Why Many Businesses Still Fear Social Media

Social media has come a long way over the past couple of years.  Some businesses have successfully embraced social media for marketing, growth, new opportunities and interactive engagement with customers and buyers.  But a number of studies published in recent months indicate that many businesses still have fears and concerns about widespread use of social media as shown by this sampling of findings from various studies:

• Research from Russell Herder / Ethos Business Law:
• 51% of senior management, marketing and human resources executives fear social media could negatively impact employee productivity
• 49% of this group claim that social media could damage company reputation
• 40% of companies surveyed block online access to social media for any purpose.
• Results from a poll of system administrators by IT security and control firm Sophos:
• 63% worry that workers share too much information on social networking websites
• 66% are concerned that employee social networking could endanger company security
• Approximately 50% block or restrict access to social networking sites
• Productivity, data leakage and malware are primary reasons for blocking or controlling access.
• A study commissioned by Robert Half Technology:
• 54% of U.S. companies ban workers from using social networking sites
• Only 10% of 1,400 CIOs interviewed said that their companies allow employees full access to social networks during work hours.
• A global survey by Avenade and Coleman Parkes Research identified key barriers to adoption of social media technologies as:
• 76% are concerned about security
• Senior management apathy at 57% of companies
• 58% fear using unproven technologies
• 50% fear a negative impact on productivity.
• A Nucleus Research survey revealed:
• Employee productivity drops 1.5% at companies that allow full access to Facebook in the workplace
• 87% of those who use Facebook at work had no clear business reason for doing it.

In spite of these fears and concerns, many business executives do understand the potential value of social media.  For example, in the same Russell Herder / Ethos Business Law research, senior management, marketing and human resources executives perceive the following potential value of social media for their businesses:

• 81% believe social media can enhance relationships with customers
• 81% see social media value for building a company’s brand
• 69% think it’s a viable recruitment tool
• 64% think it can be a customer service tool
• 46% believe that social media can enhance employee morale.

This is an interesting dilemma for marketers.  Most of us know and understand the huge potential of social media and social networking for marketing.  Many of us have successfully used social media and social networking for marketing activities and plan to do more.  If everyone in a company has some role or contribution to marketing and sales as they should, then how do we deal with these fears, concerns and apathy that will impede progress for making social media and social networking an integral part of a business?

Something else to consider is the impact of these fears, concerns and apathy at customer or prospective buyer companies.  If over half of companies are blocking or restricting access to social media, it means the social media-based marketing programs won’t reach at least half of the intended target audience.  Good reason to continue using traditional marketing channels as the social media channel matures and hopefully overcomes the current fears, concerns and apathy.

Have you faced these issues in your marketing work and how have you handled it?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Marketing Budgets Depend on Measurability

Last week’s article about Are Marketing Budget Cuts Here to Stay? prompted interesting discussions about the role of measurability for supporting marketing budget proposals.  In the current scenario of declining or flat marketing budgets, measurability is a key factor that determines what is funded and what gets cut.

In recent years, marketing organizations have greatly improved capabilities to gather data, do analysis and produce meaningful metrics about most marketing tactics and activities.  This is all good – executives and other functional areas of a company now have a measureable view of marketing’s contribution to the business. Marketing has more insights into the effectiveness of what they’re doing and tracking their activities and results as never before.

Given the constrained business conditions and expanded availability of marketing metrics, it’s no surprise that executives are insisting on more measurable supporting data to determine what and how much of marketing budgets receive funding.  While this may seem like a reasonable approach on first impression, there are some concerns that marketers should consider to ensure that the right mix of marketing plans are approved in their budgets:

• Inbound marketing channels such as websites, search engines, blogs, social media, videos, etc. are online and have built-in data gathering capabilities to produce a vast array of metrics.
• Various research studies and anecdotal information from various marketers indicate a substantial shift of marketing budget allocations to inbound marketing from traditional outbound marketing channels.
• While there is substantial proof that inbound marketing works, is it possible that some of the budget shift is influenced by it being so easily measurable and therefore more quantifiable for budget discussions with executives?
• It’s generally more difficult to get meaningful metrics with direct correlation to outcomes from outbound marketing channels.
• For many B2B and IT companies, outbound marketing channels such as trade shows, conferences, live seminars, etc. used to be the staple marketing tactic to find buyers and engage with customers.  These are the areas that are being cut the most in marketing budgets.
• Although attendance at these type of live events have declined, are we possibly cutting back more than we should because we don’t have good supporting metrics?
• I have talked with many salespeople who lament the continuing trend of decreased participation in these live outbound marketing events.  For many B2B and IT salespeople, meeting people face-to-face and speaking with them at these type of events is still the best way to find qualified prospects.
• Although some metrics such as response rates, unique website visitors, clickthrough rates and others are easy to get and meaningful within a specific performance context, are they really meaningful for determining budget allocations?
• Many marketing metrics are primarily about measuring activities.  But business results are what really count in the end.  Are the metrics for supporting marketing budgets based on funding activities or producing results?
• What about funding for longer-term strategic marketing such as positioning, branding, developing market presence and credibility in target segments, engaging with influencers, etc.  These are vital for producing business results, but tough to measure and maybe more difficult to justify in constrained marketing budgets.

Are you seeing an increasing requirement and importance placed on metrics to get budget allocations and approvals?  How are you dealing with some of the concerns raised above?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Are Marketing Budget Cuts Here to Stay?

Talking with a number of marketers and business executives over that past several weeks indicates a common theme of continuing marketing budget cuts.  Many marketers are now facing a second or third round of budget cuts after widespread marketing budget reductions late 2008 / early 2009.  The optimistic outlook for many marketers is to hopefully retain current budget levels into 2010.

Research from various sources substantiates this anecdotal information:

• Marketing budgets were cut over 20% on average in 2009 versus pre-recessionary levels in 2007/2008.
• The number of companies that cut marketing budgets in 2009 is 25% higher than predicted in January 2009.
• In one survey less than 20% of companies are expecting marketing budget increases while over 40% are expecting further reductions in 2010.

In spite of these substantial and what now appear to be sustained marketing budget reductions, companies are still expecting marketers to deliver results and performance at levels similar to those prior to the cuts.  Marketers have generally responded positively to this challenge for accomplishing the same or more with less.  The following are some of the common approaches to this challenge:

• Restrictions and reductions for expenses such as travel, agency fees, contractors and other external costs.
• Staff reductions, organizational rationalization and other internal cost reductions.
• Eliminating or delaying new projects and/or campaigns.  While this is a good short-term deferral tactic, it does raise concern whether further delay of these projects/campaigns will eventually impact business performance and results.
• Reducing spend and attention on less effective outbound marketing channels such as print advertising, direct mail, tradeshows, etc.
• Increased focus on more effective and less costly inbound marketing channels such as websites, search engines, blogs, social media, videos, etc.
• In a fortunate confluence of circumstances and timing, inbound marketing is proving to be the primary means for marketers to produce good results with lower budgets.

Although overall marketing budgets are expected to decrease in 2010, the Forrester US Interactive Marketing Forecast predicts that social media, email, search and mobile marketing spend will grow significantly in 2010 and subsequent years while outbound marketing spend will decrease even further.

Marketers have cut expenses and refocused attention in response to budget cuts and mostly achieved performance goals and expectations during 2009.  The question is whether this performance can be sustained in 2010 with flat or further reduced budgets.

What are your marketing plans for 2010?  Do you expect your budget to remain flat, increase or decrease?  Are you going to shift more budget and attention to inbound marketing channels to meet your goals?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Why On-Premises Business Software Vendors Should Give Their Products Away

Traditional on-premises business software vendors are facing challenges on multiple fronts:

• Published financial results for the second calendar quarter of 2009 from 10 of the major vendors reported license revenue declines in the 20-40% range year-over-year.
• Buyers continue to show increasing interest and preference for Software as a Service (SaaS) business software.  SaaS business software vendors reported an average of over 20% increase in new subscription revenue for the same year-over-year period.
• On-premises vendors now derive 50% or more of their revenues from annual maintenance fees, but are facing increasing dissension from customers over increasing costs and perceived lack of value for the annual maintenance fees.

Licenses are the lifeblood of on-premises business software vendors – it’s what drives current revenues from services and long-term revenues from maintenance.  These vendors must sell more licenses by acquiring new customers and/or selling more products and/or user seats to existing customers.  While most on-premise vendors have announced plans for delivering SaaS solutions and some have already delivered some SaaS applications, their on-premises licensed products are still the core of their businesses and SaaS may not be the preferred delivery for many customers.

Some vendors are responding to the challenge by offering ‘buy one get another free’ type of deals to increase the number of licenses and users for which customers will require implementation services and pay annual maintenance fees.  IMO, this is a flawed marketing tactic as discussed in last week’s bog post.

On-premises business software vendors have to get more licenses to feed their continued existence as viable businesses.  A review of their business models reveals some interesting points:

1. Based on results for the 12 months through second calendar quarter of 2009, License revenues now account for approximately 20-25% of total revenues.
2. These vendors spend approximately 20-22% of total revenues on sales and marketing, of which over 90% is usually targeted at license sales.
3. Taking cost of goods and other expenses into account, license sales are at best a break-even proposition.
4. On-premises vendors are known to deeply discount product licenses to get a sale.  Discounts of 75% or more off list are more common than most are willing to admit.
5. These vendors now derive 50% or more of their total revenues from annual maintenance fees with 80% or higher gross margins on this revenue source.
6. Services account for approximately 25% of revenues with gross margins typically in the 25-30% range.
7. License sales currently contribute little or nothing to profitability, but are the lifeblood that drives maintenance and services revenues and profitability.

Given all the abovementioned circumstances and other factors, why not give the product licenses away?  The end game is to get more customers and users using more products for which they pay implementation services and annual maintenance fees.  The business of selling licenses is tough and hardly profitable.  Why not change the game and focus on creating value for customers rather than selling them licenses.

A proactive move by on-premises business software vendors to give their product licenses away can produce several positive results:

• Bolster current services revenues and longer term maintenance revenues.
• Compete more effectively with SaaS vendors.  Negate a big selling point of SaaS vendors because there would be no initial license cost for on-premises products.
• Change the relationship with customers from selling them stuff to creating value for their businesses.
• Get rid of the licensing fee and discounting practices that customers view as a farce.
• Realign a leaner sales organization focused on creating lifetime customer value.
• Change the way customers view the annual maintenance fee to be more like an annual license fee that includes support, enhancements and maintenance.

I would go as far to argue that if these vendors don’t do this proactively now, they will have to do it reactively later anyway to survive.  They can do it on their terms now and make this a win-win situation for them and their customers.

Depending on your role from a vendor or customer perspective, what do you think about this situation and the recommendation?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Buy One Get Another Free – Is this a Good Marketing Tactic for Business Software Vendors?

A major business software vendor recently offered buyers at midsize companies CRM product licenses at no charge when they purchase a particular version of their ERP product.  There are qualification requirements to get the free CRM licenses.  The catch – customers must pay the regular annual maintenance fee on the no cost CRM licenses.

Other business software vendors have made this type of offer either directly with buy one get another deals or indirectly through product bundling deals.  The real objective is to get more of their software and more users in a client site which produces additional implementation services and annual maintenance revenues in exchange for foregoing the initial license fee.  I’ll discuss the business perspective of doing this in next week’s post, and focus on the marketing aspects of this tactic in this post.

From a strategic marketing perspective, considering that everything a company does is marketing and impacts marketing, I think there’s more downside than upside to this tactic for the following reasons:

1. This type of offer smacks of a wheeler-dealer approach to marketing and selling.  We’re talking about serious business buyers, and major industrial strength business software from major well-established vendors.  Do they really want to project a wheeler-dealer type of image for their company in that market?
2. There are a number of qualifying requirements for these types of offers and there’s always the back-end implementation and annual maintenance costs.  Even though the vendors may be upfront, open and honest about disclosing all these terms and conditions, there’s always the risk of the customer perceiving they were taken in by a bait-and-switch type of tactic.
3. The vendor is debasing the product they’re giving away by openly declaring that it has no license value.  The product they’re giving away will be viewed as adjunct or subordinate to the main product customers have to buy.
4. Is there any going back?  Although it may be a limited time special offer, buyers will remember that they attached zero value to this product, and may never be willing to pay for it again.
5. How do you explain this to existing customers who paid for the product that is now being given away?  If I were a customer who previously bought ERP and CRM, I would be on the phone with my sales rep asking for a refund or credit for the CRM I paid for and others are now getting for free.
6. What about customers who previously bought the core product (ERP in this example) but didn’t buy CRM, can they now get the CRM at no cost on the same terms?  If I were a customer in that situation, I would certainly ask for it if I need a CRM system.

While I can see this type of offer generating some activity and sales, I’m struggling to find anything positive from a strategic marketing and market positioning perspective.  I think the product being given away will be forever devalued or debased.  Is that a fair trade for the annual maintenance and short-term service revenues in the vendor's business and product plans?

What do you think about this marketing tactic for major business software vendors?  Have you tried something like this and if so, how did it work out?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Why are Marketing & Sales Forecasts Usually Wrong?

Because forecasts attempt to predict the future they will always be wrong to some degree.  Problems arise with forecasts that are usually far off the mark and the resulting impact on a business.

Not that Marketing and Sales can’t or don’t attempt to produce a good forecast, but mostly because the process many companies use is the reverse of what it should it be to produce a good market-driven forecast.

“I skate to where the puck is going to be, not where it has been.” – Wayne Gretzky

The above quote from Wayne Gretzky succinctly describes the fundamental problem with the way many companies do forecasting – it’s primarily derived from what happened last year – what was sold based on where the market was, instead of where the market is going to be and what customers plan to buy.

Take the current state of business software companies as an example of this continuing wrong-headed forecasting by business, sales and marketing executives:

• Traditional on-premises business software vendors’ license revenues are down an average of over 30% for the most recent 12 months.
• Software as a Service (SaaS) business software vendors’ new subscription revenues are up an average of over 20% for most recent 12 months.

The announcements from on-premises vendors about their results are that the shortfall is due to the economic conditions.  But, the SaaS vendors are growing in the same economy and markets.  It seems that the on-premises vendors have deeply flawed forecasting and planning processes given the size and claimed unexpectedness of the shortfall.

Now there’s a flurry of announcements from on-premises vendors about plans to bring SaaS solutions to market.  But, marketers at these on-premises vendors have seen this trend toward SaaS coming since 2007 or earlier and many urged their companies to make investments and commitments for SaaS solutions some time ago.

So what happened?  More of the same.  The forecasting process usually starts with C-suite executives adding a percentage growth number to the previous year’s actual sales numbers.  Usually with no or minimal regard for market forecasts and changing conditions.  The Sales organization in turn is required to commit to make the number.  Sales then distributes the number through their hierarchy until everyone owns a piece of the commitment – the individual, team and organizational quotas.  After some negotiations, the numbers are locked in and marketing now has to somehow produce leads to support sales quotas produced by a flawed process.

And that’s where things begin to go wrong – right at the start:

• C-suite executives want more revenue with minimal incremental investment and pressure Sales to commit to these arbitrary forecasts.
• Sales want to do what they’re comfortable with and what worked in the past – sell more of the same stuff in the same manner.
• Marketing and Sales work hard to produce leads and sales, but they’re swimming against the market currents.
• Marketing knows that markets and buying preferences are changing, but it’s tough to get the right attention until the changes leap out and slap everyone with bad results from doing more of the same old stuff.
• R&D has a huge backlog and can’t tackle any new projects for at least 2 or 3 years.

Producing good market-driven forecasts is not rocket science.  Manufacturers do it well with robust forecasting, planning and scheduling processes that drive the business from end to end.  B2C companies have a much more robust and statistically accurate process that starts with Brand Managers developing market-driven sales forecasts and business plans which become the playbook for all areas of the business.

Seems to me that the fundamental problem is that many B2B companies, especially Information Technology companies are not really market-driven – see the Marketing in a ‘Market-driven’ company article for more information about what it means to be market-driven.

How do you deal with this forecasting issue and do you have any recommendations on what has worked for you?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com

Time: An Overlooked Difference between Marketing and Sales

Most of us in marketing have experienced this scenario – your company misses the just completed quarter’s sales targets – marketing and sales leaders are hauled into the CEO/COO’s office for a grilling to explore why this happened.  Inevitably, Marketing is thrown under the bus for not producing enough leads.  But there’s a disconnect that is frequently overlooked or disregarded – what marketing are working on today is not what sales are working on today.

Although the above statement may be intuitively obvious to anyone who stops to think about it, this time difference isn’t sufficiently considered for marketing and sales performance measurement.

Consider a manufacturing supply chain as an analogy.  There are planning, scheduling, procurement and delivery activities that happen in the inbound supply chain long before manufacturing can produce a product, and then there’s the outbound supply chain to ship and distribute the product for purchase by the eventual customer.  This total lead time from end-to-end is typically 3 to 12 months depending on the industry.  Manufacturers use Demand Planning to deal with synchronizing the supply chain lead time with anticipated future demand relative to when the finished goods will be purchased.

Marketing has a life-cycle of processes over an extended time period like a supply chain.  Consider this hypothetical example of a typical B2B marketing campaign process over a quarterly time increments:

• Q1 – marketing does research, analysis and testing to formulate the campaign value proposition, target market(s), offer, etc.
• Q2 – marketing develops the campaign content, materials, enablement resources, etc.
• Q3 – marketing begins executing the campaign.  First leads start coming in.
• Q4 – campaign in full swing – leads are coming in.  Sales get qualified leads for action.

Now add the typical B2B sales and/or buying cycle of 3 to 9 months or longer on top of that and we’re in Q6 or Q7 or later when deals are planned to close for leads generated by this campaign.  So if Q7 sales didn’t make quota, marketing wasn’t working on the same leads or deals for Q7 as sales was.  That doesn’t exonerate marketing from some responsibility for the problem.  However, what these quarterly sales review meetings seem to miss, is not to look at what marketing did in the quarter in question (Q7 in this example), but what marketing did in Q1 through Q4 that led to the Q7 outcome.

Some questions executives could ask considering the time differences for a more relevant discussion and productive outcome from the review process:

• What was the original analysis for the campaign(s) that produced leads that should have generated sales in the quarter under review?
• What was the anticipated customer demand in the plan and how was it determined?
• What changed in the meantime?  Economic factors, buying cycles, customer budgets, competition, market shifts, etc.
• Did the campaign execute as planned and produce the expected results?
• Were adjustments made to the campaign as unanticipated external or internal changes occurred?
• Are sales selling according the campaign value proposition and reasons customers expressed interest?

That meeting is also a good opportunity to look forward for the next couple of quarters with the same questions to anticipate potential problems and proactively make adjustments. Also review what plans marketing have in the early phases of the campaign process that will drive sales activity 3 to 5 quarters from now.

Is this lead time difference an issue for you?  If so, how do you handle it?  Your comments are always welcome.
Copyright © 2009 The Marketing Mélange and Ingistics LLC. http://marketing.infocat.com