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Investing for the Long Term in B2B
Today’s newsletter builds on some ideas from the opening paragraph of my June 4 post, Investing for the Long Term:
Back in 2007, Les Binet and Peter Field published a highly influential research report, “Marketing in the Era of Accountability,” supported by a robust analysis of data from the IPA (the UK-based Institute of Practitioners in Advertising). Their 2013 follow-up paper, “The Long and the Short of It,” offered the following recommendation: marketers should spend 60% of their budget on long-term brand building and 40% on short-term activation. Binet and Field arrived at their conclusion by looking at the IPA Effectiveness Awards from 1980 to 2010, comparing the winners that demonstrated notable accomplishments to the winners that reached extraordinary levels of success.
As I wrote in June, drawing conclusions from an analysis of award-winning marketing campaigns is a flawed approach that generates so many questions and problems. Nevertheless, many marketing gurus hold up Binet and Field’s work as the ideal for marketing optimization. For people who believe companies should be investing more resources on long-term impact than on short-term activation, “The Long and the Short of It” provides a way to support their assertion with some notable “academic research.” Overall, I generally agree with Binet and Field’s conclusions, even though I remain skeptical of their methodology.
In October 2018, Binet and Field shared some updated information about their work, which they presented during EffWeek — the annual marketing conference hosted by the IPA. Video for the 48-minute presentation is available, as are the slides.
Following that event, LinkedIn commissioned Binet and Field to frame their research within a B2B context. We should expect the comprehensive public report sometime later this year. In May 2019, The Drum published some preliminary findings; marketing expert Samuel Scott offered an insightful summary. In the article, Peter Weinberg, global lead of market development at LinkedIn Marketing Solutions, shared his interest in studying B2B:
Binet and Field’s research has the potential to radically reshape the marketing industry by re-orienting marketers towards brand building strategies . . . Unfortunately, most B2B marketers are unfamiliar with this research, and the research itself does not distinguish between B2C and B2B marketing.
We saw an opportunity to popularise Binet and Field’s recommendations among our client base by commissioning a B2B cut of the data. In particular, we’re trying to show our B2B clients that investing in both brand and demand is a more effective strategy than investing solely in lead generation.
LinkedIn and the Long Term
I’d like to draw attention to the fact that LinkedIn commissioned Binet and Field’s investigation into B2B. What would LinkedIn — a social network for professionals — have to gain from sponsoring a research project?
I think I might have an answer, and I’ll try to connect the dots by using a personal story.
A few weeks ago, I met with Lindsay Pedersen, author and owner of Ironclad Branding. Lindsay helps a wide variety of companies build their brand strategies, but she also spends considerable time working with early-stage, venture-backed businesses that are trying to figure out “just what they stand for.” (As an example, Volvo stands for “safety” — a vision that drives not only their marketing campaigns, but also everything from product design to employee recruiting). Lindsay regularly receives pushback from clients who believe that investing in their brand “doesn’t provide a good ROI,” compared to focusing on performance marketing. I told her why I thought that was a common reaction.
During my career at A Place for Mom, we spent enough money on Google that they provided us with an account team to help optimize our spend (and — of course — to help us spend more). Google had no problem convincing us to increase spending on any paid search that yielded good, measurable returns. Unsurprisingly, Google looked for OTHER ways that we might boost our spending. At the time, we were directing a substantial portion of our marketing budget toward television ads, which we knew were proving very effective for our company. YouTube (part of the Google network) seemed like a logical extension of our television strategy, so I contacted my Google account manager and said something like: We have a broad understanding of the value of our television ads. We measure phone calls directly attributed to the ads, but we also measure the brand traffic lift we see that correlates to those phone calls. And we have measured, with some accuracy, the long-term effect of TV. So we understand the total effect of TV is much more than the short-term measurable effect. We expect YouTube to be even more measurable than traditional television because we can track both the phone calls AND clickthroughs off the ad to our website. The Google rep told me, “You can’t measure YouTube that way. You have to consider the long-term brand building impact.”
I had heard this story before.
As CMO, every time someone pitched me a new marketing opportunity (that I wasn’t already doing), they would inevitably explain their plan by stating, “You can’t measure this channel the way you do your other channels. This channel is different. The impact is going to come from long-term brand building” — with the clear implication that I should be willing to pay more for this “special” impact.
I heard versions of this argument countless times, usually right after someone’s pitch was getting derailed by questions. If marketers couldn’t justify the cost or effectiveness of their plan, they would counter that “the primary impact is long-term brand building, and therefore impossible to track.” Essentially, they tried to entice people to buy the sizzle instead of the steak.
Nevertheless, I DID believe — strongly — in the power of long-term brand building. A Place for Mom was spending a lot of money on television, based on our confidence that the ads bolstered the long-term development of our brand. I thought then (and still do) that television’s most influential force is not the encouraging of short-term activations, but rather the shaping of long-term brand identities. In fact, I believe that television’s ratio of “long-term impact to short-term impact” is one of the highest of any marketing channel. So, when my Google rep stated that the short-term measurable economics of YouTube would be WORSE than traditional TV, I was being asked to have faith that the “long-term to short-term” multiplier for YouTube would be significantly higher than for traditional television. That, to me, seemed unlikely.
So…let’s tie this story back to LinkedIn’s interest in Binet and Field’s B2B research.
LinkedIn REALLY wants you to believe in the long-term power of B2B advertising. Because if you do, you might be willing to pay more for ads on their platform than you would typically spend on campaigns focusing on short-term results. Communicating the value of long-term effects is a great business strategy for media sellers. Why? No one requires accountability for the results.
Bottom line: we shouldn’t be astonished that LinkedIn contacted Binet and Field — popular researchers who have previously highlighted the merits of long-term brand building — and then set them loose on proving the same results for B2B marketing.
B2B and Binet and Field
In Binet and Field’s recent study, they concluded that best practices for B2B marketing closely match the ones for consumer marketing — with only small adjustments. Recall that for consumer businesses, the researchers have “advocated a general best practice of allocating, on average, 60% of spend towards long-term brand building and 40% towards short-term activation.” The new analysis suggests that for B2B companies, the ratio should shift to 46% long-term brand building and 54% short-term activation. In the words of Binet himself: “B2B is a bit more rational, a bit more activation-heavy.”
Really? Why 46% and not 45%? I definitely don’t buy that Binet and Fields managed to “solve” the ideal marketing strategy down to two significant digits. That said, I am fine with the idea that companies should combine top-of-funnel marketing with bottom-of-funnel conversion. I also believe that in this data-driven world, there is a tendency to relatively overvalue end-of-funnel marketing because it’s easy to measure. In practice, companies should invest in both long-term brand building and towards short-term activation — but the ratio should be based on the specific opportunities available to their particular product, not on any “ideal” formula (like 60/40 or 46/54).
B2B marketers face two significant marketing challenges that are far less common among B2C companies.
First of all, when doing short-term activation, many of the companies I work with “cap out” on traditional channels. I advise one company that helps mid-sized businesses manage their supply chain. As you might expect, you can only identify so many relevant Google searches on “how to manage your supply chain” or “supply chain management software.” The company monetizes very well, but once they have secured all their relevant keywords at position 1.1 on all the relevant Google searches, there is not a lot left to do on that channel. This pattern repeats itself for so many B2B businesses. If you sell to small law firms, there will only be so much search demand from lawyers at those firms looking for your product. This reality illustrates why sales are usually more important at B2B companies. Sooner or later (and usually sooner) these companies will need to pick up the phone and call every small law firm in America, to see if they might be interested in their product. You can’t wait for all of them to search for you.
When it comes to top-of-funnel marketing, B2B marketers encounter a different problem: they only sell to other businesses. Generally speaking, I believe that mass marketing is very effective. Your customer base is MUCH larger than you might imagine. (Example: I have been advising a company that helps people find new dentists. They were telling me their target market is “affluent, single men and women, aged 24-36.” I replied: “No. Your target market is people with teeth.”). As much as I believe that target markets are bigger than most marketers realize, even I need to accept that if you sell office management software for law offices, your target audience does not extend much beyond law offices.
So, then, how DO you execute a marketing plan that includes mass market, top-of-funnel advertising to the 50,000 small law offices in America? Or the 100,000 preschools in America? Or the 60,000 physiotherapy clinics in America? If you have a B2B product that appeals to every small business in America, you can get away with mass marketing on television or podcasts — I’m looking at you Squarespace and ZipRecruiter. But if, on the other hand, your product benefits a specific niche like “preschools,” then mass advertising will never provide a favorable ROI — no matter what the Binet and Field study tells you.
To be clear, I’m not suggesting that you should abandon top-of-funnel marketing. You just need a different approach than B2C top-of-funnel marketing.
In Samuel Scott’s analysis of Binet and Field’s new study, he throws in the following opinion:
Personally, I can only hope that this research will be the final nail in the coffin of the B2B world’s obsession with so-called “content marketing,” which is the production of something rational and informative and then selling something on the side almost as an afterthought. Consumer brands and tech software platforms are not — and should not be — media companies.
I agree with Scott on many ideas, but in this case I think he is completely wrong. If you believe B2B companies should do more top-of-funnel marketing (and I concur with Binet and Field on this point), the strategy shouldn’t involve the “killing” of content marketing. Instead, the best approach would feature an INCREASED emphasis on content marketing.
Content Marketing your way to a better brand
If you run a new company that sells software to small businesses, your “best lead” is someone who submits a form requesting a demo of your product. In an ideal world, that lead is quickly processed and then placed in the hands of a sales rep who can talk to the customer about your product, run them through a demo, and (hopefully) close the sale. But…what if your new business still isn’t ready to walk a lead through a demo with your sales team? One option: focus on “long-term brand building” and hope customers will emerge when you are finally prepared to show them your demo. Think about the challenges you would face. You have to break through the noise, make an impression on someone who is not looking to buy your product, and then find a way to stay in their brain for weeks or months or years until the timing is right for them to consider a purchase in your category. That would need to be a pretty impressive advertisement!
When discussing ads that effectively build long-term brand identities for B2B companies, Binet and Fields provide an example: a one-minute commercial featuring a singing baby (for AA — a UK service for roadside car assistance). I suppose businesses buy services from AA, but I would hardly describe a car breakdown service as a good example of a company driven by B2B marketing. In my experience, most long-term B2B marketing happens not on TV, but at conferences that bring together the people who could actually use your product. So…how do you get your brand into those people’s minds? Perhaps you could try to convince conference organizers to run a 30-second ad on a giant screen during the event, but that seems like a stretch.
I suggest a completely different tactic for early funnel marketing: HELP your potential customer.
What do I mean by help? Introduce them to someone else, suggest a relevant conference session, or even something on a personal level, like recommending a local restaurant. Make sure to stay in touch with your potential customer, offering help whenever you can. At some point, the person might encounter a problem that your product can solve, at which time you can hand the customer over to your sales team. Of course, helping a person doesn’t mean addressing all their issues — it just means sharing information that could provide some value.
As your professional network grows, you might want to offer some useful information in a packaged form (e.g., “A brief guide to growing your [niche] business”). Respect your recipients’ time — ensure your material is worth their attention. You can periodically send more (good, helpful) material, mixed every now and then with notes about how your particular business might be helpful for them. Essentially, this process is a personalized form of content marketing.
Do you know the REAL problem with content marketing? It’s NOT that content marketing as a strategy is bad. It’s that the QUALITY of most content marketing is bad.
During my time at A Place for Mom, I learned a valuable lesson about content marketing. A Place for Mom is a marketplace, which means we matched consumers to businesses. In order to maximize our potential, we needed to “market” to both sides of the marketplace. Our team created a lot of content marketing focused on the consumer (seniors and their families). Producing that content was very inexpensive and easy. So inexpensive and easy, in fact, that we decided to generate new content for our partners on the supplier side (assisted living communities). Our plan was straightforward: (1) use the same (excellent) team that created the consumer content, (2) interview industry experts, and (3) produce original content targeted at operators of assisted living facilities. The consumer content featured articles like “How to stay healthy as you age” or “The impact of pets on senior communities.” Industry articles covered topics such as “How to give an excellent community tour” or “Managing the move-in process.” Our consumer content was awesome. Our initial stabs at industry content were embarrassing.
After some reflection, we realized the problem: everyone on our team was a consumer, thinking like a consumer. With (relative) ease, a talented writer can research any random consumer-related topic and then produce quality content about that topic, all in a short window of time. But ask that same writer to quickly study a complex topic (trade implications of Brexit) and write a newsletter for an audience of industry professionals (British customs brokers) — the likelihood of communicating insightful perspectives is virtually nil.
People running companies possess expertise in their specific industry. As such, your plans for content marketing must be grounded in the idea that anyone writing content requires AT LEAST as much expertise as the person reading the material. Otherwise, your endeavor will be a complete waste of everyone’s time.
In my opinion, most B2B content marketing falls into two buckets:
Product marketing: “Let me tell you about my product.”
Useless, pathetic, and/or laughable content — written by people who know less about the business than the person reading the material.
I am often asked by clients: “How many emails can we send out?”
The answer is: “That depends how good your emails are.”
In previous newsletters, I have criticized Groupon’s growth strategies. At the company’s peak, they were sending out seven emails a week and hitting 50%+ open rates. People loved their emails because the content was consistently extraordinary. Today, I would be shocked if Groupon’s open rates reached more than 8% because their content is regularly terrible.
When clients ask me, “how many emails can we send out?” what are they REALLY wondering? I think it’s something along the lines of, “How many emails — featuring a subject line with superficial references to pop culture events and/or holiday seasons, repetitious advertisements for our products, and inane content that doesn’t entertain or inspire anyone — can we send out, before our customers get upset with us?”
The answer to THAT question should be obvious — “Not many.”
Let’s be honest: creating exceptional B2B content is not easy. But it’s not impossible. I religiously read Matt Levine’s daily newsletter about the financial industry, and I don’t even work in finance. If you’ve never checked out his work, he commands readers’ attention by providing intelligent observations in a (very) entertaining way. Why couldn’t a B2B business targeting companies in the financial sector create content as good as Levine’s on a daily basis? I can already hear the pushback: “But Matt is an amazing writer who works for a giant media company (Bloomberg). We’re just creating content on the side.”
How is that an excuse?
I’m not suggesting that every company targeting financial advisors should create a media empire like Bloomberg. In contrast, I’m proposing something much more reasonable — your business could have one employee write a daily newsletter that matches the level of quality you would expect from a single reporter at Bloomberg. Why not? What’s the obstacle stopping your company?
The problem isn’t with content marketing; the problem is that businesses don’t want to invest in content marketing. And when they reluctantly do so, they hire a fresh, out-of-school writer for $40,000/year to create compelling content about their specialized industry. With such inadequate support, why are we surprised that the quality ends up suffering?
To be fair, Matt Levine is an anomaly who possess the abilities to (1) analyze your industry at an expert level, (2) write compelling newsletters, (3) use humor to entertain the reader, and (4) reliably produce content every single day. That said, there are other Matt Levines out there. And those people have more career options than a recently graduated English major, so they will cost more than $40,000/year. Imagine this scenario: your long-term brand building drives $50 million a year for your business. If a writer’s terrific content could increase your brand’s value by 10%, wouldn’t it be worth paying that writer $5 million a year?
So…should you go out and recruit writers for $5 million a year? Of course not. But if your financial advisor support business offered Levine $1 million a year to write for your company instead of Bloomberg, I suspect he would be tempted.
Without question, I support investing in long-term brand building for B2B companies. Important caveat: I recommend allocating the resources that will allow your company to create high-quality content. That way, you can grow your own brand halo far more effectively than producing a commercial of a singing baby (and asking to have it screened at your next annual conference).
One More Thing
Investing for the long-term makes sense when there IS a long term. But what should you do when you believe the world will end tomorrow? I leave you with this hilarious piece of short fiction (in story and podcast versions) that imagines the end of the world from the point of view of a trading algorithm.
Keep it simple,
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Edward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, including details about his latest book, check out Marketing BS.