Posted by | July 07, 2015 | Blog | No Comments

 

What Is the Business Case for Marketing Automation?

Business Case for Marketing Automation

Marketing Automation systems help you automate repetitive tasks linked to acquiring new customers. In this post I give a quick definition of what marketing automation systems do, and then put together a business case for implementing the technology.

What is Marketing Automation?

Marketing automation systems automate steps for acquiring new customers, usually focusing on online channels like your website, email and social media. They automate activities required to make potential customers aware of your products and services and then communicate with those customers over time until they are ready to purchase.
For B2B companies, Marketing Automation systems can help you

  • Generate more sales leads and
  • Convert more of those leads to sales.

How does Marketing Automation relate to CRM systems?

Marketing Automation systems usually integrate with a CRM system. Both types of technology have a different focus and different types of users. Marketing Automation systems are focused on getting an initial contact or sales lead in the first place, and then ‘warming it up’ until the lead is ready for a sales person to take over. CRM systems are usually focused on managing live sales opportunities, managing your sales team, creating sales forecasts, and managing ongoing customer support. This diagram via David Raab shows the relationship:

Marketing Automation and CRM

How do Marketing Automation systems work?

For B2B companies, Marketing Automation systems help in 3 overall areas:

  • Lead Generation –generating leads online via your website and social media, and managing leads from other sources like trade shows
  • Lead Profiling – marketing automation systems automatically help you profile your leads, building a history of their previous online interactions and pulling information in from 3rd party sources. This helps you decide which leads match your target profile.
  • Lead Nurturing – based on the lead’s profile, marketing automation systems put them into a follow-up sequence, usually based on personalized emails with some phone calls and other touches in between. This is known as ‘Lead Nurturing’. These Lead Nurturing sequences are based on sending high quality information – ‘content’ – to your prospective customers. For example eBooks, reports, white papers, blog posts, videos and industry analysis.

In practical terms, most Marketing Automation systems have these features:

  • Lead capture forms – online registration forms that you can plug into web pages and your blog to collect visitor’s registration details.
  • Landing Pages – a web page designer that lets you design and publish special web pages – ‘landing pages’ – with integrated registration forms that collect a visitor’s details
  • Lead Profiling – capture and recording of information on web visitors’ locations, where they have been on your website, what they have downloaded, their social media profiles, the company they work for etc.
  • Lead Scoring – creating a numeric “score” for each lead to indicate how “hot” it is, based on their job title, their company, the number of times they visited your site, what they downloaded etc.
  • Lead Routing – rules for sending a new lead either to a sales person or to an automated follow-up sequence.
  • Lead Nurturing – the ability to design one of those follow-up sequences, usually by defining a sequence of emails and phone-calls over a period of weeks or months.
  • Reporting and Analytics – tools and reports to help you identify which of your web marketing activities generate leads, and which kinds of leads are likely to convert to customers. This helps you figure out which activities to increase or drop.

So, What’s The Business Case?

To build the business case for any new system you need to identify the potential benefits and balance these against the potential costs.
The key potential benefits you can get with Marketing Automation include:

  • Greater volume of leads – generate more leads, mainly through online web-based lead generation
  • Better quality leads – because you profile and score the leads automatically, you should be able to improve the quality
  • Reduce the cost per lead – by reducing the manual steps and generating more leads online
  • Drop fewer leads – because the process is automated, leads won’t get dropped or mishandled
  • Increased automation / less manual steps – automation of processes for lead capture and lead management means you can scale up without adding staff.
  • Better insight – automated reporting to give you better insight into what activities generate good quality leads that are likely to convert to customers.

Business Case inputs

You normally start by looking at your existing performance without the new system. You collect indicative numbers such as

  • Average number of new leads required per year e.g. 6,000
  • Average number of new customers needed per year e.g. 120
  • Average value per new customer e.g. €10,000
  • The number of marketing and lead management tasks per customer acquisition
  • Average cycle time to acquire a customer from start to end e.g. 90 days
  • Number of staff engaged in lead generation and qualification and their % utilisation
  • Average employee salary
  • Number of customer leads that fail to convert

Benefit assumptions

Now you make some reasonable assumptions about the improvement you could achieve by standardizing and automating your processes:

  • Number of customer acquisition tasks could be reduced by 30%
  • Improved end-to-end process can reduce cycle times by 20%
  • Number of staff engaged in manual lead generation tasks can be reduced by 30%
  • Average utilisation of lead generation staff is reduced by 40%
  • Number of leads who convert to sales is improved by 20%
  • Improved throughput capacity increases the number of good quality leads by 10%
  • Successful cross-selling opportunities will increase customer revenue by 5% annually

Example RoI case

  • 6,000 sales leads generated per year
  • 120 paying customers generated per year from those 6,000 leads
  • 5,880 leads do not convert to paying customers
  • Average new annual revenue per customer is €10,000
  • Average start-to-end customer acquisition cycle time is 120 days
  • Customer acquisition cost per new customer is €2,000
  • 20 distinct steps in the lead generation and follow-up process

Assumptions for Calculation

  • A seamless marketing automation lead management process would convert an additional 10% of leads to customers
  • 30% of the lead management costs could be eliminated
  • An employee costs €35,000 per annum

Cost / Benefit Figures

  • Increase in customer conversion – assuming a 20% increase in the number of leads who convert means 40 extra customers, at 10,000 each = €400,000
  • 30% reduction in customer acquisition costs is 30% of (240 x €2000) = €144,000
  • 10% additional leads because of the automated process generates 10% extra customers i.e. 10% of 200, which is a value of 20 x €10,000 = €200,000
  • Staff costs will stay the same or reduce on introduction of the new system

So the Total benefit is €400k + €200k + €144k = €744,000

Potential costs are:

  • Annual cost of new system
  • Once-off cost of implementing new system
  • Once off cost of linking new system to existing CRM system

Summary

These example figures illustrate the kind of benefits you can gain from implementing a marketing automation system to streamline and automated your lead management processes. To gain these benefits you still need to apply effort and time to implementing and using the system – it won’t drive itself.
But there is a clear business case – if you adopt marketing automation you will generate and convert more leads than you do today, and you will be able to scale-up that lead generation without scaling up staff numbers.

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