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Highlights from 2006 CMO Council Summit

I had the opportunity to attend this year’s CMO Council Summit in San Francisco, titled “The Power of Engagement: Gaining Customer Intimacy, Influence & Inspiration”. The sessions were heavily focused on consumer marketing and brand building, so this summary will be a little off my normal topic of best practices in B2B marketing. If consumer marketing and brand building don’t interest you, feel free to skip this post.

The Power of Engagement

Speakers: Christine Heckart, GM of Marketing for MicrosoftTV, and Martyn Enterington, VP of Marketing for Textronix.

• The CMO Council Select and Connect study (of which I am on the Advisory Board) found that marketing is suffering crisis of relevancy. Marketers lack respect and relevance in the executive suite, and they feel disconnected with the realities that drive effective revenue. They let sales drive the conversations with customers, not marketing.
• How can marketers become more relevant? The speakers argued that it begins by being relevant to customers, and that this requires a solid understanding of customer needs and the buying process.
• More generally, marketers should ask themselves, “How can marketing be more relevant?” One way to think of this is to ask “What is the first thing my replacement would do?” And then, “What’s the one big thing I’d like to accomplish in the next year, and what will I stop doing to have the resources to get it done?”
• Martyn argued that it is more important to measure “advocacy” than customer satisfaction. Advocacy is a behavior, not an attitude, and is tied closely to growth. It all comes down to the question, “would you recommend my product?” Companies should calculate their “advocacy score” as the percent of “advocates” minus the percent of “detractors”. For more, see “The Ultimate Question” by Fred Reichheld.
• Measuring “engagement” will matter more than other brand measures.

Brand Transformation Keynote

Speaker: Deepak Advani, Senior Vice President & CMO, Lenovo Group Ltd.

Deepak went through the case study of how Lenovo built its brand after it bought IBM’s PC business.

• At first, they had big branding challenges. People worried quality or innovation would go down and that service and support would suffer. How should Lenovo use the IBM brand and the ThinkPad sub-brand, while still building the Lenovo brand? (People also worried about the security implications of having a Chinese company making laptops – perhaps they would use them to spy on the American people. To that, Lenovo responded that “people are reading too much Tom Clancy not enough Tom Friedman”.)
• Lenovo wanted to grow in emerging markets and small business, where IBM was not strong, while keeping the ThinkPad brand in the large business market.
• They explored different branding strategies. Option 1 - “Master brand” strategy (i.e. Samsung or Nike), where all energy is invested in Lenovo. This was rejected since they wanted to keep the powerful ThinkPad brand. Option 2 - “Sub-brand” strategy (i.e. P&G), where energy is invested only in the individual brand (i.e. Tide, Crest). This was rejected it is too expensive and too diluting to focus on many brands at once. Option 3 – “Dual brand” strategy (i.e. Toyota/Lexus), where there are two distinct brand experiences. This was rejected since it can go bad if the consumer experience is not totally distinct, which limits their ability to reuse channels. So they chose Option 4 – “Synergy brand” strategy (i.e. Motorola Razr or Apple iPod), where the master brand is strong as a sub-brand in some case
• They used a phased execution. Phase 1 – Play down Lenovo, convey message that “things haven’t changed”. Phase 2 – Now that people know Lenovo is not destroying ThinkPad, let people know they’re making it better. The motto was “ThinkPad unleashed”. Phase 3 – Introduce new Lenovo products, aimed at customers different from ThinkPad marketers. (For example, the Lenovo 3000 was launched to focus on small business with a message of “worry-free computing”. They called the product “3000” to focus on the master Lenovo brand.)
• To define the Lenovo brand, they used three criteria. The brand needs to be distinctive (can’t occupy same space in people’s mind as a competitor). Needs to be relevant. And needs to be true. Lenovo chose to go for “world’s best engineered PCs” and “global flat-world company”. To communicate “best engineered PCs”, Lenovo wanted a real Purple Cow idea that would stand out, so they released viral videos that appeared to be tapes smuggled out of the Lenovo innovation labs, showing “advanced” prototypes like flying laptops. This generated 3.5M downloads and got 800 blogs talking about where the tapes were real or just clever marketing.

Building a Brand Franchise

Speakers: Joe Gillespie, EVP, CNET Division; Dean Harris, CMO, Kayak.com; Shawn Gold, SVP, Marketing & Content, MySpace.com; and Page Murray, VP Marketing, Palm.

In this session, I was most interested in how MySpace uses their community for marketing purposes.

• MySpace has118M users, 55M uniques/month, and 2M registrants a week. Their brand is expression, creativity, individuality, and they continue to create cool tools that aid in expression. They think of their users as “ambassadors” of content.
• Shawn said that you need to engage with community in the way they want to talk to you. Otherwise, they’ll ignore you since online they don’t have to talk to you. This means you need insight on what works on your community.
• MySpace gives users lots of opportunities for celebrity. For example, anyone who registered as a friend of the movie “Clerks 2” got listed in the credits. As a result, most of those users will likely see the movie and buy the DVD – leading to additional revenue and buzz for the movie. This is a way to do movie marketing that’s never been done before, which is what marketing with MySpace is all about.
• On the topic of how a marketer can design a community that allows participation without deviating from the brand, CNET likes the term “architected participation”. For example, they found that CNET users didn’t like reviews that just said “this product sucks” or “this product rocks”. So they implemented a plan that forced reviews to be >50 words.

Growing Customer Equity – Creating Converts and Champions

Speakers: John Ciacchella, Principal Tech., Media & Telcom, Deloitte Consulting; Alicia Dietsch, VP, Business Segment Marketing, AT&T; Jeff Hayzlett, CMO, Eastman Kodak; Chris Moloney, CMO, Scottrade.

• In the complex sale, third party validation and customer referrals and references are critical. How can marketers build that advocacy? Relationship networks; affinity groups; customer councils, and advisory boards were suggested as options. (Note: I was surprised that nobody discussed other techniques, like social-networks and user-contributed content.)
• Chris from Scotttrade explained how he tries to incent referral by offering free trades for referrals. They reward both parties – the referrer and the referee. Referrals tend to bring higher value customers than advertising. They also found that referrers become MORE valuable post referral, but don’t know why.

New Channels of Engagement – Growing the Fan Faithful (NHL)

Speaker: Karen Durkin, EVP, Communications and Brand Strategy, National Hockey League

Karen’s keynote discussed how they reinvigorated the NHL brand after last year’s lockout.

• Fixed fundamental economics of sport by moving talent around to level the playing feel.
• Changed the product by adjusting rules which sped up the game and allowed for my goals. This created more late game drama and more come back from behind wins – which led to fan excitement.
• Re-launched the brand: “Warrior” commercials; my NHL; focus on fan appreciation (thank you sign on ice; open practice; cheaper concessions).
• Tried to build the brand of specific players.
• Results: Avid players returned; record attendance (92% capacity); merchandise sales up; better TV ratings and more “Center Ice” subscriptions; more NHL.com traffic.

Engaging Partners and Customers in Co-Innovation

Speakers: Diane Hessan, President & CEO, Communispace; Nam Vo, VP Marketing, Health Systems, Cardinal Health; Nancy Bhagat, VP Marketing, Intel; Philip Juliano, VP Global Brand Management & Corporate, Novell.

This session was intended to discuss how companies can engage with customers and partners to improve innovation. Most of the discussion focused on traditional methods for listening to customers, but I was interested in the following:

• Novell argued that customers will give you passionate opinions, but it’s not their job to tell you how to innovate. It’s the marketer’s job to assimilate the information and turn it into something useful. Don’t just give people exactly what they say they want; marketing must make sense of all the inputs and figure out something innovative and compelling. “Sometimes if you try to make everyone happy you end up making nobody happy.” You need to listen to everybody, but ignore customers who are stuck in the past.

3Rs of Customer Return: Retention, Renewal, Reactivation

Speakers: Rebecca Lieb, Editor, ClickZ; Ann Marie Miller, SVP, Corporate Sales, CMP; Alan Scott, CMO, Factiva; Peter Karpas, SVP, CMO and Product Management Officer, Intuit; Liz Smith, SVP, VP Marketing & Communications, Visa.

• “Retention is like the weather, everyone is talking about it but nobody is doing it that much.”
• CMP: Given that the average tenure of a CMO is only 23 months, it is hard for marketers to focus on long-term trends like retention – CMOs need to show fast results.
• Factiva is able to quantify the exact return on their marketing investment. He claims his $10M budget generates $29.325+ incremental revenue.
• Visa provides lots of tools and services to their member banks to help them keep customers. For example, they did an analysis with United / Chase to analyze the health of their portfolio. This helps keep the banks loyal as well. Visa also pushes to build the category of payment cards in general.
• Given Intuit’s reputation for top-notch Product Manager, I found it very interesting that their CMO also their head of Product Management.
• Peter from Intuit argued there is no such thing as pure awareness – when people first hear from you, you are already starting down the path of them having some propensity to buy. So the marketer’s job is not just to get people to buy your product, you need to do it in a way that defines trust.
• In order to listen to the customer, Intuit has a culture of talking to customers in person. The front-line employees know why people leave, so the executives do “skip levels” (talking directly to frontline employees) and use “listening posts” that feed into “Voice of the Customer” intelligence / query program.

Producing Predictable Customer Experiences

Julie Robertson, SVP, Marketing, Feld Entertainment, Inc. (Ringling Bros. and Barnum & Bailey, Disney On Ice and Disney Live)

• The final keynote focused on how Feld Entertainment builds their brand in a world where the “circus” looks pretty old-school compared with video games, MySpace, etc., and where there is little to remind consumers about their product for most of the year when the circus is not in town.
• They define their brand as: authentic, nostalgia/tradition, wholesome family fun, something different. You want a consistent experience but also surprise and delight. Also, cheaper than Cirque – the Walmart of live entertainment.
• They use PR and direct mail heavily to get their message to their target customer (moms).
• Recently, they changed the show, adding a story-line and dropping the three rings. By billing it as the biggest change in 50 years, they were able to generate significant PR.

Secure the Trust of your Brand

At dinner the night before, Marlene Williamson, VP Americas Marketing, Symantec Corporation spoke about the new CMO Council research, Secure the Trust of Your Brand. Some of the key findings include:

• Nearly 2/3 of marketers polled believe that security and IT integrity impact corporate and product brands, and 76% worry that security breaches negatively impact the brands of the companies that suffer such failures.
• 60% believe that security and IT integrity provide an opportunity for brand differentiation.
• However, marketers are not acting on these beliefs: most companies have not made security a bigger theme in their messaging, and only 29% of marketers have a pre-defined communications plan to act in the case of a security failure.

Benchmarking Marketing Budgets

Two of the most common questions I hear from fellow marketers is: “How much should I spend on marketing?” and “How much of my marketing budget should I spend online?” One way to look at this is through benchmarks.

Blackfriars Communications recently published the latest version of their “Sizing US Marketing 2006” report, updated to include statistics from Q3, 2006. Among the findings of this report:

• B2B companies plan to spend 4.3% of their 2006 revenue on marketing (compared to 6.8% for their B2C counterparts). Although not explicitly stated, I presume this number includes both staffing and program spending.
• B2B companies spend 28% of their marketing budget on advertising (compared to 40% for B2C companies). Not surprisingly, most of the gap is made up for by B2B’s increased spending on events (17% of the budget). Other significant categories include direct marketing at 12% and PR/AR at 8% of the budget.
• B2B companies spend more of their marketing budget online than B2C companies (17% for B2B versus 15% for B2C). This primarily reflects a higher portion of advertising going online, but also includes email and website expenses. (I should point out that this average number masks a wide range, with some companies spending 100% of their marketing programs online, and some companies spending nothing.)

MarketingSherpa’s Business Technology Benchmark for 2006 provides additional information for marketing spending at B2B technology companies in particular. A few highlights:

• B2B technology companies spend anymore from 0.9% to 8.7% of revenue on marketing, with the average company spending 3.6%. (This number includes headcount and programs, but does not include any sales-related expenses.)
• Service companies and ASPs tend to be at the higher end of the range, while complex manufacturers and companies with fewer than 1,000 prospects tend to be at the lower end of the range.
• Young companies (under 10 years old) tend to spend more than average. Brand-new start-ups should use total cash in the bank as the baseline to set marketing budgets, rather than revenue.
• B2B technology companies on average spend a whopping 31% of their marketing budget online, with smaller tech companies spending an even higher percentage online (37% of the total). This reflects the fact that online channels can be easier to get into and test at lower overall costs than more traditional offline channels.

IDC found similar numbers for IT vendor spend on marketing (as reported by Tom Pisello on SandHill.com). Their findings included:

• IT vendors spend an average of 3.6% percent of revenue on marketing. Software vendors spend the most (6.5%), hardware makers spending 3.7%, and IT service firms spend only 1.1%.
• IT vendors spend 63.5% of their marketing budget on programs and 37.5% on headcount.
• IT vendors spend the biggest portion of their budget on advertising (23.2%). Other significant budget items are events (19.3% of the marketing budget); sales tools such as case studies, whitepaper, and interactive on-line tools (16.8%); direct marketing (12.9%); PR (6.5%) and AR (2.3%); and collateral (5.1%).
  

How much do you spend?

I hope you find these numbers useful. Please share (anonymously if you like) what you spend on marketing as a percent of revenue, and how you allocate that budget. I’ll compile the answers and share the results with everyone.

Optimize for B2B Search Marketing – Part 1

By almost any measure, B2B marketers are embracing search engine marketing. A few statistics:

• Roughly one-third of all commercial searches on Google are B2B in nature
• More than 50 percent of Google’s target advertisers are B2B
• Almost 38 percent of Yahoo!’s target advertisers are B2B

This means that B2B companies will spend somewhere on the order of $3 billion on paid search engine marketing this year.

Despite all this spending, many B2B marketers continue to find it difficult to find search marketing solutions that meet their needs. This is because most commercial solutions are designed for high-volume B2C clients, not the unique challenges of B2B companies.

Why? One reason is that B2B marketers tend to be more fragmented and smaller than large consumer advertisers, spending as little as a few hundred dollars a month on search. Most search marketing vendors find it unprofitable to work with any client spending under $25,000 a month on search.

The other reason is that B2C search marketing is very different from B2B search marketing, and vendors that specialize in B2C search find it difficult to serve B2B clients as well.

Stay tuned for my next post, in which I discuss the key differences between B2B and B2C search marketing.

What You Say Is As Important as What You Pay

When the goal of search marketing is to generate leads, it is not good enough to take prospects to a generic home page when they click an ad. With less than a 2% conversion rate, it's like throwing away 98% of your search budget. Instead, search marketers must focus on conversion optimization through targeted landing pages as much as traffic generation. In fact, companies that have optimized landing pages targeted to specific search terms can increase conversions by 400% or more.

Landing page optimization is important for many reasons.

• First, prospects are using search to research your market and company, so targeted landing pages can provide relevant, useful content matched to their buying cycle. This can help your company become a trusted source of information.
• Second, in exchange for a well designed offer, you can capture contact information and get permission to enter into a nurturing dialog with that prospect.
• Third, as keyword prices become more and more competitive, the companies do a better job converting traffic into leads will be able to invest more in getting the clicks.
• Fourth, Google ranks search ads not just on the bid price, but also on the relevancy of the landing page to the search term – so a targeted landing page will increase traffic without increasing cost.

The challenge B2B marketers face is that landing page optimization requires building and maintaining dozens – or hundreds – of landing pages. Trying to add A/B split or other testing methodologies only compounds the problem.

As a result, many marketing and IT departments quickly get overwhelmed and settle for a few, static landing pages. One CMO I spoke with wanted to put up just seven landing pages – but he had to wait so long (almost a year) for his IT department to get to the request that the company was acquired before they could finish. More generally, Forrester Research found that only about a quarter of B2B search ads take buyers to keyword specific landing pages.

Fortunately, there are some great solutions out there to help B2B marketers build and test landing pages without IT support. (Disclosure: The company I work for, Marketo, provides landing page optimization as part of our suite of B2B marketing solutions.) Stay tuned for a future post on what features you should look for in a landing page optimization solution.

In the meantime, please share any best practices you have used to create landing pages that work, and what kind of results you are seeing. I'll post a summary of all the tips I receive in a future post.