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Wednesday, June 16, 2010

Solving the Mystery of How Sponsors Calculate Value

Many sponsors are still in cost-cutting mode. If you are seeking a sponsor in this market, be prepared to demonstrate return on investment. How? There are many ways to tackle the calculation. But the best way is to know what you are doing to drive sales for the sponsor. 


This week, Marketing Sherpa shared a blow-by-blow description of a sponsor's cost-cutting strategy. I share it in some detail so you can follow the logic of how ROI was discovered, and how the sponsor used it in fee negotiations with sponsees.


CHALLENGE

In 2009, Thomas VanHorn, CMO, Application Security, got word that his budget and staff were being reduced by about 40%. With less money to spend, VanHorn and his team needed to discover which programs were really contributing to the company’s sales. And with fewer staff members and outside help to perform early-stage lead development and qualification, they needed to automate as much of their processes as possible.

Here are some tactics they used to perform their analysis and adjust their marketing strategy:

Tactic #1. Measure each channel’s cost-per-lead

The team had a system in place that tracked the originating source of each lead in their database. They then compared how much they spent in each channel to the number of leads the channels originated. This calculation determined a basic cost per lead. 

Immediately, they saw that some channels were costing the team $100 per lead and more, while others were only costing them $4 to $5 per lead. 

Tactic #2. Measure the value of opportunities created by each channel

A basic cost-per-lead analysis didn’t factor in lead quality. So the team conducted further analysis to determine the dollar value of the sales opportunities created by each channel. 

- Working in their marketing automation system, they traced each opportunity back to its initial lead source, mapping every marketing touch along the way. 

- Then, they took the dollar value of the opportunity and divided it equally among each marketing channel with which the lead had interacted before becoming an opportunity. 

For example, if an opportunity was worth $X, and the lead had engaged in 10 specific activities -- such as a downloading a whitepaper, attending a webinar, etc. -- each of those activities received one tenth of $X. 

Although imperfect, the analysis gave the team insight into how each marketing program was contributing to closed deals. 

"When we checked the dollar volume of opportunities created we found no correlation to the cost-per-lead of the program," says VanHorn. "In fact, some of those [higher cost tactics] resulted in the lowest contribution to pipeline."

Tactic #3. Dial back on high-cost activities

Once the team could see how much they were paying for leads from specific programs, they made decisions on what they could -- and could not -- afford to do. 

For example, they saw that major trade shows and other large events were generating some of the highest-cost leads, which also took the longest to become opportunities. So VanHorn and his team reduced their participation in major events. 

They did not eliminate events entirely. Instead, they looked for more opportunities at smaller, local events. They also maintained a presence at a few major industry trade shows, but changed their objectives for those activities. 

Rather than viewing the trade shows as a strong lead generation opportunity, they approached them as ways to build brand awareness and buzz. They also used the events to meet with partners and existing customers -- recording those contacts in the marketing automation and CRM system, so the channel would get attributed a portion of any future revenue from that customer. 

Tactic #4. Expand use of low-cost activities

Limiting activities with a high cost-per-lead allowed the team to increase use of channels that delivered lower-cost leads. Here are a few examples of activities they created or expanded:

- Informal email updates

The team wanted to expand its use of email messages that revealed the personality of the company, and positioned it as a trusted advisor. So VanHorn created an informal email program to send a quarterly update to a large list of prospects. 

The messages were personalized with VanHorn’s signature, and did not contain sales pitches. Instead, they offered insights into important database security issues, alongside a touch of entertainment. For example, a message sent early in 2010 contained a belated "Happy New Year" message and links to two company web video projects (more on those below).

- Email drip nurturing

The team also expanded its use of automated drip nurturing for prospects that downloaded content from the website. 

- Thought-leadership oriented virtual events

They began hosting more virtual events that were not product or sales-oriented. For example, when a researcher discovered a vulnerability in a particular type of database software, VanHorn’s team worked with the company’s technical experts to develop a free fix for the problem, and then hosted a free webinar to explain how to implement the solution. 

Tactic #5. Use CPL benchmarks to negotiate sponsorships and other paid marketing efforts

Thanks to the team’s cost-per-lead analysis, they were able to determine optimum CPL for various programs. Then, they used their optimum CPL to set limits and get guarantees from vendors for sponsorship or other paid-media campaigns. 

For example, when the team set a limit on its cost-per-lead for a whitepaper hosting deal that was significantly lower than the vendor’s offer, the vendor responded with several new options to guarantee a number of leads at a cost that would meet the team’s goal. 

"They made opportunities available to me that I otherwise wouldn’t have known about," says VanHorn. 

1 comment:

ravenmarx said...

Hi,

I read whole article, its very well written and you indirectly forced me to read more and more, you made your post very interesting. Stop Identity Theft

looking for more post


Thanks.
ravenmarx

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