Marketing in times of crisis - Revenue is a consequence, not a root cause

   Over the past month, I have had the same discussion with CMOs and CEOs of small and big companies in the West Coast: What is the missing piece to our marketing strategy? Why is marketing failing to deliver value? Why we cannot get better measurement of marketing ROI?

    We see many companies creating marketing communication plans, and media plans, without first questioning whether or not they have a good product or whether or not they understand the target audience—and furthermore without a clear picture of the core business goals.

    I don't put all the blame on the CMOs. The General Manager or CEO also needs to understand and support the delicate tension that exists between engineering (or product development) and marketing.

   I met with a local start-up team last week. They have a new online service ready to launch, and the GM was complaining about the lack of support from the CMO and how some PR plans were not yet ready. When I asked some questions on fundamentals, we found that the service about to be launched was a “Solution in search of a Problem”; there was no clear market's need being addressed, no business goals defined, no target audience (unless one thinks that “WW internet users” is a good definition of target audience), no articulation of a value proposition, and the marketing plan looked more like an “objection management” document used to handle questions from the investors.

   They had smart engineers building the product, and therefore the need was for PR and online media plan, which included buying lots of keywords on Google and a social media plan (of course, nobody knew what “social media plan” meant). That was the General Management articulation of the marketing support needed for a product that had been under development for over eighteen months at a cost of +$4M.

    It took us couple of sessions with engineering, finance, and marketing in the same room to get to a point where we all agreed that some fundamentals were not in place. We started by having a definition of success (usually profit) and creating a waterfall of customer-centric KPIs (key performance indicators). Once a team agrees on the common goals and sees how marketing and engineering activities are intertwined, it’s easier to define the core areas on which to focus.

   Revenue is not a root cause, but a consequence of many things done right - Profit will ultimately be the definition of success, but profit comes from taking action KPIs that are two or three level down in the waterfall: a) improve the signup process to reduce the abandonment rate, or b) change the way advertising is served in order to maximize the number of ads per page view, or c) change the "refer-a-friend" functionality to reduce the customer acquisition costs and drive more viral spread.

     Blake Irving, former CVP of MSN Communication Services was a fantastic mentor in this area and with years I refined his proposed KPIs methodology. I have been deploying this practice in small, mid size and big companies, always with great success as it shoes us how by making changes to the core product, we are in fact working on a fundamental marketing activity: generating demand. And the KPIs connect the dots and show how the different teams work together on reaching common goals.

   The seven "Naked CMO" steps:

1. Define business strategy choosing a core definition of  success; start with “profit” if nothing else. Choose one core measurement for Loyalty (NPS – Net Promoter Score -  is my favorite as discussed in several past posts)
2. Identify the level 1, 2, and 3 drivers that affect revenue, variable and fixed costs.
3. Ensure that there is a customer-centric view on the definition of each driver; i.e., if monetization happens through advertising, then increasing page views or minutes per session could be core focus areas, but a customer-centric approach would guarantee that the increase of page views happens thanks to user interest with functionality or content and not via a poorly designed experience that makes the customer go through unnecessary pages or steps just to be exposed to more ads.
4. Choose a leading function or central point for solving conflicts and making trade-offs: Do you optimize for user experience? For financials? For feature richness? For scale?
5. Map organization to each one of the identified drivers: who does what, paying special attention to having clear governance processes and tools when two or more teams must work toward the desired result of a single driver.
6. Select focus areas (usually at level 3 or 2) and align teams around those drivers, ensuring that there is a common definition of success.
7. Make sure that it’s clear where the data comes from: internal systems, third-party-provided analytics services, surveys to a sample base, etc. Driving these requirements and ensuring the quality of the data should be a core function of the marketing organization.