When it comes to marketing, small businesses need a lot of bang for their buck.
Basedon on a recent Gartner CMO Spend Survey, marketing budgets now account for 12% of company revenue, a steady increase from 2010. For small businesses, this money is a precious chunk of change.
If it's spent without a commensurate increase in new customers, then it could lead to ruin. This makes SMBs understandably cautious when choosing a marketing agency—and creates challenges for the agencies themselves.
Marketing agencies cannot guarantee ROI, and every marketing campaign carries with it the risk of underperformance. Over 80% of B2B marketers say that it's a challenge to demonstrate how their work improves the bottom line—and 93% of CMOs agree.
Instead of guaranteeing ROI, marketing agencies need to communicate how they can minimize risk for SMBs, while providing data-driven insights that illustrate the effectiveness of their approach.
Start with Small Budgets
Although marketing agencies don't have a crystal ball to forecast ROI with, they still have common sense. More than likely, the small business is starting their marketing department from scratch - or its still incredibly new/small. In this scenario, marketing agencies can become valuable by finding what works and iterating it to the SMB’s founding team.
How does this work in practice? Let's say that a client is running a business, but there's no pre-existing marketing strategy in place. The business is moving product, however, and there's a reliable record of who's buying—age, gender, location, income level, and so on. Although it's hard to know the best way to market this product, there are tried and proven ways to market to these demographics.
Agencies can also come at this problem another way—by starting small and iterating. One of the best ways to work with a SMB is to determine the smallest amount of money required to obtain a new lead.
Once that amount has been determined, it's relatively easy/simple to come out with a plan that helps the client sacrifice the smallest amount of budget dollars in exchange for the largest number of manageable leads per month. This strategy dovetails with another good, commonsense tactic.
Determine the Right Metrics for Success
Returning to the Gartner survey, the role of marketing has changed dramatically over the course of a few short years. Nearly half of all marketing organizations have some aspect of sales hooked in, for example. IT and CX organizations are also being incorporated into the marketing machine.
Marketing agencies may not be asked to shoulder these responsibilities in the same way a CMO might, but their clients are almost certainly changing their expectations of what an agency might deliver. Therefore, it's truly important for agencies to discuss with their clients what constitutes a barometer of success. If an agency works with sales, then the agency needs to determine what that looks like for the sales team. Is it lead generation, closed opportunities, or something else?
If there's a CX partnership, how do they measure their customer retention statistics, and how does the agency prove its worth?
Once again, the prevailing challenge in marketing is that most marketers have difficulty identifying the ways that their work affects the business.
By setting benchmarks at the beginning of a customer relationship, marketing agencies can identify the targets that they'll hit, and SMBs will know what they're aiming for. With that in mind, here's one concrete approach that marketers can take towards justifying their work.
Create a Revenue Attribution Model
Revenue attribution is the meat and potatoes of the approach outlined above. Marketing agencies have limited means to predict the ROI of various projects, but there are a variety of methods that can track the success of a particular approach.
For example, one might attempt a "first touch" methodology. Say that a lead views a blog, performs some other actions involving content, and then closes a deal—the entirety of that deal might then be attributed to that touch-point.
Alternatively, agencies can use a linear attribution model.
Let's say that after viewing a blog post, the lead then downloads a white paper, and then closes a deal. The agency can take the final value of that deal, divide it by the number of touch-points, and then attribute an equal number to each piece of content.
These are extremely simple models, and they're not perfect—but without them, there's really no way for an agency to identify which pieces of content lead to revenue generation. More to the point, research from the Aberdeen Group suggests that over one-third of marketers don't perform revenue attribution of any kind, and nearly 20% don't know if they have an attribution model or not.
It's also worth noting that "best-in-class" marketers are much more likely to use complex weighted attribution models that place different emphasis on different pieces of content. From related research, this practice translates to a substantial likelihood that a company will see strong positive correlations between their marketing efforts and sales growth.
Encourage Some Risk
While we mentioned earlier that it is beneficial for a marketing agency to start the SMB off small, it is equally important that the agency also challenges the SMB’s marketing team to push themselves into new and uncharted marketing territory. Again, going back to the Gartner report, there’s a clear connection between the marketing teams demonstrating accountability and assuming risk to the marketing teams that then go on to earn a bigger marketing budget.
While it’s important that the agency works with the SMB to figure out the minimum amount of risk and money needed in order to acquire a new lead, it’s also the agency’s job to bring new ideas (perhaps a few far-fetched ones) to the SMB that will challenge their current marketing plan and urge them to dream a bit bigger.
Create a Great Friendship Between Your Agency and SMB
Being a successful marketing agency doesn't just mean serving your clients with slick, well-produced campaigns—it means doing so in an accountable and reproducible manner that complies with the changing priorities of the customer. This is a challenge that a lot of agencies still struggle with, but the techniques above provide a roadmap for customer trust.
By creating this trust with the customer, and putting forth just as much effort into their overall marketing goals as their own internal team, you’ll be creating a long-lasting relationship with the client which leads to very positive word-of-mouth. In other words, when customers grow, agencies grow too.