Avoid marketing irrelevance

Established industries are frequently disrupted. Consider the disruption caused by Technology to traditional travel agencies and stock markets or by streaming services to the entertainment industry.

The incumbents always argued that “it’s not easy to dismantle the status quo, and start over.” The dinosaurs were eventually exterminated because the newcomers did the same thing every time.

The C-suite needs to be aware of the disruption that is occurring in business today, not just in marketing.

In classic organizations, the executive sets goals and an overarching strategy. Then, Manufacturing, Research and Development, and Design create plans to achieve those goals. IT, Marketing, and Finance departments, as well as other “supporting” departments, determine the budget needed to meet both the organization’s objectives and the main business departments.

In this scenario, the marketing plans are broken and become the mortar for other bricks of the company. Marketing efforts are rarely linked to business goals.

Watch out if this sounds like you.

Why traditional marketing roles in business must change

The conventional role of business marketing has been completely reimagined in today’s modern world.

The first thing a brand does with Version 1.0 is to market it, i.e., find out how the customer interacts with a particular brand. What do they like? What is their average spending? How often do you buy?

A company can define its total revenue goals for different customer types as it learns more about its customers’ behavior.

Then, Finance, Marketing, and Technology collaborate to create a tech stack that targets customer acquisition by type of customer. Marketing budgets are then derived from these needs. Marketing and Finance are supported and driven by Technology, which enables insights and connections throughout the enterprise. R&D, Manufacturing, and Design, and then learn from Marketing’s insights and Finance’s analysis in order to develop better products.

It’s not that Marketing or Finance are the core of an organization. All departments make a significant contribution to it.

If you ask a marketer what their budget is today, they will give you blank stares. Budgets are usually defined by the cost of acquiring a new client or achieving retention goals.

Your marketing budget, for example, could be $10 at the acquisition stage. Of course, per customer. This requires that you know the total market addressable, the products, and the buyer persons.

The marketing process is simple, not complex, as we have never had this much information, analysis, and ability to iterate before!

How marketers can avoid being irrelevant

The question “What is my budget?” must be replaced by “What is my revenue target?” What’s my budget?

Get into the habit of collaborating closely with finance and becoming familiar with numbers. What percentage of revenue is generated by current customers, and what percent comes from new customers? What is the rate of churn? What is the lifetime value of customers? What is the true cost of acquiring a new client today?

It would be best if you also operated under the “only incrementality” mentality. Marketing cannot take all the credit for every sale. Costco has been able to grow without advertising or marketing because their products are so good that they can sell themselves. Costco spending $100,000 per month on marketing and dividing that by the number of new customers would give a false and overly optimistic view about how much it costs to drive new customers.

Companies will be able to determine the true cost associated with acquiring and keeping customers by continuously A/B testing and measuring incremental results. Knowing is the first step to improvement.

Even if you only have a few pieces of information, it’s better to be informed than not at all. You may only know how much it costs to churn, but that’s okay. You can allocate a specific budget for this. To see the big picture, use incrementality tests to piece together true costs.

Set an amnesty “from now on.” It’s possible that you told your C-suite executives that you were acquiring customers at $1.50 when it was actually $10. Execs are going to be delighted with accurate information and will start supporting marketing improvements. You’ll likely find that they didn’t buy the $1.50 estimate. If you can also show them a way to expand the business and acquire customers at a profit for only $10, then you will be the hero.

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