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

Here’s a great example of go to market strategy
that shows why crude assumptions can be dangerous. Branding, demand generation and channel readiness
are all valued pursuits but you need to get the balance right. Getting it wrong can be
quite expensive and wasteful. As b2b marketers we soon 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. 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 channel readiness in this blog. To give you that framework I
need to tie together three seemingly unrelated concepts the first one and this will not surprise
you, starts with the buyer. What does the buyers need 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. 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 gong 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 is 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 anyone talking. It’s valid you need to spend some energy on that.
The second activity is unsurprisingly demand generation, basically it’s getting the buyer and seller
talking. The third activity we spend our time on is we call it channel readiness, you might
call it sales enablement. It’s everything marketing does to help sales do battle. So
we kind of spend our time between those three activities, again environmental marketing
is branding, positioning, demand generation you know what that is, its getting people
talking and channel readiness is whatever we need to do to help the salesforce do battle.
That’s going to change over time but i’ll come to time in a moment. The second one is
how much of our effort should we spend on each of the market segment. 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 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 need more
of the budget and usually won. What we worked out is that his division was the number one
position and therefore, didn’t need as much money thrown at it. We had three or four division
that frankly needed a bit more love and so we successfully argued that we needed to sift
the focus from the market we were already successful in so we could become success in
a couple of other markets. Seems obviously to you know I’ve spelt it out but at the
time the big market, dominate position and big dominate guy seemed like a compelling
way to go, it wasn’t. So the second big idea is choose how much energy you should spend
on each market segments you serve and do that strategically. The third big idea is 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 are going to use this innovative idea and
frankly neither do we. So spending a lot of time on branding at that point doesn’t make
sense. The next group of buyers after the early adopters are pragmatic and they need
proof so does probably make sense to do some demand generation at that time, quite abit
actually. The next market once it’s really picked up some momentum, we don’t really need
to generate demand as much anymore 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. Now 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. 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 salesforce changes
materially. When we get to the conclusion I’ll give you some specific formula to use
and I’ll show you how to do that in 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 calculated 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 will 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 a share
of the budget on channel readiness, equipping that visionary sales guy with all the tools
he or she needs to succeed in this new market. Maybe you’ll support them with a little bit
of targeted demand generation, 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. Now in
the bowling alley we’ve got a slightly more mature market but only slightly more and it’s
largely the pragmatists have now emerged in the market and now they are 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 your
going to have to back off your channel readiness maybe to 25% so that you can now make a bit
of room in your budget, 25% for your environmental marketing, remember that’s branding and positioning.
The tornado, this is the phase where the market already knows you have to buy this stuff,
now it’s a question from whom. So what we have to focus on is creating a bias channel
so now we are going to go hard, maybe 50% of our budget will go on channel readiness
which leaves about a quarter for demand generation and branding. On main street the buyer already
knows what their going to buy the channel has largely played its hand. The point now
is we need to create preference in the market as the markets matured. So now we are going
to free up as much budget as we can, probably as much as 50% on branding which is going
to leave a quarter for each of demand generation and channel readiness. Now as we are reaching
end of life remember the task here is not to just concede defeat but slow the decline
down by looking for new uses and new users. So we basically we need to keep going and
create that demand amongst the new users so turn demand generation back up again, maybe
50% of your budget on demand, 25% on branding and 25% on channel readiness. We used to argue
that you can never spend enough on demand. But as we learnt in our most recent aligner
report, the companies with the best closure rates spent 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 generation. We found that the companies that were spending 35%,
not 45% had the highest closure rates, why is that? we believe its because generating
demand if your not adequately positioned makes you incredible, you need a degree of environmental
marketing 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 35% is about the optimal spend
in a complex sale that we know of as b2b marketing and sales. Now you can work all that out in
a complex set of spreadsheets but I’m going to show you when we go into the funnel plan
section of todays show. I’m going to show you how to do it in funnel plan and its a
really neat tool, helping you to calculate exactly how much of your budget to spend on
each. Well if you’ve enjoyed this blog then it’s likely you’ll enjoy others, if you haven’t
already can I invite you to subscribe to receive this blog. Go to math marketing.com/blog and
either subscribe to the twice a week blog or if you’d prefer the once a month as a recap
of all the key blogs for the month. Frankly, what most people do is subscribe to both and
you’re welcome to do that. Now if you’d prefer to subscribe to the you tube channel here
and can consume these blogs in that way. If you have already but you have a colleague
that hasn’t, now would be a great time to invite them and I’d 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 it in funnel plan. So as you know in the funnel plan it
captures the objectives and the strategy, the velocity and the tactics necessary to
take your product or service to market. Today’s discussion is centred around several components
of those. We began by looking at how much focus do we give to each of the key markets,
we then accessed how mature each of those segments where and finally using those two
inputs we identified how much of our effort to give to environmental marketing, demand
generation and channel readiness. That sets up what your tactics need to achieve, now
you know from previous shows that the tactics need to generate the velocity that you need.
That’s why the velocity is 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 we need
to spend 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 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 we identified
before or potentially add or drop other markets. Again because that’s a suboptimal of effort
to spend on demand generation. Let’s take a look now in the software so in funnel plan
online i have access to four plans, i’m going to choose the blogging video plan. The focus
right now is on strategy and in particular the target market. You can see here our three
markets, we are selling to the director of nursing and 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 are, let’s take a look, we’ve
assessed is it a early market, bowling alley, tornado, main street or end of life. Based
on that market maturity suggestion if we’re spending 40% of our budget on this segment
that 40% need to be spent 10 % on environmental marketing, 20% on demand generation and 10%
on channel readiness. Now 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 I have 40%, 30%
is on channel readiness thats equipping the sales guys to have that strategic conversation
and a little on demand generation for support. Let me take you back to bowling alley, so
the amount of money we spend on each of the activities of marketing is determined by two
things. How much focus we give each of our segments and how mature we assess them to be,
therefore, how much on EM, GD AND CR. The sum total of that is what we’ve presented
in the bottom of the funnel plan just above your tactics. In next weeks 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 modelling tool.
But for now may your funnel be full and always flowing.

About Ralph Robinson

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