marketing capabilities CMO

Measuring Marketing’s Contribution to the Pipeline

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For businesses, a pipeline is a targeted list of potential buyers who might have an interest in your products or services. Many companies face the challenge of capturing the attention of potential buyers and moving as many of these potential buyers as possible through the pipeline stages of contact, connection, conversation, consideration, consumption, and community. More and more companies are relying on Marketing to continuously and effectively grow their organization’s opportunity pipeline. Potential buyers who are not converted into customers are often referred to as leaks or pipeline leakage. Our role, as marketers, is to “plug the leak” and improve conversion rates. If the Marketing and Sales aspects of the pipeline are not connected and aligned properly, the potential pipeline leakage can be very large. So a crucial step is ensuring Marketing is properly aligned with Sales. Marketing and Sales alignment allows for the creation and implementation of strategies, programs, and tactics that will facilitate pipeline opportunity development and movement. Once your company achieves this alignment, the next important step is for Marketing to focus on marketing initiative that will effectively and efficiently contribute to pipeline performance and the generation of customers. We must be able to clearly demonstrate and measure our contribution to the pipeline.

Unfortunately, a Forrester Research study, “Redefining B2B Marketing Measurement,” found that “the metrics that most B2B marketers say they use — like number of leads generated and cost per lead” — rank in the lower half of the effectiveness list.” In fact, number of leads generated and cost per lead may actually work against us if we don’t look further into the buying process. At first blush, one program may produce more “leads” than another at a lower cost and therefore appear more efficient. But what is really important is how many of the opportunities convert (don’t leak) to the next stage in the buying process. If there is a higher conversion rate from the more expensive program, than it is actually more effective. If we only look at a marketing program in terms of qualified leads generated and cost, we could potentially be eliminating programs that actually help build the pipeline.

Therefore, we need to move beyond the lead as the marketing metric and leverage metrics more meaningful to the organization — metrics that are more closely tied to customer deals. Customer deals– that is, sales — is for most organizations one of the most important business outcomes. Every company establishes a revenue goal. This revenue target is generated by some number of deals and dollars from existing customers and some number of deals and dollars from net new customers. This brings up the question of what metrics should CMOs and their teams use to measure Marketing’s contribution to the pipeline? Here are four metrics to consider:

1. Pipeline contribution which measures the number of opportunities generated by Marketing that convert into sales opportunities and ultimately into new deals. This metric helps ascertain to what extent marketing programs and investments are positively effecting the win rate and reducing the number of qualified leads that wither and die or are rejected by Sales.
2. Pipeline movement which measures the rate at which opportunities move through the pipeline and convert to wins. This metric helps assess the degree to which marketing programs and investments accelerate the sales cycle.
3. Pipeline value which measures the aggregate value of all active marketing opportunities at each stage within the pipeline. This helps determine what increase in potential business marketing investments may generate.
4. Pipeline velocity which measures the rate of change within your pipeline-both in speed and direction. This enables you to determine whether your sales are accelerating, decelerating, or remaining constant.

When examining each of these metrics it is important to compare the marketing generated opportunities compared to non-marketing generated opportunities. This means we need to understand what is the difference in the win rate, average order value, conversion rate, and velocity between marketing generated opportunities compared to non-marketing generated opportunities. Ideally, over time, by monitoring results and analyzing the data related to these metrics, Marketing can begin to create more predictable results in terms of contribution, conversion, and value.

To Survive and Thrive Takes Analytical Muscle

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Today’s CMOs (chief marketing officers) face a set of completely different challenges than their predecessors. The CMO role has continued to evolve over the past fifteen years as a result of the emergence of new media, the growing number of sales and service touch points, more complex distribution models, and the fragmentation of customer segments. As a result, the CMO has moved from focusing primarily on brands and clever advertising to a larger, more strategic role designed to enable a company to meet the ever-changing needs of a diverse and global customer base. The Business Week  article “The Short Life of the Chief Marketing Officer” reported that the average tenure today for a CMO is 26 months. Recently, the CMOs at Chico’s, Home Depot, MySpace, and Rite Aid left after short tenures while Orbitz recently announced that it has “decided to eliminate the global Chief Marketing Officer position and continue managing the Company’s marketing efforts on a regional basis…”

If a short tenure is the norm, what can a CMO do today to survive and thrive? To survive and thrive, CMOs need to see themselves as champions of growth who can anticipate customers, develop their organizations’ marketing capabilities, and measure marketing’s impact on the business in terms that matter to their CEOs, CFOs, and leadership teams. This will require CMOs with a bent towards the analytical end of the marketing spectrum instead of the creative end. Successful CMOs will need to exercise analytical muscle and have a deep understanding of the business landscape in order to predict and recommend which markets, products, and/or services will deliver the most profitable revenue growth.

Six Survival Tips

According to board members surveyed for the MarketBridge study, CMOs with greater quantitative focus and measurement emphasis have a 20 percent longer tenure. Specifically, surviving CMOs will need to exhibit these six skills:

  1. Move business-focused responsibilities to the front and center.
  2. Talk in the language of business. This includes reading balance sheets, understanding business models as well as key drivers of business value, and identifying key growth opportunities.
  3. Leverage emerging marketing channels to build strong brand loyalty, reach targeted audiences, and gain insight into customer needs.
  4. Understand which metrics are valuable for demonstrating the impact of marketing on the business.
  5. Build collaborative teams committed to adding and demonstrating value to the business.
  6. Prove that the investments they are making on behalf of the company are working.

Five Ingredients for Thriving

While surviving CMOs will focus on lead generation, pipeline management, branding and customer acquisition, the most important ingredient for thriving CMOs is their ability to increase their stake in growing customer lifetime value and focus on developing long-term customer profitability.

Four remaining essentials for the thriving CMO include:

  1. Embracing analytics and metrics and leading the way for marketing performance management initiatives.
  2. Closing the gap between marketing and the customer, leading the charge for a customer-centric business strategy, and serving as the “voice of the customer”.
  3. Leveraging data to analyze market and customer trends and strengthening their knowledge of ethnography, lead-user analysis, and online customer communities to create customer-driven products.
  4. Taking the helm in helping the company anticipate and respond to rapidly changing market and customer needs, creating new business models, and leading the charge in establishing new marketing capabilities.

CMOs who want to survive and thrive must actively align every brand under the corporate umbrella with the core values of the corporate entity and reconcile the brands with one another. They must initiate intra-business collaborations that develop, deliver and communicate a value proposition that resonates with customers. Only by building tight relationships between marketing and the rest of the organization and developing relationships outside the business will CMOs be able to tap into customer information that enables the business to extend into emerging markets and bring innovative products to market. CMOs will need to use their creativity to develop new ways to gain a deeper insight into the needs of customers and understand the trade-offs that will be required to design innovative products that meet customers’ buying criteria. The global market is growing in complexity. Only those CMOs who can leverage data-management tools and processes to help companies maintain a consistent brand while optimizing pricing, placement and promotion within specific markets and connecting marketing to the business, will be left standing.