I like to use a simple shorthand for thinking about go-to-market investments, something I call the three P’s: push, pull and pricing. Push investments are those that grow the channel or distribution. Pull investments literally pull in customers so they’re the ones focused on acquisition and retention of existing customers. Pricing is really anything that has to do with your pricing model, including everyone’s favorite: discounts.
So, if those are the buckets that you pour marketing investments into, how do you figure out how much you should be pouring in? This is one of the most elusive questions in marketing. Just ask any CMO why you invest this much or that much in that category of marketing investment.
Ideally, it’s because they know why a particular investment is going to work based on experience, anecdote or historical data about what works and what doesn’t. At the very least, every marketing dollar should be helping you get smarter about where the next dollar goes.
Everyone in marketing has to reconcile many opposing forces: the need to build a brand, acquire customers, nurture existing customers, build out and support a sales channel, expand distribution, and optimize pricing and promotion, all at the same time. What makes things even more challenging beyond the pressure of making payroll or earnings per share targets is that marketing investments across all of these forces tend to operate at different levels in the customer experience, require different magnitudes and frequency of investment, offer both variable and fixed investment opportunities and—the real killer—have different financial return scenarios.
How are you supposed to weigh marketing investments across such a wide array of options?
The key comes in the form of two important steps: landing on your desired outcome or metric and establishing your primary interim marketing metric for each. What you’re looking to do is to establish a causal connection among your marketing investment, the interim metric and your outcome metric.
Think about attribution. When you purchase search ads, your interim metric might be actual click-through visits and then seeing via analytics that a certain percentage of those click-through visits convert to revenue. Naturally, these numbers will be averages. What’s important here is that you’re establishing a connection between a level of marketing investment and the achievement of your marketing outcome metric: revenue.
You might see that you drive traffic to your site by using a search ad, but a portion of that traffic also subscribes to an automated email campaign that changes the overall frequency of purchase. Instead of trying to divvy up attribution dollars across investments, I’ve found it to be more sensible to focus on the overall customer journey and how different journeys and your insight into them can help you optimize where you want to place your bets.
As you establish interim metrics for each of your marketing investments, you’re actually building out a model of how your business works and what kinds of leverage different investments might represent.
While the acquisition metrics are the easiest, the toughest ones to establish are often the most powerful. Let’s take the next category of marketing investment: engagement and retention. Put more bluntly, do you know if you make more money by selling to the customers you already have or by acquiring and selling to customers that don’t know you yet?
This is a really important question that becomes more important depending on your category, velocity of new products and the very nature of your business. Even for products and services you don’t purchase often, it’s still important to recognize that there’s a repurchase cycle that you probably want to be a part of for just about everything.
Here, you’re determining the indicators that a current customer is likely to purchase again. It might be something simple like more opened emails, a store visit or a request for a white paper. In nearly every case, your investment in marketing to current customers is much more efficient, likely to generate a return and increase sales. Are you doing enough of this now?
Moving along to investments in growing your channel. If you have a sales force, you can look at your investments in supporting that channel as a marketing investment.
For example, when you invest in your channel (like adding people to your team to engage with prospects), does that generate interim metrics that create more of a return than if you invest elsewhere? Does the additional person on the team participate in a customer journey that drives more sales, when compared to things like digital advertising?
Build out sections on distribution, explain what these interim metrics might be. For instance, in ecommerce it might be something like distributing your items in a marketplace such as Amazon or Etsy. For a physical store, it might just be a store. For a mobile app, it’s app stores.
These resource allocation questions are the real problems presented to marketers when they think about how they go to market. The only way to get your arms around all of the potential decisions is to track and evaluate interim metrics. By following this model, you will definitely get smarter about where the next dollar goes.