In this series, we have tried to show you some different scenarios for financial growth and profitability using digital marketing as the primary vehicle for success. We introduced the concept of treating marketing as a profit center by setting goals. We looked at the revenue side of the proforma balance sheet, or assets. Next we examined the costs, or liabilities involved in achieve those goals. Finally, we showed you the potential profits, or equity, for each of the scenarios and made some judgments on their viability in a greater business context. Let's wrap up this series with a discussion on planning for profitability via digital marketing.
Theoretically, there are no limits to setting goals, as long as you are willing to set the goals first, then do what is necessary to achieve them. If you set the sales and marketing budget first and work backward toward goals, you are likely to fail. Why?
Bottom line—set your goals and priorities first, figure out how to achieve them, then set budgets.
This is a key question for small businesses and startups. The budget scenarios we outlined in the Liabilities section are examples only. The real work comes in building a realistic sales and marketing plan that accomplishes your goals over time without incurring too much risk. This involves charting growth in sales revenues and expense at a pace that works for your company. For example:
If you have a detailed sales and marketing plan in place that projects and tracks both assets and liabilities in detail each month, you have a vehicle for planning as well as attracting financial resources. For example, if you are starting from a relatively weak position in terms of online visibility and lead generation, you may have to do some deficit spending in the first few months to overcome the "visibility gap." In later months, you make up for the deficits with aggressive sales activity designed to reach and convert leads into customers. Without such a plan, you are risking the health of your company as you navigate through the ups and downs of your business.
In terms of planning, small businesses are more likely to concentrate on brand awareness, focusing on top-funnel KPIs, such as traffic and lead volume. Inbound marketing best practices and technology have helped considerably in recent years, to the extent that this approach to digital marketing has become an important competitive factor for SMBs. However, even the most advanced practitioners struggle with their mid-funnel and bottom-funnel operations, mostly due to limited resources and priorities. As a result, their sales and marketing teams are not aligned, they lose opportunities and sales performance suffers.
Generally, enterprises have much more firepower to bring to bear, in terms of human resources and technology, than SMBs, yet they still struggle to optimize their resources. Even at the top end, companies still suffer from a lack of dedicated resources for content creation and sales funnel optimization via marketing automation. This is primarily the result of backward planning, i.e. setting the budget first, then figuring out what to do with it. By rethinking digital marketing as an investment in new business development, they can overcome current barriers to growth and profitability.
Marketing Executives measure sales and marketing performance by cost effectiveness in addition to contribution to the sales pipeline. Cost per lead (CPL), cost to a acquire a customer (CAC) and customer lifetime value (LTV) are common KPIs used to assess cost effectiveness. The good news is that these metrics are relatively easy to track using marketing automation to measure overall performance, at the channel level and on a campaign-by-campaign basis, but there are some fundamental requirements including:
Growth and profitability don't necessarily go hand-in-hand. Successful companies create detailed plans to achieve their short and long-term goals based on market conditions, product development and, in many cases, directives handed down by a parent company and/or investors. Marketing plays a key role in both growth and profitability because it stands at the core of new business development. Without fresh new sales leads every month and a process to help develop them into loyal customers, how will the business grow and become more profitable? Digital marketing is the primary driver of modern marketing, because the Internet is where most B2B and B2C consumers do their research, evaluate their choices and make their decisions. Without a strong investment in digital marketing, the only thing you can count on is that your competitors will pass you by.
Photo Credit: Peat Bakke
With over 30 years of business and marketing experience, John loves to blog about ideas and trends that challenge inbound marketers and sales and marketing executives. John has a unique way of blending truth with sarcasm and passion with wit. Connect with John via Twitter, LinkedIn or Google Plus.