Showcasing Marketing ROI

One of my favorite non profit marketing bloggers, Nancy E. Schwartz, was recently asked a question on her blog from a reader who wanted some professional help in creating a strategy for her declining organization. Like Nancy, I’ve been asked the same question myself many times and I was interested to see how she would answer.

Her 6 Steps to Showcasing Marketing ROI are below:

1. Stop asking marketing firms to call your decision makers and stop passing on firm materials as well.
2. Build understanding of what marketing is and the value that it will bring to the Council — and, most importantly, what the Council will lose if it continues without strategic marketing.
3. Come to the table with a succinct plan including a budget.
4. As you implement your initial marketing project, keep management and board posted on progress.
5. Serve as an ongoing marketing mentor to your management and board.
6. Once you have one or two successful marketing projects under your belt, then it’s time to develop a comprehensive marketing plan, derived from the Council’s goals.

Nancy is spot on and I suggest you read her entire column. However, I think there is a critical element that needs more emphasis. The biggest problem marketers face today from the Board or C-level suite is not a lack of funding or support but rather their own inability to connect marketing to the strategy of the business and demonstrate top- and bottom-line impact. In other words, marketers continue to run programs, campaigns, and tactics that spend money and create a flurry of activity, but those efforts are not linked to the things that are important to the CEO, Executive Director, or even the Board.

I’ve been marketing for more than 20 years and I’ve never run into a CEO that turned down a good investment in growing the business. But I consistently see CEOs turn down marketing plans that fail to demonstrate ROI. And the ROI I am talking about is NOT on how many calls were generated, or how many column inches were earned in the media, or even how many brochures were mailed out. Those are all activities and related to expenses. They’re not results. What the executive leadership wants to know is did you move the needle on the dial that is important to them. Those dials could include:

• New member acquisition
• Member retention/churn
• Brand loyalty as an indicator of referrals
• Income generated from fundraising
• Number of new donors
• Number of recurring donors
• % of fundraising to donor base and change from effort
• Share of wallet for donors

And we marketers must be better at financially analyzing the impact of our marketing efforts. It isn’t that we run a marketing campaign and say we spent $5,000 and generated 108 new enrollments. We need to know what the cost per new enrollment is, how one campaign performs against others, and what campaigns are more profitable and contribute to the margin.

Good for Nancy for identifying her top six steps. Good for her reader for asking what she could do better. And good for you if you begin to think in terms of investments from the perspective of the C-level suite.

But, what else would you add to the list of six from Nancy? Would you have a different list? And what is keeping you, or marketing, from getting the support from your executives?

-- David Kinard, PCM

[photo: Gavoon Products]

Is There a Pathway to Social Media Celebrity?

I’ve spent a lot of time lately looking at the celebrities of social media to try and see what has earned them this celebrity status. These are the people who have tens of thousands of people following them on Twitter (many well over the 100k mark), or those who have blogs everyone is referring to and commenting on.

So, I’ve been thinking about what the qualities are that these celebrities have or that their conversational feeds have. What creates stellar levels of hype around them? What I am seeing is that they are part of a larger ecosystem of four primary groups. Each part is symbiotic to the other – meaning that without one, the whole thing collapses. As well, I think that depending on which group you’re a part of determines if you’ll ever have celebrity potential.

Thus far, I’ve found there are four main ways that celebrities are created:

1. Content is the pivot point – usually.
It seems the social media ecosystem is really made up of four groups – Pushers: the aggregators and promoters of content; Creators: the originators of content; Consumers: the users of the content; and Transformers: those who see not the content, but the ecosystem as the means to an end. A more detailed profiling of the four groups would reveal greater distinctions, but suffice it to say that the primary commodity exchanged is content. The ecosystem thrives on the movement of content from one to another and the Creators, Pushers, and Consumers all live and die by it. However, the outlying Transformers do not participate in the ecosystem because of the content, but because it provides a framework for them to accomplish something else.

One example of this is Wil Wheaton (@wilw). Wil has a gigantic following but appears to use Twitter and his blog as a channel for his various streams of consciousness. Yes, his content is original, but I would submit that content is more for his own benefit – and we just get to be a part of it whereas a Creator is someone who creates for others to use and benefit from. For Wil, the ecosystem appears to be simply an outlet for his expressions. (As of this writing, Wil is ranked 12th with the most Twitter followers at 107k+.)

2. Quality does not equate status; freshness does.
I don’t deny that this is a nearly heretical statement to make, but not everyone who has a massive following is saying anything truly remarkable. Again, thinking of the four groups, those with the largest followings are typically Pushing other content.

Case in point, I was a bit disappointed when I started following Guy Kawasaki’s blog How to Change the World. I hung in there for a month or so, but eventually dropped it from my reading list because I wanted Guy. I love reading his writing but what I got in his blog was other peoples’ content he thought was interesting.

And strangely, this is exactly what makes him so attractive to follow. Social media celebrity Chris Brogan wrote about this in a recent blog post noting that "the most “important” people (in at least the public business sense) I have ever met in my life have all asked me more about myself, and even with me trying hard to turn it around, they were gracious and interesting and still worked hard to know more about me than themselves.”

Now, even though the biggest of the big are not usually delivering messianic insights their key contribution is to scour the ecosystem for fresh perspectives and transmit that freshness out to the rest of us. Key to their celebrity status is their mutant ability to intimately understand the pulse of the ecosystem, find and vet content, then share it with everyone else.

3. It’s who knows you.
If you’ve read Tipping Point by Malcolm Gladwell you’ll instantly get this next element. Celebrities are connectors. Not only will they remember you, your name, and usually something about you after meeting, but they have the uncanny ability to do this same thing with exponentially more people than the average person while finding links between everyone and everything.

It seems that key to becoming a social media celebrity is being known by the Pushers. A good example of this is when Mashable mentioned @cspenn in an article.

Pete Cashmore (@mashable), even noted the marked increase in followers for @cspenn.

Now @cspenn has a long way to go before he hits true celebrity status as he only ranks with the 700th largest following on Twitter. However, the impact of being known by a Pusher is remarkable. Not only do you get a big bump, but if another Pusher happens to find your ideas fresh, then you’ve got more Pushers transmitting your content to the ecosystem.

4. The metric is relative.
Of course, someone reading this is saying, “Hold on a minute. There are those who are celebrities but exist in smaller ponds that exist outside of the mainstream.” And therein lies the challenge of qualifying what celebrity status is and isn’t. For the most part I’ve used followers as the basis for qualifying a social media celebrity. Tracking your followers is easily captured and most commonly used as a metric of status. Blogger and social media ROI guru Beth Kanter noted in a recent post that calculating your ROI “is a much broader concept than just doing the math.”

Certainly there is merit in noting that celebrity status can exist in different circles in highly meaningful ways. For instance, another way of looking at this is to compare winning Best Actor at the Oscars versus Best Leading Performance by a Leading Actor at the Tony Awards. Ben Daniels or Mark Rylance are highly acclaimed Broadway performers, but not part of the popular mainstream conversation.

However, I submit that celebrity status is a state of relative condition within portions of the ecosystem. If you consider the long tail curve, it appears at first that there are only a few who qualify for celebrity status. But if you were to examine detail within the tail I think you’d find that there are repeating patterns of the long tail curve supporting celebrity status within various niches.

So, what does all this have to do with increasing your ability to market for good? Well, I’ve tried to withhold a label of any sort that identifies whether it is good or bad to be a social media celebrity. But aside from that element, I wonder if there is an identifiable pathway to achieving celebrity? Are there gatekeepers to celebrity? If a cause could figure out this pathway, it is possible to gaining greater exposure to your issues? A huge number of Pushers got behind Twestival’s recent event for Charity: Water raising more than $250,000 in grassroots donations. . Is this replicable?

-- David Kinard, PCM

Metric Monday – How Much is that Marketing Effort Worth?

The scenario is common – you’re in a meeting with the communications committee and someone suggests that your organization needs a brochure. Lots of ideas are shared about the size, how big, how many, and where it could be distributed. But very little of the conversation surrounds what you want to receive back from that brochure. In other words, what is that piece supposed to do for you in terms of contributing to your organization’s top or bottom line revenues? In today’s edition of Metric Monday I am going to suggest how you can determine if your marketing activities are negatively or positively contributing to your finances. Break-Even Analysis, and Contribution Analysis are two metrics you can use for this purpose.

(Important Reminder: variable costs could be the cost of goods sold, shipping/delivery charges, costs of direct materials or supplies, and/or wages of part-time or temporary employees. Fixed costs remain the same regardless of your level of sales such as rent, equipment expenses, and salary of permanent full-time workers.)

The break-even level is basically the dollar amount – in either donations generated, registrations sold, memberships acquired, etc – that is required to cover the total costs (both fixed and variable) of the marketing effort. Your profit at the break-even level is zero. The equation looks like this: Total Costs = Total Revenue.

Now, if your prices are higher than your variable costs, then revenue generated contributes to covering some portion of the fixed costs. This is a contribution level. So, your contribution can be calculated as the difference between unit revenue and unit variable costs. When you’ve generated enough contribution to cover all your fixed costs, then you have a true break-even scenario. Of course, any revenues generated that go beyond the break-even scenario is profit.

Okay, now that we have these basic financial concepts in mind, let’s go back to the idea behind the brochure. Again, the first question you have to ask yourself is what do you want to receive back from that brochure? What is it supposed to do for you? More often than not, committee members will say it will help to generate awareness. So then you have the difficult task of assigning a dollar amount to what awareness means to your bottom line. For this basic reason, I typically suggest organizations do NOT make a brochure just to have one. Assign a specific, quantifiable purpose to it – a goal that can be measured against. That’s the only way to know if you’re efforts are contributing to your organization’s value.

Practical Scenario: Let’s figure that you want to do a brochure to generate registrations for your conference. To identify the benefit of that brochure you first need to know how much each registration sells for (e.g. $300). Next you need to know the fixed costs to your organization to put on the conference – basically your own organization’s staff, equipment, etc. Let’s say that is $12,500. You also need to know the variable costs to your organization for things like confernece room rentals, meals, badges, speaker fees, etc. Let’s say they are $210). That means you have a contribution per registraiton of $90 ($300-$210=$90).

To figure out your break-even volume you divide the contribution per registration into the fixed costs ($12,500/$90). In this scenario you need to generate 139 registrations. As your variable costs change you recalculate the formula to identify how many registrations you need to cover your fixed costs and achieve a break-even point. If your brochure is more expensive and adds an extra $5 per registration to your variable costs making them now $215, you’ll see you now have to generate 147 registrations to break even. If you need to make a profit on your conference of $5,000, you can calcuate that you now need to generate 205 registrations (I figure this by simply adding the profit requirement into the fixed costs forcing it to be a positive return to the organization).

Bottom Line: Marketers spend way too much of their time just making brochures and doing marketing without fully understanding the goals and impact of their activities upon the finances of the organization. By approaching your marketing activities with a financial perspective you force clarity around what marketing is supposed to be achieving, identify measurable goals, and ensure you’re getting the most value from your efforts.

If your organization is using break-even or contribution analysis I’d love to hear how its working for you. What challenges have you faced in going through this process? What has happened as a result of adding a financial perspective to your marketing?

Study Shows Effective and Efficient Outgrows Competition

Since 2005 the Lenskold Group has run an annual research study to evaluate the effectiveness and efficiency of marketing and marketers. The most recent study has just been completed – it’s officially called the 2008 Lenskold Group / Kneebone Marketing ROI and Measurements Study – and I had a chance to talk with Jim Lenskold about the study on my radio show today.

Aside from the startling finding that nearly 91% of marketers do not think they’re really doing an effective and efficient job at measuring marketing ROI, what struck me the most is that 45% of those who said they were highly effective and efficient also noted they were GREATLY OUTGROWING their competitors. This should be a wake up call to any lazy marketers and their lazy companies to get with the program!



The show dives into the success factors of those who are leading the way, but there are plenty of obvious ones that won't surprise you including better access to marketing data and systems that support real-time marketing analysis. Clearly, after listening to this show, any marketer that doesn't realize the benefits of what it means to be a highly effective and highly efficient marketer deserves to get left behind by the competition. Every other major business function has already paved the way and done their work to become lean and data-driven; it's about time marketing did the same.

-- David Kinard, PCM