Build, market, sell. That’s been standard procedure ever since the Industrial Revolution—a business model that confines marketing’s role to introducing the product, a mere intermediary between production and sales. The model is quintessential limited media era, but one that practically everyone continues to follow—to their detriment.
Consider Mercedes-Benz. The ninety-year-old company, known as one of the world’s top luxury brands, uses an operating model of build-market-sell and focuses heavily on its grand advertising campaigns. By contrast, Tesla, a company that’s only thirteen years old, has outsold Mercedes to become the number-one luxury car in 2018. Indeed, Tesla is the poster child of the context marketing revolution. Its business model is born of the infinite media era: marketing is intrinsic to every aspect of the business—from the location of showrooms, to the booking of test drives, to the purchase of vehicles, to the amassing of thousands of advocates who help fund the next Tesla vehicle design in progress. Tesla’s business model of market-sell-build-market is what I consider the consummate context marketing model (CMM).
We’ll begin this chapter with a further exploration of Tesla’s methods compared with Mercedes-Benz. Then I’ll describe a new C-suite role that brands will need if they hope to execute experiences seamlessly and adopt this new idea of marketing. From there we’ll look at how to value your contextual marketing efforts, how to continue those efforts postpurchase, and how to gain buy-in for context marketing across organizational teams.
When you compare Mercedes-Benz and Tesla, the market-first model wins hands-down. Where Mercedes focuses on mass advertising as its growth model, Tesla doubles down on context across the entire customer journey to fuel its growth.
Marketing at Tesla begins in the ideation stage of the customer journey, with the company’s well-known focus on a shared purpose: getting the world off fossil fuels. This focus on sustainable living through radical innovation—rather than focusing on electric cars only—is the heart of Tesla’s brand strategy. Most articles written about Tesla showcase its unusual business strategy and unconventional choices, such as launching a car into outer space. (It helps when the company founder also owns a space exploration enterprise.) Mercedes-Benz, on the other hand, is only about the cars. This key difference explains why, as of 2018, Tesla has been mentioned more than twenty-three thousand times on CNN.com, compared with five thousand mentions on the same channel for Mercedes-Benz. And even though much of the press Tesla garners is on topics other than electric cars, its powerful purpose-focus spills over to the product conversation. Tesla’s current market share of the electric car conversation is the largest, at 22 percent, while Mercedes-Benz is eighth at 5 percent.1
In addition to ideation, Tesla has also mastered context at other stages of the customer journey. In the consideration stage, it dominates the results of every major search term related to electric cars. A recent search for “best electric car” turns up a U.S. News & World Report article on the eight best electric cars: two of them are Teslas, with the Model 3 getting an honorable mention.2 No other electric car manufacturer is mentioned more than once in the report.
In the purchase stage, Tesla has replaced the dreaded, time-consuming process of negotiating with a salesperson with an experience that Paula Tompkins, writing for ChannelNet, an omnichannel marketing site, describes as “empowering”: she simply used the website to schedule her own test drive and within seconds received a text confirming her appointment. Shortly afterward, she received an email with a link to MyTesla.com, a personalized site where she could configure her own car and go deep into the details she cared about, on her own time. Tompkins was also paired with an owner advisor (not a salesperson), who helped Tompkins weigh options and further develop her understanding of the car. That conversation directly affected her choice in the end, helping her decide that the all-wheel-drive option was not for her.3
Tesla’s contextual effectiveness in the customer stage may be the most impressive of all. The company provides 24/7 tech support and proactively alerts owners when maintenance is due. After a bit of time, Tesla transitions owners into advocates by introducing them to its referral programs, which offer a cash incentive of $1,000 to both the Tesla owner and the friend who purchases a car based on the referral. PC Magazine reported that a top advocate, known by his handle Wei70644, referred a whopping 188 people who also purchased a car, singlehandedly bringing in $16 million in sales for Tesla, at a cost of around $135,000 for his prizes.4 That’s a strong driver of revenue, and all of these stages taken together is what a connected, contextual brand experience looks like from start to finish.
Comparing Mercedes’s build-market-sell model with the CMM used by Tesla (market-sell-build-market) is revealing. When Tesla began taking orders for its midpriced Model 3 in May 2016, more than two hundred thousand customers had paid deposits to reserve one in the first twenty-four hours (before the physical product even existed), and Tesla raked in over $10 billion in presales globally. Domestically it presold 270,000 units, three times the total sales of all (not just electric) domestic Mercedes-Benz C Class cars in the same year. What’s more, Tesla pulled off this hugely successful launch without a grand campaign or so much as a tagline. An impressive feat, no doubt, yet even more impressive is that the average cost of advertising per car for the Model 3 was $6,5 compared with Mercedes’s $926.
Tesla is just one example of how the infinite era is forcing businesses to adopt an operational model that realigns the business around creating contextual experiences, but it proves the power of doing so. It had no need to advertise, because contextual marketing was inherently part of the way Tesla ran its business: meeting people where they are and only when they’re already interested in spending time and connecting through a higher purpose.
You might be thinking, well of course Tesla succeeded—it was built during the infinite era, from the ground up. So, what if your company has been entrenched in limited era practices for decades, if not nearly a century as Mercedes has been? How can any business make such a transition without throwing itself into chaos? As I’ve tried to make clear throughout this book, not only is such a change possible, but it’s also necessary for survival. Having a chief experience officer on board will help make it happen.
Context-based marketing requires a new executive whose operational bounds extend far past traditional marketing and deep into all departments. That person is the chief experience officer (CXO), whose primary task will be to ensure that the context of the customer—that moment-to-moment experience—drives every action your company takes in each stage of the journey.
This role isn’t a new idea, as it was first proposed in The Experience Economy back in 1999, but now it is gaining serious traction in the market. Contextual brands around the world are shifting toward this role—acknowledging that marketing is a primary economic driver of the business and putting a CXO at the executive table. In 2017, Publicis, the oldest and one of the world’s largest marketing agencies, hired a CXO, and in 2018, J.Crew hired longtime Starbucks executive Adam Brotman as CXO, placing him second-in-command to CEO Jim Brett. The list of similar appointments across industries is growing, along with a notable evolution in the roles and responsibilities in the C-suite.
For many brands this transition may already be in play. At Motorola, for example, Eduardo Conrado moved from his position as chief marketing officer to become senior VP of marketing and IT in 2013. As Conrado told Ad Age: “Our view is that, more and more, technology is a business enabler.… And as more companies are centered on the customer, then IT should also be supercharging the customer engagements of the company.… The CMO has been knee-deep in technology strategy. It’s a natural fit.”6 In 2015 Motorola went further to include customer experience under Conrado’s command, expanding his purview. While Conrado’s title isn’t CXO, rather EVP–Chief Strategy and Innovation Office, he describes his role as “responsible for managing the company’s growth-focused strategy, accelerating innovation across the company’s products, services and software, and bringing a design-centric approach to business model and customer experience innovation” on his LinkedIn profile.
The CXO, or whatever title you choose, must be the owner of all contextual efforts, including the technology—the contextual platform—and must ensure that all leaders are actively contributing to the customer journey strategy. The person in this role can be nothing less than a master of collaboration, with a central focus on experiences. The technology linked in the contextual platform won’t work without teams across the business acting more interdependently than ever before. And that kind of collaboration requires strong modeling in the C-suite. In fact, according to the Salesforce study, high-performing marketing organizations are seventeen times better at collaborating across the entire customer life cycle than underperformers.7
As your organizational structure changes, previous titles take on a new function under the CXO. The CMO transitions to a more creative role responsible for the brand voice, acting more like a traditional art director or creative director. The CIO transitions from managing internal networks to managing the hosted network of systems used to obtain and share the data that drives the contextual platform. The CXO and the CIO work closely together to ensure the technologies that support brand experiences evolve as quickly as possible and in line with government regulations. As Ingrid Purcell, CXO of ME Bank in Australia, describes it, her role is “the perfect blend of creativity, customer focus, and technology.”8
With a new executive able to build bridges across all departments focused on creating a contextual customer experience, brands must take the next step: proving these efforts are worthwhile.
Marketing departments have long struggled with proving the value of their efforts. The distance between a brand experience and final outcomes leaves any metric proving value subjective at best. Such lack of objective measures has held marketers back from achieving greater status in organizations worldwide. It’s also no doubt contributed to the short tenure of marketing leaders.
When the data science team at LinkedIn and I looked at fifteen million data points to investigate employment life cycles, we made a shocking discovery. The average tenure of a marketing professional across all business verticals was the shortest of any role in the business world: just 2.6 years. That’s less than the lifespan of a hamster! Fortunately, along with everything else that has changed in the infinite media era, so has the way marketing can prove its ever-growing value to any organization. It starts with a new way to showcase marketing’s value.
Businesses everywhere have the idea that return on investment (ROI) proves the value and effectiveness of anything, be it a channel, tactic, or action. But that measurement is the wrong one to value marketing. Dominique Hanssens, former director of the Marketing Science Institute and Distinguished Research Professor at UCLA’s Anderson School of Management, focuses on this question: What is the short- and long-run impact of marketing on business performance? Hanssens and I have discussed this topic at great length, and we firmly believe ROI and attribution methodologies are insufficient valuation methods for marketing activities.
First, capital expenditures and percentage returns are based on annualized time frames. Marketing results, however, are not annualized or even finite in their returns. Investment in marketing activities today may not see returns for some time, but that doesn’t mean the investments were unwise or that they didn’t produce the highest value for the company. They simply do not track to an annual measurement.
Second, in many cases, marketing returns are not financial. So using a financial metric to measure a result not tied to a financial outcome is ill matched. Take the ROI of an email. There is virtually no cost to creating or sending an email. Many times, the email engagement is many steps removed from the actual purchase, yet we use ROI to show the value of that effort.
Hanssens likes to point out another major flaw with ROI: it is not a linear return. If you get a 25 percent ROI on the first $100 invested, you won’t see the same results on the second investment. So a 25 percent ROI on the first $100 does not guarantee a 25 percent return on the second investment. It may actually take $110 or $200 to obtain the same 25 percent ROI. So if ROI is used as an investing guide, it can lead to underinvestment in marketing programs.
On top of everything else, ROI is a numerical representation of what we’ve done in the past, but it provides no guidance on how to improve future outcomes. And yet, despite all of these ways that ROI is problematic for showing marketing’s value, it remains the number-one method that businesses use to value our efforts.
A more advanced—but still flawed—way to use ROI is emerging in attribution and influence reporting, which suggests that ROI shouldn’t be tied to all marketing “touches”—or actions—but rather only to those actions that influence consumers’ decisions. Or, in terms of attribution, actions that have the highest influence on consumers’ decisions. According to this ROI theory, attribution and influence can be calculated in one of three ways:
The assumptions behind each of these calculations are more advanced than basic ROI. However, they are still flawed for two key reasons: they do not take into account the full experience, and they still do not show any real value, because they are still assuming ROI is a value metric. To give you some clear examples of how flawed these reporting methods are, I spent some time talking with Gary Angel, former head of digital analytics for Ernst and Young, and we came up with the following examples to help you better see the flawed logic of these supposedly improved valuations.
Statement: Our traffic is up!
Note that the first action had nothing to do with the increase in traffic, even though it was the first touch the business took to engage the customer. Equal attribution believes everything is benefiting the result, while last touch focuses on the effect of the last campaign on the increased traffic and assigns a correlation—but there isn’t one. The larger trend is not seen by the ROI calculations, so relying on ROI only leads to decisions based on poor assumptions. Let’s look at another.
Statement: Our online revenue is up!
Once again, the first action had nothing to do with the outcome, even though it was the first engagement. Equal attribution believes everything is benefiting the result, while last touch suggests there’s a correlation with email—and there isn’t one. The larger trend is not seen by these calculations, so relying on attribution or any variation of ROI leads to decisions based on poor assumptions.
With the shift in the infinite media era to using strategies focused on the customer journey, marketers must expand their idea of value past how well a campaign performed. They need to show a clear picture of the health of the entire customer journey, as well as how quickly and efficiently individuals are moving across it. With marketing now the owners of every brand experience, we need to track the experience from start to finish and show how we’ve affected it. Most important, we need to prove how our efforts affect total revenue.
The only way to see a full picture of the customer experience in a single view—and track context marketing’s impact on it—is to use a new reporting method: the weighted pipeline model. That will mean giving up old ideas of ROI and embracing this new holistic and predictive measure. By seeing the entire customer journey in a single model, marketers can showcase many value metrics, such as (1) net new demand, (2) future demand, (3) how marketing affects customers’ motivation across the journey, (4) increases in existing revenue through decreasing customer churn, and (5) increased brand advocacy.
More and more, businesses will be giving marketing an elevated place in the C-suite and making it a primary business driver. We therefore must be able to value our work in a way that can be tracked and reported on a balance sheet, which is what the weighted pipeline is. ROI can’t do that.
The executive leadership in your company doesn’t care whether email open rates have increased; they want to know the effect of those achievements on business outcomes. The weighted pipeline is the reporting model that can measure the full value of marketing’s success in bringing in new business and retaining current customers. It is holistic, objective, and an accepted method already used in many businesses, mainly in the sales department. (Venture capital firms also use it to determine business valuations, and publicly traded companies use it to report future growth on reporting calls to investors.) Now that your context marketing approach is run on an automated platform with the ability to track all touch points across all of the customer journeys associated with a brand, you’ll be able to use the weighted pipeline valuation model and show marketing’s true value.
Here’s how it works: the weighted pipeline model examines each member of your brand audience and the likelihood for each to convert into revenue, even how much revenue, at a future point in time. It makes these determinations using historical business data combined with the real-time personal data gathered by your contextual platform, and therefore is highly accurate. It’s also holistic: it takes into account all actions, even unknown factors outside our control, such as word of mouth. After all, it isn’t a single experience that drives a person to purchase; rather, it’s a large combination and variety of experiences. By looking at how the experiences, taken together, move individuals through the various stages, you can see how all your efforts are working together. But the weighted pipeline also takes into account the effects of your efforts that you can’t necessarily see, because you are not looking at individual actions but net outcomes. Weighted pipeline results are also prescriptive: they show you where your journeys are breaking down, so you can fix them and prove that the prescriptive action actually worked.
Let’s take a look at the weighted pipeline model translated into contextual marketing terms by examining its four parts: volume, velocity, efficiency, and probability.
Each stage of the journey should be defined as the period of time in which a specific set of questions/actions is happening. In a B2C environment, stages may be categorized by buyer type or persona, such as first-time buyer, repeat buyer, advocate, and so on. All of these segments give us a solid understanding of the average total order size and an average length of the full buying cycle.
The weighted pipeline model acts as a balance sheet, providing a snapshot of the current health of the customer journey. This view offers insight into changes to the revenue stream. Table 13-1 provides a simple example of a calculated weighted pipeline for all stages of a customer journey. You can see the total number of people in each stage (volume); the average time people stay within each stage; how quickly they move through the stage; how efficiently your efforts move those people from stage to stage; and the probability of someone at any stage becoming a customer.
|
Measuring total demand with the weighted pipeline |
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|
Stage |
Volume |
Velocity |
Efficiency |
Probability |
Weighted value |
|||||
|
Ideation |
100 |
5 days |
70% |
10% |
(100 × .1) × $10,000 |
|||||
|
Awareness |
70 |
9 days |
77% |
14% |
(70 × .14) × $10,000 |
|||||
|
Consideration |
54 |
10 days |
40% |
20% |
(54 × .2) × $10,000 |
|||||
|
Purchase |
21 |
30 days |
50% |
50% |
(21 × .5) × $10,000 |
|||||
|
Net new pipeline total |
290 |
54 days |
Net new pipeline value |
$411,000 |
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|
Customer |
200 |
75 |
10% |
10% |
(200x.10) x $20,000 |
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|
Advocate pipeline total |
$400,000 |
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The revenue metric is pulled from your sales team, and in this example the average order size is $10,000. Note that when calculating the weighted pipeline as a person progresses in the journey from the customer stage to becoming an advocate, you need to take into account the increased average purchase size of advocates. In the example below, I’ve used $20,000. Also note the weighted pipeline ends at the customer stage. That’s because lifetime customer value (LCV) is the better measure for marketing’s impact on advocacy (see the next section).
Just as a balance sheet opens doors to new metrics—like debt-to-equity ratio, inventory turnover, and average age of receivables—the weighted pipeline model is the foundation for many new marketing reports. Marketing can show total future demand in a single revenue number by adding together the (volume × probability) of each stage, as noted by $411,000 in table 13-1. This “pipeline total” metric allows marketing to translate its full efforts directly into a single revenue number. Tracking changes with this number easily translates marketing efforts into actual business value.
The model also tracks the total time it takes to complete the journey, which allows marketing to track and show its effect on customer motivation and to track the customer journey as a whole. Finally, new reports such as velocity by stage and efficiency by stage can be used to show the value of granular efforts while highlighting specific issues within the journey.
With new reports possible using the weighted pipeline model, it will be up to you and your executive team to choose which reports you share at board meetings. Now that marketing is a string of connected experiences, however, our reporting must be able to show their combined effect and translate those efforts into a number that our executives respect—revenue. The weighted pipeline model offers the best way to show marketing’s holistic value.
While the weighted pipeline model measures current demand at each stage in the customer journey, LCV measures how your efforts are generating more revenue by extending the contract time and size of each deal. When tracking LCV, you need to focus on three things: tenure, churn rate, and average order size. In the customer stage, tenure marks how long a customer or an advocate stays a paying client, while churn is the average percentage of customers who leave each year. You’ll need to use an updated annualized contract value for your advocates, since they typically spend much more than regular customers do. As I did in the previous table, here I’ve used $20,000 for advocate spending (see table 13-2).
|
Weighted pipeline for measuring LCV |
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|
Stage |
Tenure |
Churn |
Weighted LCV |
|||
|
Customer |
455 days |
5% |
($10,000 × (455/365)) × (1 − .05) |
|||
|
LCV of a customer |
$11,842.00 |
|||||
|
Advocate |
1,200 days |
2% |
($20,000 × (1,200/365)) × (1 − .02) |
|||
|
LCV of an advocate |
$64,438.00 |
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LCV calculations allow you to report on the average value of each customer—and how you arrived at that increased value. Are they simply spending more money, staying longer, or are you able to keep more of them as customers? This model will answer those questions for you, while showing how well you’re using marketing methods to gain more profit from customers and advocates.
Apart from providing a superior metric, the weighted pipeline model also becomes a guide. When marketing uses a weighted pipeline, each number in the model becomes a signal, alerting the team of issues in the journey, where to focus, and which actions will result in the best use of marketers’ time. By combining agile methods with weighted pipeline reporting, brands now can know where to focus, which ensures they are delivering the highest value to the businesses per unit of time.
As powerful as reporting is, you’ll have to take one more step to make the full transition to context marketing: getting the buy-in of other departments. Many of the programs contextual marketers create are far outside marketing’s traditional scope. Onboarding programs affect the product team, new sales nurturing programs affect the sales process, and automated support follow-ups affect the service team. Each team and department must be brought into the process to ensure its success. Rather than doing that in a forceful way, read on to learn how to secure a smooth transition to a cooperative approach throughout your organization.
Now that marketing is owning the customer experience across all touch points, there are many new teams—from sales to production—that you must work with. Building brand experiences together that those other teams will have faith in—and will support—is just as critical to your success as anything else. Once you gain the trust of those teams and involve them in the process, outcomes dramatically improve.
Of all the teams you’ll work with, sales is typically the most challenging. But if you learn to build better experiences with them, not just for them, you’ll gain a solid foundation that you can replicate with other teams and departments.
Gaining the trust of sales begins with recognizing that those folks know many specifics about how your customer makes a purchase that you likely don’t. Sales is a highly skilled position, and teams are typically an assertive bunch. Your best salespeople get results because they are smart. Sales is a repeatable process, and your best reps have already built a great process. Your programs should follow that process. If you try to come in and reinvent the wheel, your efforts will get stymied at arguably the most important stage of the customer journey: purchase.
So single out your best salesperson, maybe two, and book time with them to ask about their process. Understand how they identify objections, what emails they send, and when. Most great salespeople have several versions of their emails, and they constantly refine them with phrases that are landing well. They also likely have them all saved in a document for easy copying and pasting. Get your hands on those emails! This will be your email content. Try to use them “as is” to the extent possible. It doesn’t matter if they’re not pretty. What matters is that sales has confidence in them. The key here—at least at first—is to mimic what those salespeople do. Not only will that help you do a better job, but it will also gain their trust and bring them on as partners in your effort.
Next, find out the most common objections they face from customers and potential customers. Those objections will inform which automated programs you build first to help trigger customers to take the next step forward along their journey. Build programs only for common objections, such as the following:
Next, ask salespeople how they handle such objections. Their answers will be a golden input to your strategy because great salespeople usually follow some type of timed process. When I was selling, we called this a cadence. My cadence was 2-2-12. I would call and leave a voicemail upon getting a new lead. Then I would wait two days and call back, but leave no voicemail and send no email. I’d then call again in two more days and leave another voicemail and send an email. Then I’d wait twelve days and do it all over again. These cadences will become the strategy that guides the timing of your automated program.
By mimicking the best salespeople, you’ll also get the rest of the sales team to buy into your context marketing program. If you skip this legwork, your sales team simply won’t cooperate, and your contextual efforts will never get off the ground.
Use this same process with every program that requires buy-in from other teams across the organization: your support team, your client services management team, and your product team all have lots of intelligence that you’ll need to incorporate as, together, you create and manage your river of amazing brand experiences. Ask those teams, involve them, learn to work with them. They have a lot of specific knowledge that will be critical to your success. By working together, you will all succeed.
The changes required to become a contextual marketing organization are not simple, or small. It requires new executive team members, a new method of working, a new business model, and even a new way of reporting. This is a significant amount of change for the entire organization, not just marketing. To drive this change, your chief executive must be on board. Remember, the number-one trait of high-performing marketing organizations is they have full executive buy-in to a new idea of marketing. You now know what context marketing entails and how to execute it. In the next, concluding chapter, let’s cover your first step to making the needed changes, and where you must begin: gaining executive buy-in.