Is Your Marketing Team Wasting Money?By Michael Ortner, Capterra |
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The question that marketers and salespeople in every industry are faced with is, “where do I go to find my prospects?” In few industries is this question as easy to answer as for the enterprise software industry. More than 9 out of 10 IT decision makers use the Web as their primary source of information regarding product research. And not surprisingly, most software vendors report that a vast majority of their leads are from the Web. To illustrate this, the following data represents the number of times that each of the following software phrases were entered as search terms within the Overture network of search engines during the month of January 2003: So why is it that software marketers are not spending most of their advertising dollars online, but instead are still plowing money into tradeshows, magazines, and brochures? The simplified answer is that they are not realizing that the main goal of each and every advertising dollar they spend is to help drive sales and profits. For young companies fighting to break even, this means lead generation. Every single advertising dollar must go toward finding leads. Any dollar spent on a magazine ad because it “helps to get our name out” or on a tradeshow because “our competition is there” is a dollar that could have been spent on finding valuable prospects. Not until your company is generating consistent profits can it afford to even consider advertising tactics that are generally considered branding efforts. Combining these two ideas – that enterprise software prospects are on the Web and that all advertising dollars should go toward lead generation activities – leads to the conclusion that the major function of the marketing department within enterprise software companies is to experiment with different online marketing campaigns. Toss out the glossy brochures and get ready to start crunching numbers in excel spreadsheets. Before we get to the spreadsheets, which websites are enterprise software buyers utilizing to perform their online research? First, just like the rest of us, they start at their favorite search engine. Focusing on Google and Overture will cover 80% of Internet searches. Next, search engines lead buyers to websites that focus specifically on enterprise software. Capterra is the leading example, but there many niche sites that focus on very specific segments of the software industry. The best way to find them is to perform searches at Google (or whatever search engine you prefer) on the phrases that you believe your prospects are entering. You can be sure that the websites that appear on the first page of results are getting the attention of your target audience. The beauty of Internet advertising programs at sites such as Google, Overture, and Capterra is that you can pay when someone clicks on your ad – as opposed to when someone supposedly “sees” your ad. This makes it very easy to measure results without the guesswork that is typically involved. Determine how many clicks it takes to result in a qualified lead (25-50 is typical), establish how many qualified leads equate to a sale, calculate the present value of a new customer, and now you will be able to know the limit of what you should be willing to pay for a click. For example, if you pay $2/click, and you know that 1 out of 40 clicks results in a qualified lead, and you know that it takes 10 qualified leads to get to a sale, then the cost to acquire one new customer at $2/click is $800. If the price of your software is $500, then the cost to acquire new customers is too high and it does not make business sense to advertise in this way. But if you are charging $5,000, or $50,000, or $500,000, then clearly this is a worthwhile investment. Being able to measure your marketing return on investment accurately enables you to determine the opportunity cost of other advertising programs. For example, if you spend $12,000 on a tradeshow (be sure to include salaries and travel expenses), you are missing out on 15 new customers that you could have acquired using those dollars in Pay-Per-Click advertising. Therefore, either you need to get enough qualified leads at the tradeshow to result in 15 new customers, or you need to justify that just “being there” was worth it. Just because your competition is wasting their money, should you? Several caveats are worth noting. First, recognize that Web leads will very often be more educated leads. They will be more informed in regard to the competition, and therefore more price-conscious. This is a fact of life in the Internet age. IT decision makers who rely on the advice of their biased consultants without doing the proper research are getting fired and their numbers are dwindling. This abundance of market information combined with intense competition results in enormous pricing pressure, thereby increasing the importance of a high quality sales team in addition to a lean and mean software development team. Second, you need to recognize that most of your clicks will not result in qualified leads and that this is OK. Just like other forms of advertising, pay-per-click is a numbers game. The difference is that (1) it is much easier to measure the effectiveness of an online campaign and (2) the Web is where your prospects are doing their product research. Web users who click through to your website will include competitors, students, analysts, journalists, consultants, resellers, prospects who are a year away from buying, and prospects who can’t afford your product. But the 1 out of 40 who downloads your demo and talks to a salesperson will eventually pay for all of these. Consider your website to be like a funnel. You might get 1,000 new visitors to your website in a month and only 25 of these may be qualified leads. Your website needs to cater to these prospects and make it as easy as possible for them to obtain product information, access a demo, and speak to a salesperson. This is the main point of your corporate website. If you are not doing this, then you are missing out on valuable prospects. If you are doing much more than this, you are probably taking money away from where it really needs to go – attracting prospects to your website. This leads to third caveat… If you are not using a tool such as Hitslink to track where you are getting your clicks and leads from, then you will not be able to measure which marketing programs are working. Simply knowing that your leads came from your website is not good enough. Your marketers should know exactly how many visitors your corporate website receives every month, how many of these are new (non-employees and non-partners), what specific websites they are coming from when they find your website, and how many of these turn into qualified leads. If your marketing team (which your webmaster should report to) cannot answer these questions, then you need a new marketing team. Can you imagine going to 10 different tradeshows throughout the year and not keeping track of which ones delivered good results versus no results? How would you determine which ones to attend next year? The same applies to online marketing. Prospects do not stumble upon your website by accident. They either come directly to your website after hearing about your company offline, or they find you through a link from another site (such as a search engine or directory). In most cases the latter is true. So therefore, it is imperative to know at which websites they are finding the link to your website. These websites are where your prospects are and these are where you need to be advertising in order to generate leads. Every dollar that marketers spend on tradeshows where they think they need to be seen could have been spent getting real leads for you. If they would rather spend their time and money on high-profile “branding” efforts, they need to go work for Microsoft or Oracle. They are the ones who can afford it. In the meantime, the marketing department, more than ever, is accountable to the sales team. If they aren’t getting you enough solid leads, then they are not doing their job. Michael Ortner, ortner@capterra.com, is a founder of Capterra, an online marketplace for enterprise software. Capterra provides a number of online resources, including a comprehensive directory of business software products, an archive of software reports and articles, and a software selection methodology, that guide IT decision makers through the process of finding and selecting software. Capterra is an online marketing channel for enterprise software vendors, allowing them to increase their exposure in the software directories. |
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