neat way to determine in advance how much you can spend on a lead is to calculate the allowable cost per lead for your campaign. This number can then be used as a benchmark for evaluating campaign investments, and deciding which ones are likely to work. If a campaign is looking like it’s not affordable, then you’ll want to make some tweaks, like find a stronger offer, or narrow your targeting.

Begin by calculating your cost per inquiry. Assemble the total direct campaign costs, including all fixed and variable costs that can be directly attributed to the campaign. Include creative and pre-production work, cost of developing and producing content, and the normal variable costs of campaign development and execution. Divide this amount by the number of expected campaign responses, and voila! There’s your cost per inquiry.

Then, estimate the costs associated with qualifying a lead. Don’t try to determine this number on a per campaign basis — it’s too hard. Instead, calculate an average qualification cost for inquiries over a set period, such as a year. Gather up all your inquiry-handling costs, including the direct headcount involved in inquiry capture, fulfillment, qualification, and nurturing. If your back-end processes are outsourced, gathering the data is as simple as adding up the bills. After you have a number for the year, divide it by the number of inquiries handled in the year. This number will serve as your average cost to qualify an inquiry.

Finally, go talk to your counterparts in finance and sales to gather several data points. You need the average order size, namely, the total revenue divided by the total number of orders. (If this number swings wildly, do the calculation by product category.) You need the margin (or its opposite, the cost of goods sold) and the direct sales expense per order, calculated by the total sales expense divided by the total number of orders.

Let’s look at an example of how this works. The chart works through some hypothetical numbers to arrive at a cost of lead closed and an allowable cost per lead, and compares the two. Your goal is for the cost of a closed lead to come out lower than the allowable — obviously. If it’s higher, you lose money on the campaign.

To get to Allowable Cost per Lead, it’s not actually necessary to know how many inquiries will be generated, qualified, and converted. But you do need to know the cost per inquiry, the cost to qualify an inquiry, the qualification and conversion rates, the net margin per order, and the direct sales expense per order.

 

Comparing your cost per closed lead to your Allowable Cost per Lead: A hypothetical example
Cost per inquiry (campaign cost/# responses) $100
Average cost to qualify an inquiry (lead management costs/inquiries per year) $50
Total cost per inquiry qualified (cost per inquiry + cost to qualify) $150
Lead qualification rate 25%
Cost of qualified lead (cost per lead/qualification rate) $600
Lead conversion rate 30%
Cost of a closed lead (cost of qualified lead/conversion rate) $2,000
Average order size (annual revenue/# orders) $10,000
Net margin per order (revenue per order x margin, 60%) $6,000
Allowable cost per lead (net margin per order – direct sales expense, $3,500) $2,500

 

In this hypothetical example, say the campaign spent $15,000 and generated 150 inquiries. Whatever the cost and the responses, the important number is the cost per inquiry. Here, we have hypothesized it as $100. Separately, the average cost to qualify an inquiry for the year was calculated at $50. We divide the qualification rate (25 percent) into the total cost per inquiry qualified ($150) to calculate the cost of a qualified lead. Then, we divide that by the conversion rate (30 percent) to get the cost of a closed lead ($2,000).

This number is then compared with the allowable cost per closed lead ($2,500), which is a simple calculation of the net margin per order minus the cost of sales (hypothetically set here as $3,500). In this example, the campaign looks promising, because the expected cost per converted lead is $500 less than the Allowable Cost per Lead.

If you put this information in a spreadsheet and play with it, you can quickly see how much leverage there is on the back-end, meaning after the inquiry has come in and you are working it through qualification and nurturing. A few efficiencies on qualification rate and conversion rate work wonders on campaign ROI.

A version of this article appeared in Biznology, the digital marketing blog.

Direct Mail: Know the Response

There are many times when customers reach out to us to help them increase response rates. When that happens, my first question to them is “What was the response rate on your last mailing?” Now you would think that after 24 years in the business the standard response to this question would no longer shock me — however, that is not the case.

There are many times when customers reach out to us to help them increase response rates. When that happens, my first question to them is “What was the response rate on your last mailing?” Now you would think that after 24 years in the business the standard response to this question would no longer shock me — however, that is not the case. When I hear “I am not sure,” I cringe. In 2015, how can you not know what your response rate was? You need this information. How can you execute a marketing plan without knowing your numbers?

So, let’s take a look at what the DMA 2015 Response Rate Report found:

  • The average response rate is 3.7%
  • The average cost per response is $19 which when compared to other channels is very competitive
  • Best performing style by category is an oversized envelope at 5%
  • The next best performing style by category is a postcard at 4.25%
  • The most expensive category to mail are dimensional pieces at $30 per response
  • The next most expensive are catalogs at $23 per response
  • The most common way to track direct mail response is online at 22%
  • The next most common way is through a call center at 19%

How do your numbers compare? One key takeaway is that direct mail response rates are higher than all digital media in the study. Direct mail can benefit your marketing mix, but you need to know your numbers so you can keep doing what works, and fix what doesn’t. One other note: most marketers now use more than one channel in order to fulfill campaign objectives. The study found that in most cases marketers were using three or more channels. When they were, the channels used most often together were direct mail, email and social media.

There is no way to predict exactly how well your direct mail campaign will perform, but knowing what the direct mail averages are helps. You need to know your average in order to set a baseline. From there you can work on making changes that could enhance your response. The three core components to focus on with direct mail are the list, design and offer. Keep in mind that when you create offers, free things are a better driver than a discount. This does not mean that you have to give your product or service away, you can give away a generic item such as a gift card for coffee.

When you decide to make changes — no matter what those changes are — keep a group of people separate from the change group. They will be your control group. You will use the control group results to compare with the changed group results to see which had a better response rate. You can test this may different times or further segment your list with a different change on each segment other than your control segment all at one time.

When you know your numbers, you are able to predict your results with more accuracy and continue to improve the quality of the direct mail you are sending out. When you are able to send the right offers to the right people by knowing your results, you decrease your cost per acquisition and increase your ROI. When you are just starting out, you can track your numbers in an excel spreadsheet. This will allow you to compare numbers from past campaigns as well as plan for the next one.

How to Tell If Your Marketing Works

My live Target Marketing Group Webinar yesterday, “How to Tell if Your Marketing Works,” deals with my favorite topic: measuring the results of direct marketing beyond traditional response rate metrics. Direct Marketers are their own worst enemy when it comes to measurement. They often don’t know what’s working and what’s not, because their real ROI is hidden inside their data.

My live Target Marketing Group Webinar yesterday, “How to Tell if Your Marketing Works,” deals with my favorite topic: measuring the results of direct marketing beyond traditional response rate metrics. If you missed it, you can access it on-demand here.

Direct Marketers are their own worst enemy when it comes to measurement. They often don’t know what’s working and what’s not, because their real ROI is hidden inside their data.

Analyzing direct marketing campaigns was a lot easier before the advent of the multichannel consumer. Sure, there were a certain number of orders that we couldn’t attribute to a specific promotion, but for the most part response rates ruled. Now, people check out products in stores and then buy online to get a better deal (think flat screen TVs). Or they shop online, decide what they want based on features and product reviews, and then buy in-person (think cars).

And they do all of this on multiple devices: their home computers, their work computers and their mobile phones and tablets. So it’s hard to track them.

Even though consumers engage with brands on their own terms across multiple platforms, many marketers are stuck measuring the results of individual tactics rather than taking a holistic view of measurement. So when a single email or display ad fails to achieve the target level of attributable sales within a specific period of time, then they consider it a failure. Even though the communication has made an impact on those who didn’t respond, they can’t measure it, so they don’t count it. And while many direct marketing practitioners now embrace the idea that their advertising has a cumulative effect of building a brand over time, most fall short of being able to quantify that ROI with meaningful metrics.

This webinar examines four ways to uncover hidden ROI from your direct marketing promotions:

  1. Using your database to look beyond response rates
  2. Benchmarking your brand awareness and tying increases in awareness to sales
  3. Creating an engagement score to measure the cumulative effect of various promotions over time
  4. Measuring the value of your social media

If you’re interested, check it out here.

How Do You Spell ROI?

Return on Investment: Everybody’s talking about ROI, but not everyone agrees on what it is. Given the various ways that I’ve heard marketers bandy about the term ROI, I wonder how many of them really understand the concept, and how many just use the term as a buzzword. There’s certainly a disconnect between the way many marketers use of the term and the traditional definition embraced by CEOs and CFOs.

Return on Investment: Everybody’s talking about ROI, but not everyone agrees on what it is.

Given the various ways that I’ve heard marketers bandy about the term ROI, I wonder how many of them really understand the concept, and how many just use the term as a buzzword.

There’s certainly a disconnect between the way many marketers use of the term and the traditional definition embraced by CEOs and CFOs.

A study by The Fournaise Group in 2012 revealed that:

  • 75 percent of CEOs think marketers misunderstand (and misuse) the “real business” definition of the words “Results,” “ROI” and “Performance” and, therefore, do not adequately speak the language of their top management.
  • 82 percent of B-to-C CEOs would like B-to-C ROI Marketers to focus on tracking, reporting and, very importantly, boosting four Key Marketing Performance Indicators: Sell-in, Sell-out, Market Share and Marketing ROI (defined as the correlation between marketing spending and the gross profit generated from it).

So CEOs clearly want marketers to get on board with the true definition of marketing ROI. You can calculate marketing ROI in two different ways:

1. Simple ROI:
Revenue attributed to Marketing Programs ÷ Marketing Costs

2. Incremental ROI:
(Revenue attributed to Marketing Programs – Marketing Costs) ÷ Marketing Costs

Either of these definitions is consistent with the classic direct marketing principles of Customer Lifetime Value (the “R”) and Allowable Acquisition Cost (the “I”).

Back in 2004, the Association of National Advertisers, in conjunction with Forrester Research, did a survey on the definition of ROI where respondents could select from a menu of meanings. The results showed that there was no definitive definition of ROI, but rather, that marketers attribute up to five different definitions of the term and many use it to refer to many (or any) marketing metrics.

Member Survey of Association of National Advertisers on meaning of ROI
(multiple responses allowed)

  • 66 percent Incremental sales revenue generated by marketing activities
  • 57 percent Changes in brand awareness
  • 55 percent Total sales revenue generated by marketing activities
  • 55 percent Changes in purchase intention
  • 51 percent Changes in attitudes toward the brand
  • 49 percent Changes in market share
  • 40 percent Number of leads generated
  • 34 percent Ratio of advertising costs to sales revenue
  • 34 percent Cost per lead generated
  • 30 percent Reach and frequency achieved
  • 25 percent Gross rating points delivered
  • 23 percent Cost per sale generated
  • 21 percent Post-buy analysis comparing media plan to actual media delivery
  • 19 percent Changes in the financial value of brand equity
  • 17 percent Increase in customer lifetime value
  • 6 percent Other/none of the above

While I couldn’t find an update of this study, clarity around the definition doesn’t seem to have improved in the last 10 years, given the results of The Fournaise Group survey. And the increased emphasis on digital and social media marketing in the last 10 years has probably made it worse. The Fournaise Group found that 69 percent of B-to-C CEOs believe B-to-C marketers now live too much in their creative and social media bubbles and focus too much on parameters such as “likes,” “tweets,” “feeds” or “followers.”

It’s time for marketers to stop using ROI as a buzzword for any marketing metric. You can’t measure and improve something if you don’t clearly define it.