How Growth Marketing Can Help CMOs Justify Marketing Spend
Even before the onset of the global pandemic, CMOs faced a challenging situation within their organization. They were expected to accomplish more with less budget, and be prepared to justify those budgets. But operating under traditional marketing practices hampered their ability to meet their KPIs.
Many organizations operate in silos, limiting collaboration and alignment between marketing and sales teams. Marketing’s role can be limited to attracting leads at the top of the funnel, for sales to then nurture through to conversion. This approach often results in an inconsistent customer experience, leading to customer churn – and increased tension between these two revenue-driving teams.
In discussions with our clients, we’ve found that these challenges have only grown more pronounced in the current environment. Companies spent 2020 hyper-focused on attracting any and all possible revenue dollars to drive bottom lines. They rapidly pivoted to reinvent product, channel, and demand strategies in the midst of quarantines, shutdowns, and changing consumer needs. Although conditions are easing slightly in this first quarter of 2021, that focus on revenue will continue through this year and beyond. More than ever before, CMOs also need to pivot to deliver growth and resilience.
How can CMOs accomplish this? To start, they should broaden their role's nomenclature to include and emphasize “growth”. As one CMO has put it, “the role of the CMO these days is really being a chief growth officer for the company.”* What does that mean?
From an operations perspective, when asked to justify marketing spend, CMOs can demonstrate how marketing plays a critical role in every part of the organization, especially the company’s bottom line. How do they demonstrate this?
From an execution viewpoint, growth marketing deploys a more dynamic, data-driven approach: ongoing experimental marketing to optimize lead-to-conversion rates, increase sales funnel velocity, and reduce sales cycles. Armed with this data, CMOs are well positioned to demonstrate the value of marketing to the entire organization. Now the question is: how can growth marketing help CMOs deliver growth at scale?
Growth marketing vs traditional marketing
Growth marketing – also known as growth hacking – has been around for a decade, gaining prominence in 2020 as many organizations focus on growth and revenue. Essentially, growth marketing is Demand Generation with a focus on acquisition and retention versus only focusing on acquiring new customers. While traditional marketing’s focus is limited to awareness and acquisition, growth marketing focuses on the complete sales funnel. It’s important to note that growth marketing does not replace traditional marketing components – it adds a layer of strategy and tactics and close collaboration with sales.
Here’s what a traditional marketing campaign looks like: offer a special promotion; buy an email list; run ads with keywords and demographic targeting. However, this approach invokes the Law of Diminishing Returns by not updating strategies or tactics to optimize budgets or meet customers’ evolving interests. True customer engagement is lacking.
In that same traditional campaign, another contributor to the lack of customer engagement is that marketing-sales firewall: Marketing moves a lead to the top of the funnel where sales takes over with no continued input from marketing. This lack of collaboration can create misaligned communication, which can create a lack of trust for the lead.
In growth marketing, its core strategies focus on building long-term customer relationships by using the purchase funnel as the underlying model for the buying process and customer journey. True demand generation and growth marketing makes sales and marketing teams full-funnel partners, from first touch to client conversion and post-sales account management. And instead of a blinkered top-of-funnel focus, growth marketing analyzes in-flight campaign data at every stage of the funnel and dynamically adjusts to improve results.
Growth marketing is powered by experimentation and analytics. Experimentation is where the “hacking” terminology comes in. As opposed to executing traditional marketing methods, growth marketing tests creative, innovative, and low-cost strategies for building and maintaining a customer base. This type of experimentation improves campaign efficiency by capturing data faster than traditional methods, while powerful analytics enables marketing teams to quickly identify what resonates with audiences and adjust campaigns in flight.
Testing beyond A/B
Everyone’s heard of A/B testing, but that dichotomic label does a disservice to the powerful testing and experimentation capabilities available today. Current marketing technology enables growth marketers to deploy multivariate testing to experiment with what content is delivered to different audience segments across channels.
The test data helps to develop highly optimized strategies targeting each audience segment, in some cases down to the individual level. This granularity enables hyper-personalized cross-channel campaigns to meet the prospect/lead with targeted messaging. Response data helps to optimize future campaigns by testing new variations to increase accuracy with every experiment.
On the analytics side, growth marketers are technical marketers with powerhouse ad buying, programming, and automation skills in service to driving innovative creative strategies. They run transparent analysis on campaign performance in real-time, create hypotheses to understand the cause and effect on marketing performance, and make adjustments on the fly to deliver optimal results.
Given current business conditions, executing revenue-driving, short term growth strategies to meet revenue goals is understandable, but doesn’t position the company for long-term success. It is no longer sufficient to quantify marketing success by total new leads or calculating ROI of obtaining new leads against sales figures. Growth without retention isn’t actually growth at all. True growth derives from shifting from lead volume to lead quality to closing a deal and creating loyal customers.
Metric-driven marketing for sustainable growth
The first step in implementing a growth marketing model is tracking and analyzing metrics across the entire organization. To facilitate this switch, it may be helpful to use the acronym AAARRR (also referred to as the A3R3-funnel) to understand the growth marketing funnel stages.
- Awareness: How many people are you reaching? Measure brand awareness through web traffic analysis, surveys, social listening, and search volume data
- Acquisition: How many visitors are reaching your website and converting to customers? Don’t just look at visitor numbers, look at those who aren’t converting for deeper analysis
- Activation: How many people take the first important step? Finding the right mechanism to accelerate customer engagement with your product/service to demonstrate value and build brand affinity
- Retention: How many people come back for a second/third/fifth time?
- Revenue: What percentage of activations become customers? In growth marketing, revenue-related metrics drive experiments in pricing and strategies
- Referral: Peer-to-peer marketing is an extremely powerful tool to drive referrals. Analyzing and optimizing referral rates is a key growth marketing tactic and the most efficient way to acquire new customers
The current climate is a great opportunity for CMOs to act as agents of change across the entire organization. As you consider the growth marketing model, remember it’s not a total tear-down-and-replace exercise. Growth marketing will layer on top of your traditional methods to deliver greater insights and control by anticipating the rate and nature of change and proactively adapting to it. Now you can create more targeted campaigns that engage and retain customers.
*Today’s CMO: Transforming the role to be ready for what’s next, Marie Gulin-Merle, October 2020