Wednesday, September 9, 2009

Digital Spending: Bought, Owned, Earned?

This kind of conversation must run though hundreds or offices weekly. A CFO talking to a CMO about spending on Social Media Marketing.

CFO: "Before I spend any money in this environment, I need to know the impact of this investment to the company’s bottom line. I need to see an ROI."

CMO response: "It's not about the ROI; it's about creating awareness. Having people understand our brand will create engagement, which will lead to revenue."

Two people in the same boat wanting the same thing, reading the same news. The global economy continues to grow. Pipelines are thin, and prospects are taking longer than usual to buy. It is tough out there. Both the CFO and CMO are still expected to do their jobs. Prospects still have needs they must take care of, and it's become more important than ever for companies to communicate and demonstrate their differentiators and value.

The task for the CMO is to prove that the "return" in ROI does not need to be about revenue. It could be an increase in engagement, interaction, click-through, the key is to make sure it is measurable and tied to business objectives. When this is accomplished, the discussion becomes less about money and more about the value that the marketing initiative is creating.

The issue for the CFO is one of available money. In the past, many CFOs were at fault for being too willing to award budget dollars for projects that lacked clear direction and analytical rigor. When times were better, and they were flush with money, they often failed to hold CMO’s accountable for the return-on-investment. Most marketers, for their part, jumped too eagerly into digital in an effort to stay current, as most of us know, it is a learning process on how to find customers and make money off SM.

Now that every expenditure must count, now that the CFO's confidence is shaken Social Media Marketing is concerned, and the CMO has lost credibility of not understanding SM. While new digital tools such as social media seem interesting and worth investigating, the end results are still too up in the air.

As a result, there is a great impasse created by a crisis of trust and confidence, money and need to be a player, two aspects of their relationship need rebuilding if their organization is going to succeed in the SM marketplace.

Most CFOs understand instinctively that there is some undefined, magic equation that states an increase in awareness yields an increase in purchases. They also are aware that technology can serve to uncover the magic a bit, but they need more education. How does new technology and social media relate to the business, how do they influence customers, and how can they help the business grow?

It's the CFO's job to be skeptical. What CFOs need is for CMO’s to be honest and to let them know when they are taking an educated guess. They are used to working with assumptions. They just need those assumptions to amount to something with a dollar sign in front of it. For example, if marketing can show the results of its calculation that illustrates the spending differences between loyal and non-loyal customers, the CFO will be comfortable making the leap that loyalty equals revenue equals investment, even if the numbers are not precise.

For instance, a key goal of "acquisition" is awareness -- which is where many marketers are focusing their social-media initiatives. Employing tools such as Facebook, MySpace and Twitter, many organizations struggle to logically correlate more Facebook "friends" with driving higher awareness and, consequently, higher revenue. I think we all know that having gobs of followers is meaningless unless you have a way to have a dialoge with them. Therefore, as marketers build out their social-media budgets, they should focus on optimizing the relationships among social-media activity, the number of people engaged in that activity, and click-throughs to their sites and online purchases.

To help the CFO properly evaluate the value of any marketing initiative, consider the measurement concept of bought vs. owned vs. earned.

Bought refers to any type of media that are purchased, from TV spots to radio to digital-marketing campaigns such as banner ads. Bought media are where most organizations have spent money in the past and have little capability to track its specific value other than to assume a "magic formula."

Owned media are the assets and intellectual property that are specifically owned and controlled by the company, such as advertising creative, collateral and websites. Once analytics capabilities are in place, organizations can measure the efficacy and fine-tune the assets to reach their desired goals.

Earned media is the concept that others will talk about a brand as a result of either good or bad experiences. Old as time, of course, word-of-mouth is now becoming measurable. Twitter, for example, is allowing marketers to measure this type of communication.

This is the very essence of marketing in a social-media world. Campaigns start and stop, but successful organizations look for long-term, loyal, repeat customers.

This is a place both CFOs and CMOs need to strive toward. By examining the relationships among spending on bought, owned and earned media, companies can fine-tune their marketing to ensure their investment is driving the maximum results.

Larson note: The concept of bought vs. owned vs. earned is something most of us have never heard before or even thought about. This could be the best way to analyze where marketing campaigns could be optimized with SM moving deeper into our lives.

The social networks between people and their family, friends and business associates play a persuasive part in purchasing decisions, vendor choice and churn behavior. CMOs by tapping into this valuable pool of marketing intelligence can strengthen their own acquisition, up-sell and retention campaigns with solid ROI that they can talk to their CFOs about. The challenge of quantifying the value of social networks is not easy there are soft sells and hard sells. …………..

Howard Larson
Larson & Associates
Target Marketing & Telesales Professionals for new account acquisition
Making good businesses great and great businesses even better

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