I’ve had it. I’m calling ‘time-out’ on marketing. It’s been failing for years and whether it’s Angel, Venture Capital or Private Equity, there’s always the assumption that the business requiring investment knows what it’s doing, yet why do so many fail?
I’ve done the research and this serious problem needs to be exposed for what it is. Let me explain what I’m going to do:
After decades in the hot seat as a Managing Director and CMO and of course having done some extensive research over the past few months during lockdown, I’ve uncovered some really important business intelligence.
There are so many reasons why start-ups fail, but to make matters a little easier to digest, I’ve used the infographic from CB Insights who have a following of over 600,000 people.
CB Insights provided a useful infographic that gives a snapshot of their findings which shows a staggering 42% of failures are due to ‘No Market Need’. The giveaway is in the description – MARKET.
Here's the full 'finger-pointing' list of the other marketing related descriptions to blame:
Ten out of twenty and every one of these issues are completely related to marketing. There is no denying it, if the start-up hooked-up with, or employed an individual who knew how this ‘marketing stuff’ worked and they actually mapped out all of the above before starting the company they may have been in with a fighting chance.
If someone wants to start up a business and they have their own money, then they can be as intransigent and daft as they want, as long as it’s not someone else’s money.
If, on the other hand, they expect to create a work of fiction and then go ‘cap-in-hand’ to an investor, one would expect them to have everything sorted and the business plan to tick every marketing box. But sadly, and clearly this is not the case. The following is an excerpt from the Harvard Business School, which has been referenced multiple times on the Internet:
The statistics are disheartening no matter how an entrepreneur defines failure. If failure means liquidating all assets, with investors losing most or all the money they put into the company, then the failure rate for start-ups is 30 to 40 percent, according to Shikhar Ghosh, a senior lecturer at Harvard Business School who has held top executive positions at some eight technology-based start-ups.
If failure refers to failing to see the projected return on investment, then the failure rate is 70 to 80 percent. And if failure is defined as declaring a projection and then falling short of meeting it, then the failure rate is a whopping 90 to 95 percent.
It seems that irrespective of their background or pseudo ‘social proof’ or initial sales, start-ups keep failing, but why?
People follow one of two paths; they either comply to the industrial complex model as mentioned by Seth Godin et al and simply get their qualifications and secure a job for their lifetimes or they go down the route of entrepreneurialism and start a business.
It’s great that someone has an idea they believe can be transposed in to a new business. However, there is a great ‘driver’ that says anyone can do this. Whether it’s talking about the land of opportunity, or the free market, the bottom line is that it is clearly not that simple.
The existence of Shark Tank and Dragons Den shows that getting a lump of cash is a commendable achievement, perhaps that’s all they want?. But somehow it stops there. Once they’ve got the money, they vast majority of businesses go south. Even CB Insights state that Start-ups lose focus, lack passion or burn out and that’s after all the marketing related issues.
Marketing is the root of the start-up problem. Gone are the days of paying a minimum wage or commission-only for people to wear out shoe leather cold-calling or dial-for-dollars. The fact that this worked in the past, that it’s the lowest form of marketing requiring the least intelligence and the least effort and cost on behalf of the company means that virtually every business will do it. In fact, I would go as far to say that many businesses get their social proof from going down the cold-calling path and using their statistics to prove to investor they can make the grade. The story seems feasible, especially as they say they’re going to employ a super-marketer to help them generate even more.
To give some substance to this root cause, take a look at the background.
To communicate any sort of message over the past 120 years or so, we’ve used newspapers, telephone, radio, cinema, television and in the past 30 years, the Internet.
From the 1950’s (I’m specifically talking business to business here) sales were achieved by cold calling. That meant knocking on doors, telesales and some advertising. And it stayed that way until the Internet in the 1990’s. With the Internet, we got spam, the dot-com boom bust and then marketing automation came on the scene from about 2008.
Predominately all business marketing is carried out in a linear fashion, that's to say, CMO's execute one campaign after another, analyse performance and try something else due to poor success. Whilst this keeps everyone in a job for as long as possible until they're fired or move on before they're pushed, it is unhelpful to any business as it takes too long to identify a working tactic and few CMO's understand it takes ten attempts for a prospect to become familiar with a brand and only one-in-three attempts actually get through, so thirty are required.
The simplest strategy is to condense the variety of content items required to achieve the highest response and advertise at the right frequency.
Unfortunately, in B2B, no one really likes to write or create content, I know this first hand from personal experience and from research. Our definition of content is to provide genuinely valuable, expertly written, high quality content that will ‘wow’ the prospect and encourage them to keep in contact with the supplier until they’re ready to buy.
And, by-the-way, content means written content, video, podcasts and now even live streaming, because no one can second-guess what or when someone likes to look at content and so you have no choice but to create all three/four.
To distribute content, most businesses use marketing automation platforms, which were developed to work around the spam email and engagement problem in the mid-2000’s.
Marketing Automation enables an item of content to be placed behind a ‘curtain’ or ‘gate’, hence being called ‘gated content’ and access is permitted in exchange for an email address etc.
Typically, after clicking a website button or pay-per-click banner, it linked to a landing page which requested a form to be filled and then they could access the download. Marketing Automation is also used to manage newsletter subscriptions and browser visits amongst other features.
On the face of it, marketing automation seems like a good idea, until the browser realised the content wasn’t very good and so they never returned to the site or bought anything. Or the email series was a waste of time or the newsletter was all about sales and nothing else!
To make matters worse, the supplier company then used the email address to hunt down the browser and telephone them, just like the good old fashion cold-call. This upset the browser even more.
Apart from the significant expense, marketing automation made the CMO’s lazy, believing they could automate engagement when in fact it’s ended up alienating prospects. You also have to factor in that 70%-80% of the sales and research process is already done before a prospect will even entertain speaking to a salesperson, however, the CMO’s were demanding a transaction before prospects got to know, like and trust them and scuppered their chances before they even got to talk.
Because of all the marketing technology (MarTech) in place, CEO have naturally believed they had all the right systems in place.
Yet with all this MarTech, the CMO can’t increase engagement and deliver sales qualified leads to the sales department. Sales complain at the quantity and quality of the leads and Marketing’s retort is that sales ‘can’t sell’. This is the primary ongoing problem or tension between sales and marketing for decades.
Marketing Automation has ceased to be a distribution platform, but rather a method to automate the production of cold-calling KPI’s that ticks the boxes for marketing qualified leads and identify the conversion to a sales qualified lead.
The marketing and sales funnel has simply become a business illustration that never works properly, even with lead scoring, and the business never gets to realise the promised profitability that automation was supposed to bring according to the automation sales company!
No amount of AI will replace a genuine connection via content in the format the business prefers to consume it in. Marketing departments keep buying into AI in the hope they can extract some 'gold' from the scant content they have produced.
To confirm and compound matters, here’s the real surprise…
For the past seven years, going back to about 2013, the press and recruitment industry have repeatedly published that the tenure for a CMO is dropping, from an average of 44 months in 2013, right down to a current average of 18 months! That’s right 18 months.
* It is a bit strange that in 2015 'they' were saying it was 42 months, then the following year in 2016 it was 18 months!
Seth Godin on London Real August 2020 – 39:23 min mark, states the same statistics for Fortune 500 companies in the USA, based upon the premise that CMOs promise to change everything, can't deliver and get moved on.
A seven year documented problem means that it’s been going on for longer, especially as the basic technology hasn’t really changed since about 2008 and by that I mean CRM, sending emails and slightly later marketing automation as you can see from the above MarTech Landscape.
It seems a CMO joins a company, takes three months to prepare a new strategy, is given 12 months to execute and then three months explaining why their plan didn’t work and then they’re fired or jump before they’re pushed.
When the senior marketing person or CMO fails or gets fired, the CEO or VP of Sales, if there is one, has to step in and direct that ‘new business’ needs to be achieved in the same way he or she did it (back-in-the-day) and that’s by telesales/cold-calling. This is reminiscent of “I didn’t get where I am today without doing some good-ole cold calling, so if it was good enough for me, you lot can do it now”.
Whilst the business looks for another senior marketing person, the rest of the new business team are told to get back on the phones again, reverting back to a 1950’s strategy.
Cold-calling over the telephone is most definitely the recipe for creating and maintaining a treadmill operation that means the company will fail if it stops, yet due to the high cost of people required to make calls, the profitability is ripped out of the business yet the cycle continues because marketing never gets their act together.
And if they’re not actually dialling, then the new business team are busy clicking away on LinkedIn Sales Navigator trying to identify multiple people within a prospective business they can group together and apply an ABM strategy.
It makes sense why marketing departments and CMO hold little sway in a business because:
Primarily it’s content, but not just any old content. There needs to be a systematic and repeatable set of parameters and guidelines that a business can follow, irrespective of the ‘big marketing plan’ a new hire might come up with.
Ideally, the start-up would create all the necessary content, well in advance, they’d get marketing, set up Pay-Per-Click with some adverts that would help them craft the best messaging and then, once they began to get traction, through content, start making plans to scale their business and approach investors with a bone fide socially proven business that has the ability to attract new sales, 24/7 – 365 without needing to fall back on telesales.
Firstly, content needs to be targeted to the segments and personas of those you intend to sell to. In simple terms there are three content levels; Primary, Secondary and Product:
Taking a view on the above, when videos or podcasts are created, then the same logic needs to apply.
For more information, take a look at our Essential B2B SEO Guide for CEOs.
There’s actually nothing to fear if you know what needs to be done. There’s virtually no cost involved because any or every business needs to adopt this approach, therefore, you continue with generating new business in whatever way you are doing now and introduce the new strategy in parallel.
As the new strategy develops and starts delivering results, you are able to reduce the old way of generating new business and start enjoying a new business model that attracts business rather than having to go out and find it, because, in simple terms, they’re already looking for you, that’s what search engines are for!
In a bizarre way, this whole review about how people or customers need to be communicated with is the basis of digital transformation. A business needs to be empowered to both communicate and act on feedback from its customers, whether they’re paying you or the other way around.
Touchpoints, engagement, feedback, customer service and support all feed into the DT eco-system that helps businesses weather the storms.
The old-style marketing function and general approach I’ve spoken about has been handed down from generation to generation so-to-speak. It’s a bit like “well, we’ve always done things this way”. The trouble is, if every marketer is performing in the same way and none of them are making an educated change, then the adage ‘if you do what you’ve always done, you’ll get what you’ve always got’ will apply and it certainly does in this respect, which means a 75%-95% failure rate for investments.
The same applies to anyone who has been involved in the marketing conversation for any length of time, all the way up to the CEO. If no one has evaluated the past problems, they’ll also believe the old ways are acceptable and simply cross their fingers and hope for the best. This explains why Start-ups or established businesses keep getting it wrong.
Even if analysts are deployed to assertain the viability of financials, unless they're astute marketers and understand the infrastructure background to new business development, they'll always be in the dark and unable to report accurately.
We believe that by challenging the marketing plan before any change or investment is agreed, especially at the discovery and due diligence stage, will significantly increase the odds of these business achieving their IPO’s which in turn will increase a VC Investment funds’ success and everyone’s long-term reputations.
In simple terms, anyone who is looking for investment needs to prove they can attract new business, not that they have a telesales teams making 000's of calls or sales people with little black books. They must prove they can attract new business based upon their content (written, video, podcast etc.). Current marketing technology can track virtually everything from a click on social media or a search engine through to engagement from email to time spent on a website. The metrics are a sure-fire way to illustrate the ability and scaleability of any enterprise.
At salesXchange, we have created a B2B Marketing Reset Playbook, inspired because of the lockdown, that sets out everything needed in a step-by-step, illustrated guide that will reset or re-align marketing focus to steer that business to new business success.
To help businesses or investment companies, we offer two solutions;
As you consider what I’ve said, take a look at the other pages on this website, there’s quite a lot of information there, but there are various downloads, videos, podcasts and articles which maintain the message about content. And of course, you can download a copy of the B2B Marketing Reset Playbook.
Business have been dealt a serious blow over the past six months and the only way to get out of this health-related straight-jacket is to change how businesses communicate to prospects, especially as they are exactly like you and me - we all know how to Google something, so it’s about time B2B actually exploited it.