It’s a never-ending conversation: How to close the gap between marketing investment and performance.
Even with the inflation/recession conundrum, data reveals that marketers are happy to allocate dollars to their digital marketing activities. The February edition of The CMO Survey, in the Harvard Business Review, noted that marketing departments plan to increase spending by another 16% in 2023 (over the current 57%).
That’s the glass half-full portion of the story. The same study found that 30% of those surveyed said they are experiencing “average-to-no returns on their investments.”
How can we close the gap? It’s important to understand what’s going on underneath the surface.
Top Reasons for Underperformance
It’s likely there’s no single problem impacting marketing performance. Conceptually, however, there are some common, systemic conditions that seem to exist that have been observed and noted by those who study companies large and small.
1) Marketing has evolved, but the organization hasn’t.
Long ago, traditional marketing departments sat alongside digital marketing departments. This still exists, often in larger companies. But over time—as all marketing has become digital in one way or another—there's been much integration between the two, particularly in smaller companies.
As opportunities expand across delivery channels, performance still tends to be evaluated in a silo. How is your YouTube campaign performing? Your affiliate marketing channel? Your email campaigns? And, of course, your paid and search-based initiatives.
Performance is evaluated vertically without acknowledging the cross-pollination that happens from the prospective customer's seat. The error is the belief that customers are on a journey limited to a single channel, instead of noting that we customers experience a brand across multiple channels.
Integrating activity—and results—is hard. When a company begins with a well-defined strategy, it's easier to link and measure performance against a strategic KPI instead of setting only viewing success based on channel-specific performance.
I recognize that assessing spending in one channel has to be done; but expanding the attribution across channels is a better way to understand overall investment.
2) Data exists, but for no defined purpose.
Here’s a case: A company has a plethora of data, but has not truly defined—nor prioritized—what questions they want to answer first. What are the most important data points that will help answer a core question that delivers performance against their stated goals? They may have short-term and long-term goals, but which are ripe for marketing investment today?
By declaring a set of objectives as paramount, investment can be directed to initiatives most likely to reap results in a reasonable timeframe.
Think about the difference in messaging and channel strategies based on these different ideal customers:
- New customers who are primed for repeat purchasing (think of trial or free offers that lead to a paid version).
- Businesses that represent a future revenue stream because they may eventually need an expanded set of offers or services… an early stage small purchase that readies the customer for the next phase.
- Companies with a business model/structure that has a high probability of measuring short-term return on marketing spend, e.g., an ecomm business during the holiday season vs a B2B brand that typically has an 18-month purchase cycle.
In the first case, it might actually be a sale during the promotional period. In the second it might be an expansion of an email nurturing database. Think about how the data you retrieve should be different for each?
We have to look at what the “right” data is that delivers on longer term growth versus a sale today.
For example, a business that traditionally targets an end user begins to explore new business through third-party referrers where marketing will deliver more than the 1:1 sales opportunity. How will that long term goal alter the data that’s important for this new approach?
The data they have today about end user buying behavior will be important to third-party referrers, no question. But what else is important to this referrer base? Is it more instructive to understand end user purchases among the current product line? Or, is it more illustrative to see how their end user purchases new products, which their referrers consider a key point of differentiation? What additional data is necessary to make the case to high value referrers or partners?
Focusing analytics resources on future growth versus past performance is really their next best action.
3) An increasingly complex digital buyer journey presents unanswered challenges.
I often advocate that small businesses pick a single strategic goal—the most promising one that aligns with 12-18 month revenue goals—and support that with a small set of affordable channels at a specific point on the buyer journey.
But, as they grow, it's become important to look across the journey to see where drop-offs occur. Those moments in the journey can define gaps in specific marketing activity that can be “fixed.” This exercise can identify issues with pricing, a sales process, the absence (or presence) of customer reviews, and more.
It’s important to understand what’s going on underneath the surface.
For instance, if “awareness” is a core strategic objective, and that's where the energy is focused, how will you know when there's an opportunity to improve engagement or your sales process?
An integrated approach can yield better insights and reveal tactical solutions that may be hidden when we look at a single moment on the journey and the investments you’ve made there.
4) Waning third-party data is perceived as “unsolvable.”
For a lot of companies, intensified privacy rules seem like a big scary monster. What will you do without precious third-party data? Can anything be done?
It’s true: With the rising role of organic channels, it’s harder to score the data coming out of organic—and slower to move a prospect along the journey. But, once you have them you're in the driver's seat, so you actually have more control over engagement in the post-awareness stage. There is much at your fingertips to address here, both on the sales and marketing side.
Oftentimes, companies (especially B2B) revert to a sales-driven nurture cycle, which is smart. However, there is a layer of marketing activity that can support this sales process. Almost like an invisible hand supporting 1:1 sales nurturing with brand leadership, a consistent brand presence, even reputation management leveraging a company's leadership. All this accrues to the sales cycle and is exclusive of any third-party data.
5) Potential misalignment between internal company objectives and external marketing activities.
This is always a consideration when hiring marketing service providers. It can be especially precarious when there’s no defined strategy, or even a loosely defined one, in place.
What will you do without precious third-party data?
Still, it is cost-effective for smaller companies to outsource digital expertise. Outsourced providers have a deeper knowledge of changing parameters in digital performance—a constantly moving target.
But, there may come a time, as a company grows, when this expertise becomes more central to the internal functions under the domain of an in-house leadership team. It becomes even more important, then, to start with owning the strategy and managing data over time.
Viewing the Bigger Picture
It’s fair to say that some companies have wrestled with a few of these obstacles, while others are taking small steps to tackle even a single one. No matter the scope, if we look at them holistically, it becomes possible to see the bigger picture—and devise an approach to address them all.
If you’d like to explore more insights on marketing spend, strategy, and ROI, here are some resources to get you started:
See our entire YouTube channel, Marketing Air-Cover, for additional guidance on marketing strategy for small businesses.
You can find more about the Marketing Strategy Lab for small businesses here.
Learn more about hiring a fractional CMO here.