Targeting investments in a recession

Last month, Extraprise and Oracle co-hosted a dinner where analyst John Neeson, the co-founder and managing director of analyst firm Sirius Decisions, led a conversation about areas on which to focus in 2009 to enable your organization to survive and thrive in this economy.

The round table dinner was for Bay Area B2B Marketing and IT executives, and focused on the potential for optimizing and integrating the sales and marketing functions. John addressed both the downturn and positioning yourself for an agile rebound upon economic recovery. He noted that he’s working with many companies to support re-budgeting marketing, and in the process has to contend with companies making knee-jerk reactions on how to reduce budget. He highlighted one CFO's direction, which was to look at the 40 programs that were ongoing and cut them all except for the top 1 or 2 results-producing programs.

John’s position reaffirmed what other analysts are saying, which is that even as all unnecessary costs should be trimmed, results must still be achieved. And in general, doing the same things (or more accurately, less of the same things) is unlikely to have the desired effect on retaining sales and revenue. The key is to introduce new paradigm shifting capabilities into the organization. To do this, what’s working well should be retained, but for less effective efforts, funds should be reallocated to focus on promising new initiatives.

In terms of the potential for both using new tools and ensuring “best practice” use of the tools available, John highlighted that the average company required 16 leads to generate 1 sale, whereas best practices companies required only 7 leads. Though John didn’t extend this to extra dollars spent by the average versus best practice company, at an estimated cost of $5-6 thousand per lead, “average” companies are spending an extra $45-54 thousand per sale. Obviously increasing conversion efficiency could yield the cost savings that the CFO and CEO are looking for while still maintaining sales and profitability.

John outlined 10 of the most important opportunities for enabling the most efficient companies to blow away the competition.

1. Channel and sales enablement. Provide sales (direct and channel) the tools that will give them access to the knowledge assets that support in-process sales pursuits. Foster sharing of information on a two-way basis as information learned in the field can be used to tune, refresh, and continuously improve the knowledge base. As one dinner attendee reported, great leaps and bounds were made just by focusing on “searchability and findability” of information.
2. Building a digital relationship. Demand generation consumes from 40-60 percent of a company’s marketing budget. Ensuring the right individualized message gets to each opportunity regardless of where it is in the sales cycle is critical, and automating this process is essential if it can be done economically.
3. Propensity modeling. Maintaining predictive models of outcomes based on attributes and behavior is essential in terms of being able to prioritize, optimize, and provide the right messaging and timing to those in the sales and nurture cycles based on calculated analysis rather than guesses or hunches.
4. Data quality. B2B data decays rapidly, and needs to be cleaned, appended, and verified on a consistent basis. There is measurable value in this process, but it often omitted because it can be a challenging and time consuming process. In terms of driving towards best practices, efforts applied against inaccurate data are wasted. Another aspect of data quality is that marketing should focus on improving data quality through the entire marketing and sales process. (Side note: A recent B2B article focuses on the importance on focusing on internal lists in a recession.)
5. Focus on the lead to close ratio. This ratio encompasses the key transition from marketing to sales. As noted above, companies should drive towards best practices of 7 to 1 versus the industry average of 16 to 1.
6. Business process reengineering. Optimizing processes rather than activities enables overall improvements in bottom line results rather than in somewhat less meaningful intermediary results. The importance of change management is to foster the cultural, personal, technological, and other changes that are required to achieve optimal results.
7. Persona-based marketing. As a counter to one-size-fits-all campaigning which leverages a bland corporate message to nudge people through the sales process, identifying personas of the most prevalent or most ideal customers allows messaging to be targeted to specific problems and needs and fosters acceleration of the sales cycle. Furthermore, codifying attributes of target customers enables digitization of the process.
8. Live event marketing. This type of marketing is of added importance in an economic environment where people are more discerning in their investments, require more personal attention, and require additional assurances against risk. One element that should be recognized is that the live event is the icing, and the journey that leads up to the event is key. It’s all about building up to a live event.
9. Better understanding the lead development cycle. Creating a taxonomy can support improved measurement and better analysis. Since the cost of a lead is typically in the $5-6 thousand range, and goes up to $15 thousand for the sales person to qualify lead, better understanding where an opportunity is in the cycle will be required in order to prioritize and estimate costs of developing a pipeline. Furthermore, in processes where there is a transition from one organization to another (i.e., marketing to sales), ensuring that all parties are speaking the same language goes a long way in reducing
10. Inclusion of localization of marketing. Even as corporations seek to ensure consistency of brand and messaging, focus on the customer dictates that the message be synthesized into forms that engage individuals from different cultures, geographies, and current local conditions. One method recommended to achieve this goal is to develop regional demand generation centers of excellence which take the corporate message and optimize for regions and location and then provide the technology, specialized skills, and best practices to enable efficient delivery of marketing programs.

For those not willing to accept the risks and exhaustion that accompany “white knuckling” it through the downturn, targeting investments in priority areas provides the best opportunity for achieving sustainable improvements. Although John didn’t provide a generalized workplan to get from average to excellent, he did reinforce that two things specifically won’t work: doing nothing or simply slashing programs and costs across the board. In fact the real opportunity is not in optimizing any one activity, but in looking at the entire lead generation to sales process to improve overall efficiency.