In my work as a fractional CMO, I am often helping small businesses navigate the transition from sales-driven revenue to marketing-driven revenue. This is no small feat, because of the time and investment it takes.
I just had lunch with the managing partner of a $5MM services firm. He was telling me how hard it was to ask his partners to spend money on marketing – and he was talking about $20K, which was a fraction of what they would need to really become a marketing-driven company. Why were his partners dubious? Because the ROI was not going to be fast or definite enough.
Compare that with a strategy meeting I was in last week for a $10MM services firm in which a partner – who was one of the biggest skeptics of marketing 2 years ago – said, “If we hadn’t invested in marketing over the last 2 years, I’m not sure we’d still be here today.” (To his credit, he was a skeptic, but an open-minded one.)
Let me tell you something that marketing agencies have a hard time telling you: the ROI of marketing almost assuredly looks terrible for the first 12 months you’re doing it. And may look terrible the second 12 months.
But if you’ve made the right investments in that time, you almost assuredly will be reaping the rewards of your marketing machine by your third year. And they are rewards that are beyond the scope of anything you could have generated with a sales-driven strategy. In other words, marketing can get your business to the next level – but it’s going to cost you.
It’s not easy for leaders to invest in something that is unproven and takes 12-24 months to start paying off – especially given the “black art” nature of marketing, which means that you can never really “arrive” at a marketing strategy that you can lock in and forget about. Each company’s marketing recipe is different. There are generalizations you can start from, but at least 1/3 of those generalizations will be wrong.
Why “waste” all that money marketing, then? Because building a marketing machine is like driving a car instead of pedaling a bike. If you’re happy biking and it takes you where you want to go…great. Stick with your sales-driven approach, and don’t bother building a marketing machine. But if your market is getting more competitive, or your customers are more price sensitive, or your buying cycle is getting longer…that bike probably isn’t going to be enough anymore.
Most people recognize that markets don’t stand still. Customers, competitors, and technology are constantly changing.
Although most people recognize that, many don’t appreciate the imperative that that dynamic places on them as leaders. The simplest way I’ve learned to describe that imperative is this…
Your business model is a depreciating asset.
In other words, the way you do business – whether that’s how you find customers, how you produce what you offer, how you deliver what you sell – is losing value every day.
Like other depreciating assets you have – your house, car, refrigerator, computer – you have to maintain it simply for it to keep working the way it’s supposed to. And you have to more-fundamentally change or replace it on some kind of predictable cycle – 3-4 years for a computer, 5-10 for a refrigerator.
How quickly your business model depreciates is mostly a function of the degree of change in your market. And, since there’s more change in every market these days, we all need to put our leadership teams on notice that we’re going to have to reinvent our business model sooner than we’re used to. Rule of thumb: the cycle is probably half what it used to be. (So if the model used to last 10 years, it’s best to plan for it to last 5.)
If your leadership team is skeptical when you tell them this, offer the following true story. I know a smart, tech-savvy teenager who has a nose for online businesses. He found an opportunity last Fall that he liked. Here’s how that played out:
- Week 0 – discovered opportunity
- Week 1 – supply chain set up
- Week 2 – open for business
- Week 5 – profits to date: $200K
- Week 11 – profits to date $500K
- Week 13 – rejected offer to purchase business for $100K
- Week 16 – competitors raise cost of advertising to a level that the economics no longer work, business model no longer profitable, business closed
To summarize, that’s a business model that was able to net $500K in 4 months – I know $15MM businesses that aren’t generating that profit for the year – but whose value depreciated to $0 in that same 4 months.
If you talk about markets changing, it seems like something “out there” that may not impact you. If you talk about your business model depreciating around you week by week, it gets much clearer that you need to act with some urgency.
It’s Valentine’s Day – a day when we celebrate the role that marketing and sales plays in our personal lives. And in honor of Valentine’s Day, let’s take a look at a new trend in marketing and sales.
Many of my clients love sales and hate marketing. Sales is short-term, tangible, clear – what’s not to like about sales?! On the other hand, marketing is long-term, more subtle and intangible, and much less clear. Unfortunately, many business owners never get past that black/white dynamic to see that marketing is one of the most important pieces of the puzzle to grow a business.
Good marketing – at the small/mid-sized business level – has always been about driving revenue – getting more people to buy more, sooner, at higher margins. But that’s often overlooked when marketing focuses on tweets and clicks and likes and pretty graphics.
Fortunately, there’s a new trend that focuses more on the good kind of marketing – that trend is Sales Enablement.
Sales Enablement is how marketing helps sales – it’s the tools, systems, content, and support that salespeople use to engage prospects efficiently. Because there is more competition today than there used to be, businesses cannot afford the inefficiency in the sales process that used to be OK. Marketing brings scale, consistency, and clarity that brings down the costs of making the sale.
At a recent marketing and sales retreat I led, we reviewed a Hubspot video on Sales Enablement. It said that 70% of the buyer’s decision is made before they even talk to a salesperson. In other words, most of “sales” actually happens during the phase that is usually handled by marketing.
What does the trend toward Sales Enablement mean for you?
- Most small businesses are overinvesting in salespeople and underinvesting in their marketing.
- Sales needs to describe to marketing what it’s hearing from prospects and customers, and what it needs to address buyer concerns.
- Marketing needs to create for sales standardized tools and strong, consistent messages to make the sales process more efficient.
- You need to appreciate what a strong connection there is between educating prospects about their needs, and making sales. Buyers are making their decisions while they’re learning…in fact, because of what they are learning.
Sales Enablement can help you generate more revenue more efficiently. If you think your sales and marketing are not keeping up with the times, you should use the topic of Sales Enablement to open a discussion among your leadership team about how your approach could change.
As a small business coach, I’m always interested when the conversations I’m having in my client strategy meetings are echoed in news from the Fortune 500. And we had one such example last week – ESPN’s transition of their on-air talent from specialists to generalists.
Specifically, ESPN’s President John Skipper said, “Dynamic change demands an increased focus on versatility.”
Many of my clients are professional services firms – they are selling their people’s skills and thinking. Several weeks ago, in a quarterly strategy meeting with a 40-person services firm, the leaders asked me what I thought about a shift they were considering to organize themselves in specialized teams that could create deep expertise in certain areas. Here’s what I said:
- There is a lot of uncertainty in the market. That means that you don’t know what kind of work will come in, or when it will come in. (I am seeing this across my client base.)
- As a result, you have to have flexibility in who you assign to different jobs, because your talent assignments are probably not going to work the way you plan them.
- The only way you can have the flexibility you need to handle work in this uncertain environment is to actively develop cross-discipline agility – you have to make sure that people’s “downtime” is spent developing new skills.
In other words, you need to have a talent base that has a lot of flexibility in what and how it works – which is exactly why ESPN is making the shift they are, to multi-dimensional on-air talent.
Creating a flexible staff is no small task for small businesses. The large majority of small businesses under-develop their talent – that is to say, their talent development is mostly opportunistic and accidental assignments that happen to build new skills. That’s often OK – but it’s less likely to be OK these days, and companies who don’t get better at talent development are going to feel the pinch and pain of less-agile workers more and more, since the market will continue to be an uncertain place.
What’s needed to actively develop your people? How should they fill their downtime? Have your people…
- Explore new areas by looking through trade publications or surfing industry web sites
- Hold regular lunch-and-learns for your staff to educate each other
- Shadow each other doing work that’s new to them
- Sit in on internal or customer meetings that involve new areas for them
Are you developing the generalists your business needs – the ones with the skills and agility to navigate the uncertain environment we all face?
Stage 2 companies must already have a clear and compelling value proposition if they’re successful enough to have grown out of start-up, right?
Well, yes and no. They do have enough traction in the marketplace to show that they have a value proposition that works. But it’s actually unlikely that the company has a systematic way to communicate the value proposition. And if that is the case, it will find that revenue growth is harder and harder to achieve – and in a competitive market, the company may start to lose ground to other companies who are communicating their message better.
What should a value proposition look like? When I started out in marketing, I worked with an excellent marketing agency, who explained that the “brand positioning statement” should follow a classic formula of, “For [market segment], Our Brand is the [product category] that [customer benefits] by [points of differentiation].”
So, for a clear and compelling value proposition, you need:
– A clearly defined target market segment or customer profile – is it marketing directors who work with global brands, or owners small businesses in cities, or…
– A definition of the product category – the marketing agency I worked with explained that orange juice could be defined as a breakfast drink or as a health drink, so picking the product category has a big impact on how the product itself is perceived
– A description of the customer benefits – what are the pains you alleviate (lost revenue, production downtime, etc.) and gains you enable (new revenue sources, talent retention, etc.)
– The points of differentiation – choosing from all the ways that your product works or the ways you deliver your service, what are the ways that set it apart from the competition?
Once you have your value proposition, make sure you reinforce it with everyone in your company, and you use it to focus your marketing and sales messages.
Loch McCabe of Shepherd Advisors uses an interesting frame for thinking about your company’s health and growth. What would it take to double your revenues – and then double them again? Loch recently spent an hour with me describing his process for creating Exponential Growth, as he calls it.
Those kind of results aren’t easy to achieve, but there’s definitely a formula that works, and Loch is good at describing that formula. (And he’ll be sharing it during his upcoming workshops 10/22 in Ann Arbor and 10/24 in Saginaw.)
What stands out for me in Loch’s process is the focus on customers and markets. At the heart of Exponential Growth is customer-based strategy – using insights about your customers to identify the “leverage points” that will give you outsized returns for the investments you make.
From there, he goes beyond your current customers to look at emerging market trends. An important part of exponential success is being able to ride the right market waves, and Loch’s process highlights which ones to jump on.
Loch has asked me to talk about the organizational-development aspects of Exponential Growth during the workshops. So, when you get the strategy part right, what does it take from a leadership, teamwork, organization, and culture perspective to manage and execute that growth.
Let me give you a sneak peek of my thoughts here…
Organic Growth is more accommodating of cracks and stresses in your organization. Don’t have the right VP of Ops? Haven’t solidified your sales process? Don’t have a solid pipeline of talent? With Organic Growth, those issues are OK – they’ll need to be addressed, and will be over time, but they won’t create any serious risk.
Exponential Growth, on the other hand, forces and enables you to get your house in order. It magnifies the strengths and weaknesses of the organization. It offers a carrot and a stick for dealing with your issues – solve them and you see big results; avoid them and you’ll feel the pain.
Honestly, Exponential Growth is not for most people. It requires strong leadership, solid teamwork, effective operations, and a dynamic culture. Of course, that’s what most companies are aiming for – and struggling with. And that, I think, is the opportunity that an Exponential Growth vision offers. It’s like saying we’ll put a man on the moon – it’s a rallying vision to get people to break out of the patterns they have and address the issues that can linger and smolder for years and years if the goal is just Organic Growth.
What could a game plan for Exponential Growth do for your company? If you find it intriguing to think about, you should talk with Loch or attend one of the workshops to find out more – see the links above, or let me know you’re interested and I’ll connect you.
Many of my clients are proud of the “family feel” of their companies. They care about their people, see the whole person, and create a bond of trust that moves them well beyond an “employer-employee” relationship.
The last few years have been hard for the leaders of these companies, because they haven’t been able to protect their employees from the tumultuous market environment that their companies are operating in. Bonuses have been cancelled, raises postponed, training missed, and some of the “family” have even been let go.
In a discussion this week with a leadership team that was debating how to balance the benefits of a family feel with the realities of operating a company within the rules of business, I pointed out that it is profitability that provides the flexibility to treat employees well.
Look at a company that treats its employees well, and you’ll also be looking at a company that has a profitable business model.
At a Board meeting with one of my family business clients a few weeks ago – a company that has been passed down through several generations – they said it another way: “Always protect the money tree first.”
After yesterday’s meeting, I thought, “If profitability is the foundation of an empathetic company, what is the foundation of profitability?”
The answer has many parts, of course – strategy, productivity, discipline, teamwork, culture, accountability, etc. But I’d say the thing that comes first, before making the profitability happen, is…empathy. The ability to empathize with your customers, so that you understand what they need and how to make their lives better, in a way that they value.
If you want to empathize with your employees – if you want to create that great family feel – empathize with your customers.
There are many values that a company can live by. If you haven’t considered having Empathy as one of your company’s core values, it’s worth a look. And if you haven’t defined any of your core values…we should talk.
Confused by all the marketing options? Here’s a quick way to cut through the clutter…
Your marketing and sales occur in a funnel, with lots of unqualified suspects at the
top, fewer qualified prospects in the middle, and even fewer scoped proposals
to potential customers at the bottom.
Most of the “chatter” about marketing is focused on the Top of the Funnel (TOF). The
problem with TOF marketing, though, is that it’s a 2% game. Super Bowl ads,
Facebook ads, click-through rates – they’ll all have about a 2% response rate.
That’s why most people say, “Marketing doesn’t work.” They’re right – but they
really mean TOF marketing.
Middle of the Funnel (MOF) marketing is much more powerful – response rates of people
who know you and are interested in what you do are usually around 15-20% –
about 10 times the rate of the top of the funnel. That’s where most people
should focus their marketing – getting more out of the relationships you have.
How? Email, webinars, speeches and workshops – things like that.
Is 20% not good enough for you? Then focus on the Bottom of the Funnel (BOF). It’s
not marketing down there, it’s sales. And most companies have hit rates of
40-80% on the proposals they write – two to four times MOF rates, and 20 to 40
times TOF rates. What kinds of things should you invest in to improve sales?
Account plans, sales training, sales process improvement – things like that.
Where to Begin?
So, here’s the simple lesson in looking at the response rates at various points
in the funnel – start at the bottom of the funnel when you are starting to
upgrade your marketing and sales, and work your way up. BOF upgrades will get
you the most bang for your buck. Once you’ve optimized your sales, then move up
the funnel and upgrade your MOF marketing to people who already know you. Only
after you’ve got a good MOF system should you then wade up into the 2% world of
TOF marketing to make more people aware of what you do.
“Value proposition” is one of those phrases, like “paradigm shift” and “synergy”, that started out as a good idea…but was then so overused that a lot of people don’t understand the importance of the original thought.
But a clear value proposition is as important as ever, especially for growing and Stage 2 companies that are past start-up.
What is a value proposition? It’s a statement that describes who your customer is and how you make them better – the value that you create for them.
To get a better idea of what a value proposition should be, let’s look at the good, the bad, and the ugly of what it can be.
In my work as a marketing strategy consultant, I get to see all kinds of value propositions. Usually, they are OK, and have some redeeming qualities. But there are some that are simply awful.
The worst has to be a statement like, “We offer our value proposition to our customers.” In other words, the value proposition is… “our value proposition.” You can see why that would be a problem – it doesn’t describe who the customer is or how they improve. Often, if asked to tell more about the value proposition, these people will say, “We offer good service at a low cost.” That makes me cringe, too, but that’s a subject for another column…
Another ugly value proposition is doing everything for everybody. I recently asked the CEO of a marketing firm who his target market was, and was shocked when he shrugged his shoulders and said, “We work with pretty much anybody.” (Note: if your marketing firm does not have a clear value proposition itself, they can still help, but don’t ask them to develop yours.)
Look at this video – the value proposition seems to be…”we’re the most popular.” I’m sure there was more thinking behind it, but compare this one to the one I show farther below, and you’ll see that it doesn’t say much.
Which brings us to bad value propositions. With these, the company has usually successfully described the customer and the value – but what they describe…is a problem. Here are some examples of value propositions that are a strategic problem for a growing company:
– Basing the value on something only the owner can provide
– Basing the value on being good and cheap (note: please pick one if you haven’t already!)
– Basing the value on flexibility and quality
All of these value propositions work when a company is small and in start-up mode, but they are unsustainable in the long run. It’s almost impossible to grow a company when it is:
– Reliant on the owner to deliver the value (Steve Jobs being the exception that proves the rule)
– Dependent on finding labor that is good and cheap (there is not a lot of good, cheap labor available, folks!)
– Expected to provide high quality AND offer a lot of flexibility
So, what does a good value proposition look like? One of my favorite examples is demonstrated in an ad campaign that came out in 2010.
Listen to what they say they can do for their customers. And look at how they portray their customers – despite their broad appeal, it’s clear they are selling to people who are active. I think this is a great example of an ad being so “on strategy” that the value proposition is perfectly clear.
Here’s what I think a good value proposition looks like:
– It is focused on a specific market that is the appropriate size for the company’s resources
– It is focused on quality, cost, or speed – or if it’s a niche offering, then 2 of those 3
– It clarifies what the company doesn’t do
– It’s been developed by the team, so that everyone understands it and is committed to it
A good value proposition is just one of the pieces of a marketing strategy. If you’d like to learn about the other pieces, feel free to register for our upcoming teleseminar on marketing, at stage2secrets.com.
I was working out at the gym in Ann Arbor last week and heard the song According to You from Orianthi, the lead guitarist for the Michael-Jackson-tour-that-wasn’t. It reminded me of one of the key concepts that I work on for clients when we are doing marketing strategy – who is your target market?