A go to market strategy example of why too much demand is bad

 

Here is a great go to market strategy example of why crude assumptions are dangerous. Brand / Demand / Enablement need a balance, and it changes over time.

B2B marketers seem to be dragged between two extremes at the whim of Sales: We’re either just doing branding ‘stuff’ or we’re supposed to focus on leads. So which should it be?

Today we’ll use a go to market strategy example to show why too much demand is just as bad as too little, and how to get the balance right. 

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Here’s a great example of a go-to market strategy that shows why crude assumptions can be dangerous. Branding, demand generation, and enablement or channel-readiness are all valid pursuits, but you need to get the balance right. Getting it wrong can be quite expensive and wasteful. As B2B marketers we seem to be dragged between two extremes. On the one hand, we’re expected to do a really great job of just the branding things. On the other, we’re expected to generate leads. Now, which of those is right? And the answer is it depends. I’ll show you what it depends on and how to strike the right balance. I’ll use a go-to market example to show why we need to strike the right balance between demand generation, branding, and enablement, or what I call channel readiness, in this blog.

To give you that framework, I need to tie together three seemingly unrelated concepts. The first one, and this won’t surprise you, starts with the buyer. What do the buyers need? Put a twist on that and how does that change over time? That’s the first point. The second point is how much of our effort should we spend on each market segment and that’s a strategic decision for us. And the third point is what are the types of activities that we as marketers spend our time on and how should that change over time? In this blog, I’m going to tie together those three concepts to build a simple grid to explain and help you explain how you should spend your marketing budget year on year.

How does sales think we spend our time? How does the executive think we spend our time? And how do we think we spend our time? So one of those three ideas is about how we should spend our time and really, there are three main activities that marketers spend their time on. Branding and positioning, or what I call environmental marketing, is one of those things. Basically, it’s creating the right conditions for us to succeed in, but it doesn’t actually get anybody talking. It’s valid. You need to spend some energy on that. Second activity is unsurprising. It is demand generation. Basically, it’s getting the buyer and the seller talking.

And the third activity that we spend our time on is, we call it channel readiness, you might call it sales enablement. It’s everything that marketing does to help sales do battle. So, we kind of spend our time between those three activities. Again, environmental marketing is branding and positioning. Demand generation, you know what that is. It’s getting people talking. And channel readiness is whatever we need to do to help the sales force to do battle. And that’s going to change over time, but I’ll come to time in a moment. Let me get the second big idea on the table first.

The second one is How much of our effort should we spend on each of the market segments? I want to tell you a real quick story about a squeaky wheel. I did a lot of consulting with a company years ago and there was a very, very physically large and quite dominating guy who ran sales for this division, one of four or five divisions, and he would always argue why he needed more of the budget and he usually won. What we worked out is that his division is the number one position and therefore, didn’t need as much money thrown at it. We had three or four other divisions that, frankly, needed a bit more love. And so, we successfully argued that we needed to shift the focus for the market that we were already successful in so that we could become successful in a couple of other markets.

Seems obvious to you now, the way I spell it out, but at the time, the big market, dominant position, and foreboding goal, you know, big dominant guy, seemed like a compelling way to go. It wasn’t. So, the second big idea is choose how much of your energy to spend on each of the market segments that you serve and do that strategically.

Third big idea is that what the buyers need from us changes over time. You think about the really early adopter. These are the buyers that don’t yet know how we’re going to use this innovative idea and, frankly, nor do we. So, spending a lot of time on branding at that point just doesn’t make sense. The next group of buyers after the early adopters are pragmatic and they need proof. So, probably does make sense to do some demand generation at that time. Quite a bit, actually.

The next market, once the market’s really picked up momentum, we don’t really need to generate demand as much anymore. Maybe a little bit, but not so much. So what does matter? It’s all about creating a positive bias in the channel. That matters now because the channel can sell our product or somebody else’s. And then when the market maxes out at Main Street, at that time, we probably don’t need to generate too much demand. We don’t anymore need to focus on channel readiness because the buyer already knows how to buy this stuff. Really, what we should be doing is focusing now on our brand to create a position of preference.

So, the point I’m making there is as the market changes, the mix between generating demand, branding, and enabling the sales force changes materially. When we get to the conclusions, I’ll give you some specific formula to use and I’ll show you how to do that and a great tool. Shortly, I’ll show you how to do this in funnel plan, but before that, I’m going to do two things. I’m going to share with you my conclusions and I’m going to invite you to receive other blogs like this.

Let’s get to the conclusion first. So of course we need to start with how much of our total budget we want to spend on each of the segments. Get that number firmly in your mind. Then, allocate that allocated money. So you’ve already carved it up between segments. Now, for each segment, work out how mature you believe the buyers are within that segment and allocate your activity types according to what the market needs. Let me go line by line on what they actually need. We’ll start with the early market.

In the early market, we need to help the visionary sales guy to create new strategic opportunities. So you want to spend the lion’s share of your budget on channel readiness, equipping that visionary sales guy with all of the tools he or she needs to succeed in this new market. Maybe you’re support them with a little bit of targeted demand generation, maybe like boardroom breakfasts or big, strategic ideas like that, but not high-volume activities. Forget about branding. It just doesn’t matter at this point.

And in the bowling alley, we’ve got a slightly more mature market, but only slightly more. And it’s largely the pragmatists have now merged into the market and now they’re ready to buy, but what they need is proof that this is a good idea. So now you want to pull the demand generation lever as hard as you can. Maybe it’s going to be around 50%, which means that you’ll need to back off your channel readiness, maybe to 25%, so that you can now make a little bit of room in your budget, 25%, for your environmental marketing. Remember, that’s branding and positioning.

Now, in the tornado, this is the phase that the market already knows that you need to buy this stuff. It’s a question of, “from whom?” and so what we need to focus on is creating a biased channel. So now, we’re going to go hard. Maybe 50% of our budget will go in channel readiness, which leaves about a quarter for each of demand generation and branding.

Now, in Main Street, the buyer already knows what they’re going to buy. The channel has probably largely played its hand. The point now is we need to create preference in the market as the market’s matured. And so now, we’re going to free up as much budget as we can, probably as much as 50% on branding, if you like, we call it environmental marketing, but it’s branding and positioning, which is going to leave about a quarter for each of demand generation and channel readiness.

Now as we reach end of life, remember, the task here is not to just concede defeat, but to slow the decline down by looking for new uses and new users. So, we basically need to keep going, but we need to create that demand amongst the new users. So, turn demand generation back up again, maybe 50% of your budget on demand, 25% on branding, environmental marketing we call it, branding and positioning, and 25% on channel readiness.

Now, we used to argue that you can never spend enough on demand, but as we learned in our most recent alignment report, the companies with the best closure rates spend 35% on their demand generation. Now, the average is 45%. That is, across the sample set, 45% was the average amount of budget spent on demand gen. We found that the companies that were spending 35%, not 45%, had the highest closure rates. Why is that? We believe it’s because generating demand if you’re not adequately positioned makes you incredible. You need a degree of environmental marketing, branding and positioning, for your demand generation to be successful.

We used to argue that 45% was a good amount to spend on demand generation. We now believe that 35% is about the optimal spend in a complex sale that we know of as B2B marketing and sales. Now, you can work all of that out in a complex set of spreadsheets, but I’m going to show you when we go to the funnel plan section of today’s show, I’m going to show you how to do that in funnel plan. It’s a really neat tool for helping you calculate exactly how much of a budget to spend on each.

Well, if you enjoyed this blog, then likely, you’ll enjoy others. If you haven’t already, can I invite you to subscribe to receive this blog? Go to align.me/blog and either subscribe to the twice a week blog or, if you prefer, the once a month, which has a recap of all of the key blogs from the month. Frankly, what most people do is subscribe to both and you’re welcome to do that. Now, if you prefer, you can also subscribe to the YouTube channel here and you can consume these blogs in that way. Now, if you have already, but you’ve got a colleague who hasn’t, then now would be a great time to invite them and I would be so grateful if you’d do that. Why don’t you do that now, either subscribe or flick it along to a friend, come back, and I’ll show you how we do that in funnel plan.

So as you know, in the funnel plan, it captures the objectives, the strategy, the velocity, and the tactics necessary to take your product or service to market. Today’s discussion is centered around several components of those. We began by looking at how much focus do we give to each of the key markets. We then assessed how mature each of those market segments was. And finally, using those two inputs, we identified how much of our effort to give to each of environmental marketing, remember that’s branding and positioning, demand generation, and channel readiness. That sets up what your tactics need to achieve.

Now, you know from previous shows that we really have focused that the tactics, or focused on discussion that suggested that the tactics need to generate the velocity that you need and that’s why the velocity’s important. Well, that’s true, but what’s also true is that the character of those tactics should reflect this deliberate mix between environmental demand and channel readiness. You can see in this example that we’ve identified that we need to spend about 20% of our budget, time or money budget, on environmental marketing, 45% on demand generation, and 35% on channel readiness.

You may recall my earlier comment that suggested that 35% was optimal. What that would suggest is that you should iterate on your strategy. Go back and test whether you want to keep that same focus on each of those three markets that we identified before, or potentially add or drop other markets. Again, because that’s a sub-optimal amount of effort to spend on demand generation. Let’s take a look at that now in the software.

So, in funnel plan online, I have access to four plans. I’m going to choose the blogging video plan and the focus right now is around our strategy and in particular, the target market. You can see here our three markets. We’re selling to the director of nursing in private hospitals, the national sales manager of tourism operators, and the CEO of small businesses. And this is our allocation of spend. Having assessed how mature each of those markets is, let’s take a look.

We’ve assessed, is it an early market, bowling alley, tornado, main street, or end of life. I’m not going to change it on this occasion. Based on that market maturity suggestion, if we’re spending 40% of our budget on this segment, that 40% needs to be spent 10% on environmental marketing, 20% on demand generation, and 10% on channel readiness.

Now let me change that maturity. Remember that’s 10, 20, 10. Let me change that maturity to early market. Remember, I suggested in the early market, forget about branding. It’s way too early. So now our 40% is spent 30%, that is 75% of the 40%, 30% on channel readiness, that’s equipping the sales guys to have that strategic conversation, and a little bit of demand gen support.

Let me take it back to bowling alley. So, the amount of money that we spend in each of the styles of marketing, activities of marketing, is determined by two things: how much focus we’re giving to their segments and how mature we assess them to be, therefore, how much on AM, DG, and CR. The sum total of that is what’s presented in the bottom of the funnel plan, just above your tactics

In next week’s funnel vision, I’ll show you how to work out what the ideal sales channel will be for taking your product to that chosen market and how much sales force you need with a great capacity modeling tool. But for now, may your funnel be full and always flowing.

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