Some people were concerned that spending money on marketing campaigns and advertisements could become an exercise in flushing money down the toilet.

True. If you have no idea what you are doing, what you want to achieve and you have an agency that is resonating at the same plane as you are, you might as well just give us the money now. We can flush it for you, easy.

But then, to “pay on results” or “pay by performance” is not as simple as it might appear. Marketing, advertising and communications is largely a skill based, creative industry; where the “products” are ideas and actions. Just as a beautiful fireworks display is over when its over, ideas exposed can not be taken back and re-used. Viewed in that light, I am sure you can see the challenges of a “pay by results” program.

There are parts of the program that are what we can consider as “sunk costs”. These are costs that any agency will incur no matter what. Being a service industry, it is rather difficult to quantify such costs. However, it is not impossible. The real costs that are hard to measure are the creative costs. Have you ever wondered why the “Mona Lisa” is worth millions and millions, while your rendition of Miss Universe 2007 (who of course, will look mucho better than Mona), is only appreciated by your little nephew? Will you pay the millions for Mona to smile at you? Not me. I have neither the means, nor the passion to spend my blood on that.

I would like to enumerate the various challenges that needs to be overcome before a “pay for results” approach is viable.

Objectives

Clear objectives must be established right from the beginning. Such objectives should include not just the intent of the campaign, but also clear, measurable results. Each item should be definitive. For example, sales revenue is a clear measure, top-of-mind-recall is a clear measure too. Whatever the metrics, these must be spelt out explicitly at the start. They cannot be made up as you go along. That is neither fair nor sensible.

Measurablility

When the objectives are clear, there is another hurdle to cross. Measurability. How do you measure the results of specific items? As an example, if sales revenue were the measure, is this all sales or just sales in the targeted market? How would that be measured in a consistent and objective manner?

On top of that, the results must be attributable to the campaign in question. Marketing noise like tactical sales offers from dealers, one-off promotions and other such actions could influence the results one way or another. To be fair, you would not want the results to be inflated and be misled, neither would the agency want it to be suppressed and get paid less.

Accountability

The marketing campaign is merely one cog in the complex web of this activity called a “business”. Deals, alliances, partnerships all affect the progress of the business. Whether the marketing, advertisement or event was responsible for the good (or bad) results, needs to be clearly defined. Again, such measurements and assignments should be made at the start, and not the end, of the exercise.

So, if you want to pay when you see the results, you will also have to be willing the pay the price of measuring the results in an objective and impartial manner. Proper cost accounting, systematic surveys and audits are just some of the systems you need to have in place for this to work well.

Having said all this, most of the time, it is impossible to get a clear enough consensus for this to work. For small companies, they will not have the proper control systems in place for a truly objective measure. The large companies prefer a known budget as opposed to a “moving target”. Agencies of course, simply worry about getting paid their dues.

Its a tough world out there in Marketing. For the agencies, it is the fight for due respect and to get the piper’s pay. For the marketers, it is a struggle to get the best deal (in price and in results).

There is no single, simple answer. Most important is for each to find a trust-worthy partner, and work together. Don’t go it alone. Find a friend.

You don’t need to write a formal 50-page business plan to get the benefits of business planning. In fact, it’s often better to craft a workable plan that you will review regularly to make sure your business is headed in the right direction. Here are a few things to consider if you’ve been procrastinating or don’t know where to start.

Just start. Writing a business plan doesn’t mean you have to cover every section included in business planning books or software. It’s actually better to start with your own concepts for what your company should look like and what needs to be done – and create a plan that you can start using today. Don’t worry about formal structure. Your business plan doesn’t have to follow a formal business plan template exactly, so don’t worry if your plan doesn’t include every section. Think about what needs to happen in your business in the next few weeks and months. Then, write it down as best you can in bulleted format, as a mind-map, with pictures, or whatever makes sense to you. Start with an outline and work from there. Start with the most immediate tasks. What will affect your business today, tomorrow, next week? Create a plan for the next month – what do you need to do right now to grow your business, get through a current crisis, or attract more clients? Focus on the short-term and let your business plan evolve as your business evolves. Create priorities. Don’t think about your business plan as just an abstract concept. Rather, it’s your business, and you should use your plan to help you achieve your goals, work productively, and better allocate resources. What are your priorities? What is the highest and best use of your time? What are your income-producing tasks? Those are where you should spend the bulk of your time. Set metrics and benchmarks. Even if you hate numbers, having metrics and benchmarks to measure your business success is crucial to achieving your goals. At minimum, you should know how much revenue you must make each month to cover expenses. Keep your plan simple. If you don’t write up a formal market analysis, industry analysis, financial projections and other information usually included in a traditional business plan, they won’t clutter your working document. If later, you do develop them, add them as supporting information in your appendix. Be flexible. You will never have complete, perfect information to create the ideal business plan for your company. Rather, you must work with what you have. Yes, you will have to make assumptions and some things will be uncertain. Make sure you document these, so that you can edit your plan accordingly as you learn new information. Take responsibility. You are writing a plan for your business, so you need to know the details inside and out. While it is okay to speak with consultants and business planners for guidance, you – not them – should write your business plan so that you understand all the details and how everything fits together. You control the fate of your business, not outside professionals, so set goals you are comfortable with and action steps you can achieve.

Think of the components of your business plan as pieces of a puzzle. Just as you usually don’t have to put the entire puzzle together before you recognize the image, you can start building your business with just a few pieces. As you see how the pieces fit together, you can expand and complete more of the puzzle – but the key is to start somewhere.

CMOs are under tremendous pressure to produce results from marketing spend.   In fact, the average tenure of a CMO is under two years.   It seem like all eyes are looking at you.

Why is this happening and what can we do about it?

In this post, I share how I recommend you speak with your CEO and CFO in this new world.  In a nutshell, I believe the conversation needs to change.  If I may, I’d like to explain how to do this.

If you’ve read my white paper How to Find New Customers or listened to the recent podcast on demand generation with CMO Club members Brian Harmon, Paul Dunay, Jon Miller and me, you heard how the world of B2B marketing changed.  You learned how we live in a “self service” world today and how important it is to have a good understanding of customer buying cycles, as well as the need to nurture leads and create thought leadership content so your firm can become the trusted advisor they turn to in time of need.

CEOs and CFOs look for quarter to quarter revenue – they turn to Marketing to produce ROI on marketing spend.  They want a strong flow of qualified leads for salespeople to work on and, unless the money you’re spending produces leads, the pressure quickly mounts.   Your marketing programs might be making progress, but without leads, no one cares.

But since buyers are in control, your ability to directly influence them is minimal.  You need to patiently build relationships and convert those to buyers.  But your CFO and CEO have numbers to deliver.  The mismatch between the world of today and the demands of leadership is why turnover and pressure are so high. 

In the face of that pressure, how should you deal with your CEO and CFO?

I believe you need to do three things right away.

Educate your CEO and CFO on what is happening and why in the world of B2B Marketing and Sales.  (You can start by reading How to Find New Customers)
Set realistic expectations of what can and cannot be accomplished (realistic time frames)
Most importantly, you need to measure different things. 

In order to understand how measuring needs to changes, we need to begin by taking a look at customer buying cycles in How to Find New Customers.  The four steps are:

Untroubled/Unaware
Have Problem
Need Solution
Consideration

In order to get someone to buy from us, he or she must move through each of those steps.  

If we understand the process, then we can  measure the progress through it.  We can measure the number of people in each step periodically and, more importantly, track them as they move from step to step in the buying process. 

We should still track leads – particularly in detail like this: Raw Lead, Marketing Qualified Lead, Marketing Accepted Lead, Sales Qualified Lead, Sales Accepted Lead, and Won/Closed.  But we need to measure process flow too.

Using analytics (which web pages are they visiting, for instance), telesales (ask them) and other techniques, we can classify our prospective customers as to which  of the four steps they are in.  Even more importantly, once we start collecting data like IP addresses and emails, we can watch and qualify movement from step to step.  Also, since Marketing is trying to develop trusted relationships, that too is a metric we ought to measure.  We can have telesales call our prospects and get feedback on how we are perceived.  (Do they trust us?)

This approach offer several advantages for Marketing. 

It shows process rather than raw statistics, so we can track prospects long before they are passed to sales as leads – giving us ammunition to show our CEO and CFO. 
Since we are tracking movement through a process, we can demonstrate real progress – progress that builds confidence – even before leads start flowing. 
Since our goal is to be perceived as a trusted advisor so they turn to us in time of need, we measure our success. 
Lastly, because the customer buying process is universal, this method works regardless of what marketing or lead nurturing program we use.

So here are my action items for you.  Educate your CEO and CFO on the new realities of B2B sales and marketing.  Share with them your new approach and measures.  Explain how this will give them far greater insights into longer term results.  And put the new metrics and measures in place.