GROWTH. TRANSFER. LEGACY.
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Of all the functional disciplines within a business, there's a solid argument that marketing is the most strategic. Each of the other disciplines are critically important to the survival of a company, but in terms of strategic substance, my money would be on marketing.
If you believe I'm right about this, then you'll be surprised that according to EvaluSys® Marketing Evaluation historical results, 74% of businesses do not have a strategic marketing plan in place. If marketing is so strategic, wouldn't most companies have devised a marketing strategy and a plan to execute it? I might also conclude from this statistic that, almost certainly, 74% of businesses could do marketing better, which should lead to more sales, higher margins, and greater profit.
Clearly, a company that improves its sales, margins and profit will have increased the value of their business. But are those improvements sustainable? Has the organization adopted the perpetual marketing processes and disciplines to make those positive metrics the new-normal?
I recently polled Investment Bankers and Business Brokers from the LEVEL Expert Network™, asking them "from a prospective buyer's view, are there any specific metrics a buyer might look at to determine quality of marketing, branding, etc., which will influence their quality of earnings assessment and the multiple they would be willing to pay for a business?" Their responses highlighted FIVE KEY METRICS:
There are other metrics or KPIs (Key Performance Indicators) commonly used to measure marketing effectiveness, such as Marketing Qualified Leads, Funnel Conversion Rates, Marketing Spend per Customer and Return on Marketing Investment. These and many other KPIs are useful in measuring effectiveness of specific marketing processes, and they are all helpful in demonstrating how well marketing programs are managed.
Still, you cannot get those five key metrics where you need them to be to impress a potential buyer unless you have a strong marketing strategy and disciplined processes to execute that strategy. Let's look closer at those key metrics and the how marketing contributes to success.
Customer Retention - It is essential to deliver value to exceed customer expectations every day, and marketing plays a key role by continual product/service innovation and brand loyalty.
Recurring revenue - As above, designing solutions for customers providing continuing value they depend upon and are excited to pay for.
Customer Concentration - Marketing that keeps the sales funnel filled with qualified leads to ensure revenue and profit is broadly distributed across a growing customer base.
Cost of Customer Acquisition - Making smart marketing investments producing a consistent flow of highly qualified leads reduces the sales burden to close and reduces the cost of acquiring new customers.
Lifetime Value of Customer - Customer retention and product/service innovation (noted above) combined with sound pricing decisions leads to maximizing lifetime value of customers.
Creating a great marketing strategy and marketing operations to reliably execute that strategy should be among your first investments toward enterprise value growth. Matt Christ, Partner / Brand Strategist with Brand3 and LEVEL Expert Network™ member shares a story about a customer who made those investments and achieved significant improvement in the key metrics.
A regional landscape company came to us requesting full-color ads in a premium publication. Convinced this magazine would reach their affluent target market, they were prepared to gamble a significant proportion of their annual marketing budget.
We declined this work because they lacked a strategic marketing plan to organize their media spend into a measurable campaign structure. In addition, there was a noticeable gap between the quality of the brand image/message and the quality expectations of their ideal buyer. If not addressed, their planned advertising expenditure would not have produced a worthy return on investment.
Instead, we prescribed and delivered an in-depth market assessment and competitive analysis as part of a strategic marketing plan, followed by a brand refresh. These actions immediately produced consistent, high-quality leads, reduced customer acquisition costs and increased customer retention. To date, this client has reduced its marketing budget while doubling the business size in just two years.
After their brand was positioned to address what their ideal customer wanted, their marketing gained traction. From an internal perspective, their whole team was trained to rally around their new brand promise. The team was then able to deliver a much more focused and high level customer experience which in turn yielded more loyal customers.
-- Matt Christ, Brand3
As you can see from Matt's story, marketing can play a vital role in driving key metrics influencing enterprise value. In the coming months, I'll share how other business functions contribute to growing the value of a business, including expert ideas from other members of the LEVEL Expert Network. Over time, I hope you'll come to appreciate the importance of a holistic, cross-functional value growth program like LEVEL Value Architecture™, powered by EvaluSys® Value Growth Architecture™.
Value Growth Architecture is a trademark of EvaluSys LLC. LEVEL Management Partners, Inc. is a licensee of EvaluSys®.
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