Article

 

Success Factors of a Best-Run Marketing Organization: How Does Your Team Stack Up?

by Bernard Chung | SAPinsider

October 1, 2007

The success of marketing organizations relies on their ability to drive new business through better customer relations, brand awareness, and demand generation. Get best practices employed by marketing organizations that excel at effectively meeting this goal. And find out how tools like SAP CRM’s Marketing Performance Management dashboard can provide the technology foundation you need to support this strategic marketing transformation.
 

Marketing budgets tend to consume a hefty share of a company's discretionary spending, so executive teams want to see profitable results from their marketing dollars. One of the most critical challenges for chief marketing officers (CMOs) — the average tenure of whom is less than two years these days — is how to tangibly prove the marketing team's contribution to the business's success.

It's not an easy task: A recent study by the Marketing Leadership Council found that, on average, marketing organizations could calculate ROI for only 28% of their marketing budget1. And an SAP Value Engi-neering study found that 86% of trade spending in consumer products companies — on in-store promotions, for example — was not profitable.

To increase credibility with C-level executives and boards of directors — and to ensure their staying power — marketing leaders need to demonstrate solid contributions to the company's strategic, tactical, and financial goals. Today, companies judge the success of their marketing organizations on their ability to drive new business — by increasing brand awareness, generating demand, and fostering profitable customer relationships (see sidebar).

Marketing's Substantial Transformation: The Old Rules No Longer Apply

In the past, marketing groups tended to focus on isolated analysis and planning, reacting to the demands of executives and sales teams without a strong connection to customers. While marketing frequently delivered creative insights that arguably supported top-line growth, program execution often was not coordinated with other company activities, and the value that marketing delivered was rarely measurable.

This model can no longer stand. The proliferation of channels, brands, and customer segments provides new challenges, and new trends are shaping business approaches in nearly every industry. In high-tech, channel marketing programs are seeing more funding; financial firms are focused on reducing customer acquisition costs; and small and midsize companies are paying more attention to pay-for-performance advertising. These trends are necessitating massive changes in companies and their marketing organizations. For example:

  • Efforts are shifting from a product focus to a customer focus

  • There's a greater emphasis on accelerating, measuring, and optimizing campaign execution

  • IT investments are on the rise, with the goal of providing tailored customer information across the enterprise and turning customer insight into frontline action

These trends can help change the perception that marketing is just an isolated cost center, instead proving its contribution to a business's long-term, profitable growth.

How are leading marketing organizations getting the job done? Walk through their best practices, and you'll see what role software solutions — and customers — can play in helping marketing teams demonstrate favorable business outcomes.

Best Practice #1: Implement a Customer Value-Based Strategy

Successful marketing organizations focus on the value that their customers generate for the business. Some customers are very profitable and are critical to retain; others may generate low profits or actually be unprofitable to serve. To deepen marketing's understanding of customer profitability, it's essential to consider lifetime customer value. An analysis of customer value should be based not just on historical profitability — some customers may provide low margin contributions today but lead to significant profitability in the future.

Implementing a customer value-based strategy helps optimize your entire channel mix, improve investment decisions, and better target your marketing campaigns and programs. It helps promote loyalty, nurture lifetime customer value, and enhance profitability in the long run. A first step to get there is to segment your customers based on their value to the business so marketing, sales, and service teams can provide these customers with the most suitable offers and serve them through the most appropriate channels (see Figure 1).

Figure 1
Simplified example of an online retailer's customer value-based strategy, which differentiates special offers, interaction channels, and services based on value segments

A customer value-based strategy can have a significant business impact — consider a large oil and gas company's lubricants business, which was earning the lowest margin of all the company's business groups. Using value-based segmentation, the lubricants group clustered customers into six tiers and determined that 90% of the overall revenue came from 12% of their customers. With this understanding, the company realigned sales and marketing to focus on the most profitable customers. Despite substantial increases in crude oil prices, the lubricants business moved from last place to first in terms of contribution margin percentage — simply by turning customer data into actionable insight.

To make this transformation, count on data warehouses and advanced analytic techniques to play an important role. Companies should look beyond basic revenue data to truly understand customer value and behavior. When data is gathered from an array of sources and mined effectively, robust analytic capabilities can provide more accurate visibility into long-term customer profitability, leading to more actionable insights.

Best Practice #2: Be the Champion for Consolidating and Disseminating Customer Data Across the Organization

To fully understand customer needs, buying habits, profitability, and trends, it's not enough for only the marketing department to collect customer data. Companies need to bring together data and insights from all parts of the company that interact with customers:

  • The sales organization and distribution partners will often have a strong sense of what customers need and how well the brand and pricing strategies are functioning

  • The service and support organization (including call centers) collects a wealth of first-hand information on what customers complain about on a daily basis, what customers' concerns are, and which cross-sell and up-sell messages are driving the highest hit rates and margins

  • The marketing organization collects information directly from customers by tracking responses to marketing campaigns, conducting surveys in the customer base, and buying customer data from external providers

Many organizations store all of this information in multiple databases, which makes consolidating and maintaining accurate customer data a challenge — one that hinders effective analysis and decision making. Because of its specific role, marketing is often in the best position to champion the consolidation and dissemination of customer data to attain a 360-degree understanding of customers across the organization. We encourage marketing teams to serve as the owners and high-level architects of this customer data consolidation, help promote necessary IT programs, make customer insight accessible throughout the organization, and articulate to decision makers the benefits to other departments:

  • The sales force will benefit from richer lead information to help target the right prospects and counter competition

  • The call center can use customer insights to refine complaint-handling and turn service calls into sales opportunities

  • Marketing and product development can create new plans derived directly from customer data

By breaking down these silos, marketing can not only ensure timely distribution of customer insights, they can also drive significant cost reductions in IT support costs for multiple systems and technologies. This will help raise marketing's value to the enterprise as a whole (see sidebar).

Rely on IT to Help You Think Beyond Marketing

A powerful marketing team is one that can demonstrate its substantial role in productivity improvements, demand generation, and customer satisfaction gains. To do this, a best practice is to have marketing teams spearhead the creative redesign of business processes in which marketing is involved — including not only sales and service, but also product development, supply chain management, finance, and those involving external partners and suppliers. The key is to think beyond marketing's four walls and incorporate other departments' perspectives. Ask yourself:

  • How can we effectively support the sales organization with qualified leads or route leads most efficiently to channel partners?

  • How can we ensure call center agents know about new sales promotions and make the most appropriate product or service offer to customers?

  • How can we align marketing planning and budgeting with corporate financial planning processes?

  • How can we help ensure that inventories are stocked when a new advertising campaign hits the street?

  • How can we provide customer insight to spur new product innovation?

To deal with these questions and concretely prove their team's value to the organization, marketers are turning to technology for the tools they need to succeed. They are looking for CRM solutions that cover customer-facing processes across marketing, sales, and service, tightly integrated with software applications to support enterprise resource planning, product lifecycle management, supply chain management, and partner relationship management. With SAP CRM and an integrated business suite, SAP provides such solutions — equipped to help you think beyond marketing and continually innovate end-to-end processes across the enterprise.

Best Practice #3: Close the Marketing Loop and Apply the Right Metrics

To improve marketing's impact, it's essential to take a closed-loop marketing approach. You need to look at the entire marketing process from analyzing and planning, to execution and monitoring results — and then feed the outcome back into the next cycle. To close the marketing loop, it is absolutely critical to set up benchmarks and KPIs that support corporate goals, align marketing's business plans with those of related organizations, and measure results on an ongoing basis.

For example, a company might choose rate of revenue growth as a metric to monitor the success of a marketing initiative, in addition to focusing on the campaign response rate. Many factors influence these metrics, but holding marketing accountable for new revenue may be a surefire way to prove marketing's role in business growth. Additionally, joint KPIs will unite sales and marketing leadership around common, customer-centric goals and corporate growth (see Figure 2).

Figure 2
SAP CRM's Marketing Performance Management dashboard shows marketing metrics, such as campaign response rate, combined with corporate KPIs, such as product revenue

Many common metrics are highly relevant for understanding the impact of marketing, including campaign response rate, return on marketing investments, lead-to-sales cycle times, lead conversion rates, brand recognition rates, and customer satisfaction, to name just a few. What's important is that marketing teams must be heavily involved in selecting the metrics that support strategic goals and are likely to drive desired customer behaviors. In this way, marketing will increasingly gain the organization's trust and earn the ability to invest in new programs or target the expansion of new growth areas.

Best Practice #4: Take Advantage of IT to Improve Process and Resource Efficiency

Establishing and monitoring key metrics is an important step toward improving marketing's productivity. But there are many opportunities that go beyond the basic approach of measuring, monitoring, and improving key metrics (see sidebar).

SAP's Central Marketing Platform

SAP CRM helps organizations insightfully analyze, plan, develop, and execute marketing activities through all customer interaction points. The solution supports critical marketing processes, including:

  • Marketing resource management to manage the use of marketing resources, control and manage budgets, and facilitate collaboration

  • Segmentation and list management to manage enterprise customer and prospect data and enable customer segmentation and analysis

  • Multi-channel campaign management to facilitate marketing execution through all inbound and outbound interaction channels, including direct mail, email, and the Web

  • Lead management to generate highly qualified leads and automate the lead-distribution process for efficient follow-up, bridging the gap between marketing and sales to increase conversion rates

  • Marketing analytics, enabling the conversion of reports and data into actionable insights, predicting customer behaviors, and understanding why marketing activities did or did not work

Marketers in consumer products industries may also want to consider the trade promotion management functionality, which cuts across marketing and sales processes to optimize the spending of trade funds to generate end-customer demand and increase profitability. Or they could look into channel marketing funds management to leverage channel partners (and their marketing budgets) to expand marketing's reach by funding co-marketing activities.

Leverage advances in data analysis. Direct marketing has become a science in which marketers — using data-mining techniques — can deliver finely tuned campaigns that speak with a relatively high degree of accuracy to customer needs. There are various behavior propensity models, for example, that help explain variability in observations and enable market researchers to accurately model purchase decision drivers.

Sophisticated algorithms can also optimize recommendations for product and service offers. SAP's real-time decisioning engine, for example, uses customer data and situational context (e.g., Web or call center interaction) to identify the best cross-sell and up-sell offers for a particular customer in real time. Learning from the customer reactions, the decision model improves with every interaction and makes even better recommendations next time.

By adopting such techniques, marketers can optimize investments, reach out to customers more effectively, and generate incremental revenue.

Deploy IT-enabled processes. Today's enterprise solutions include lead automation systems that help ensure that marketing provides highly qualified, accurate leads to the right channel and the right employees for timely and efficient follow-up. Campaign management tools support creating and monitoring multi-wave campaigns across multiple channels (see Figure 3). Marketing resource management systems provide visibility into activities, help minimize duplication of effort, and ensure that actual spending is tracked against budgets. By advocating for these types of solutions — especially software that can integrate well with a company's existing IT platforms — marketers can ensure that productivity continually improves and that resources are deployed for their most productive uses.

Figure 3
SAP CRM allows marketers to create multi-level campaigns across different channels with easy-to-use, drag-and-drop tools

Conclusion

As customers continue to change their buying patterns and competitors keep adjusting their strategies, marketing will need to advance both the art and the science of its approach, and better align with other departments including sales and customer service. The guiding light must continue to be customers, with the goal of ensuring they are extraordinarily satisfied — so they continue to buy your products and services.

To do this — and simultaneously prove its worth to the business — marketing must shape programs and cross-organizational processes that add value for customers and that ensure the optimal use of resources. Here, IT solutions will continue to play a larger role, providing the foundation to analyze massive amounts of data and to strategically segment and mine that data to yield actionable, value-based insight. IT solutions can also help streamline organizational processes to improve marketing execution, marketing spend, and ultimately revenue impact.



1 Marketing Leadership Council, 2005 Marketing Investment Benchmarks (January 2005).


Additional Resources

The CRM 2008 conference in Las Vegas, March 3-5, 2008, for campaign management best practices and expert-led instruction on achieving higher marketing program returns (www.sapcrm2008.com)

"SAP CRM Marketing On-Demand: Wave 3 and 4 Updates" by Seema Thomas (CRM Expert, Volume 3, Number 4, www.crmexpertonline.com)

"Business Drivers for SAP Trade Promotion Management" by Michael Debevec (CRM Expert, Volume 3, Number 4, www.crmexpertonline.com)

Bernard Chung (bernard.chung@sap.com) is Director, CRM Solution Marketing at SAP Labs, LLC in Palo Alto, CA, responsible for the global messaging and positioning of SAP CRM Marketing solutions. He has over 10 years of product management and marketing experience in the enterprise CRM and marketing automation markets. He started his career in database marketing at large financial institutions, including American Express and Wells Fargo. Prior to joining SAP in 2004, he was part of the product management team at PeopleSoft and Oracle. He holds a mechanical engineering degree from the University of Washington and an MBA from Carnegie Mellon University.

Stefan Haenisch (stefan.haenisch@sap.com) is Vice President, CRM Product Management at SAP AG, responsible for the Marketing product. Prior to joining SAP in 1998, he was a consultant with Kiefer & Veittinger where he implemented and developed SFA software for leading pharmaceutical companies. Earlier in his career, Stefan was a business consultant for a top strategy consulting firm. He holds a master's degree in business and engineering from the University of Karlsruhe, Germany.

Dru Shiner (dru.shiner@sap.com) is Director of the CRM Center of Excellence at SAP America, Inc., responsible for CRM business development. Dru has more than 15 years of experience working with leading technology companies including Siebel, Oracle, and now SAP. Dru most recently served as the Director of CRM Business Strategies for North America at Oracle, where he developed comprehensive business cases tying business initiatives to solutions. Dru is also a Certified Public Accountant (CPA) with over 10 years of experience in private and public practices.

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