Posted by randfish
SEOs and executives speak different languages. It's a simple fact, but it's one that often acts as a blocker for getting your ideas and investments approved. A simple change in how you communicate your marketing goals, triumphs, and challenges could be what's standing between you and getting the C-suite buy-in that's integral to your success. In today's Whiteboard Friday, Rand helps you translate your marketing jargon into financial metrics and data that the folks in charge will actually care about.
Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. This week we're going to chat about tying marketing metrics that marketers use to the things that CEOs, CXOs, whatever the C-level titles that you've got are, investors, board members, to the metrics and data that they care about.
This is a problem that I've talked about with many marketers over the last few weeks, especially at some conferences and events where folks say, "Hey, we've got our metrics dialed in. We know what we're doing. But when we present it to the Board, or when we present it to our CMO, or our CEO, when we show it to our investors, not only do they not get it, it's like we're not speaking the same language, and therefore we're not able to have a conversation productively about where investment should and shouldn't be made, and they're not able to give input into whether they think our idea is a good one, or whether they think there's a good return on investment there." This can be tough.
Start with the metrics that marketers care about
So what happens is you're a marketer, you're presenting here to your Board of Directors or to your executive team, and you say, "Hey look, we've got traffic growing in every category. SEO is up. Social is up. We've grown our link profile, which is going to help us with search, all these great things." Fantastic, but the Board is sort of sitting there like, "Well, I don't really know how to contribute, and how does that tie in to higher lifetime value of customers, because that's the thing that I know and the thing that I care about, and I'm not sure this marketer person is really investing in the right kind of ways for the organization."
That sucks. As a marketer, that totally sucks, because it means that you are not communicating your message, and that means you're not going to get, you're unlikely to get buy-in from all these people that you really care about and need their permission and their acceptance in order to make the investments you need.
The thing is, marketers are very focused on the funnel.
We care about metrics that show top-of-funnel growth. We care about which channels send that top-of-funnel traffic. We care about how people are moving through the funnel. We want to see conversions and conversion rate, which is why we work so much on conversion rate optimization, and we care about marketing metrics that predict better retention or greater recidivism, meaning people are buying again or coming back and becoming customers again.
This is our world and we live in it. It does translate okay, decently to the Board level.
Translate marketing metrics to the financial ones that investors care about
But if you think about what folks care about at the highest levels of a company's strategic imperatives — that could be a Board of Directors, could be investors, could be C-level folks — they're really focused on things like market size, meaning: How big is our addressable market? Who could we potentially reach? What if we run out of those people — can we keep growing? Are more of them coming into the fold, or are people exiting this market and going somewhere else?
They care about cost of customer acquisition. How much does it cost us to get one new customer?
They care about customer revenue, the revenue that we actually get from those customers that we're bringing in, whether that's going up, and overall growth rate. Are we getting more customers over time? Is that rate of growth expanding, meaning acceleration?
They care about customer lifetime value. Customer lifetime value is something that pretty much every metric we calculate as marketers should tie back to that, especially when we're having conversations with these kinds of people. Essentially it is when a new customer comes in and they make any kind of purchase from us, they spend any type of dollars with us — a product, a service, a subscription, whatever it is — how much do we get over their customer lifetime? Meaning if it's an e-commerce play, it could be the case that they come and they buy five things from us over the course of two years on average, and that dollar total is $360, and 40% of that is gross margin for us. Essentially, the rest is cost of goods. Okay, that's customer lifetime value.
Or if you have a subscription business, like Moz is a subscription business, if you subscribe to our tools, we'll charge you $99 a month or $149 a month. I think on average our customer lifetime value is essentially $120 times the average customer lifetime span, which is somewhere around 11 months all in. So it's that number multiplied out. So $1200 or $1300, somewhere around there, that's customer lifetime value.
That doesn't actually count recidivism, people who quit and then come back again. We're trying to get to that metric, and we need it, because you want to be able to speak to true customer lifetime value. This is sort of the underpinning of all the rest of this.
But other things these folks are going to care about, comparison of cohorts. So it's not the case that all customers are exactly the same. You know this as a marketer, because you know that it costs you a different amount of money to acquire folks through one channel, and they perform differently than folks who are acquired through a different channel. You know that different cohorts of personas, for example, people let's say who work in an agency versus who work in-house, maybe those are two different kinds of people that you serve in a B2B model. Or you know that folks who are higher income versus lower income spend different amounts at your e-commerce shop, that type of stuff. That comparison is very interesting to these folks as well.
Another comparison that matters is a competitive comparison. How big are we, how big are they? How fast are they growing, how fast are we growing? What's their customer lifetime value, what's ours? What's their retention and recidivism rate, what's ours? Those things, massively interesting to this group as well.
Then there's a bunch of other stuff that they care about, like cost of goods and teams and market dynamics, etc. Marketers generally don't touch that stuff and don't usually need to worry about it.
But the solution to our problem here is to speak this language.
So let's go back to our initial story.
Instead of saying, "Here's traffic growth from all these different channels, and here's how we're investing in search, versus social, versus paid ads, versus trade shows," all this kind of stuff, what we want to say is something like, "Hey, here's the traffic from SEO, and here's the traffic from social, and as those have been growing, our cost to acquire a new customer has been falling, because those channels are organic, and that means we don't pay each time we get a new customer from them. We only pay for the upfront investment in sweat equity, creativity, engineering needs, web engineering needs, and whatever we're doing. But then it keeps paying dividends, and because of that you can see this CAC falling as our search traffic has risen."
Now you have the attention of these folks. Now you've engaged them in a way that they care about, because they say, "Aha, more organic search, lower cost to acquire a customer," — which is great because CLTV to CAC ratio, the ratio of lifetime value to acquisition cost, this ratio right here, is something that every investor, every Board of Directors member, every CXO cares deeply about. It's the underpinnings of the company. That's what makes a profitable company work and what gives it the ability to grow. When you speak their language, you get this type of response.
So what I'm going to urge you to do as a marketer is to take any metric, any data point, any story you're trying to tell around return on investment, around a project you have, and turn it into something that makes sense to the group of people that you're talking to, especially if that's strategic-level. You want to tie those to tangible improvements or to issues. It could be problems. It may not be just positive things. It could be negative things too, in the areas your CXO or Board or investor cares about.
So let's imagine — and this is a conversation that many, many folks have — they say to me, "Rand, we want to hire an SEO consultant, or we want to bring an SEO in-house full-time, but we've been having trouble getting buy-off from our CEO or our CMO or our Board."
Well, let's change the conversation. Instead of, "We need to hire an SEO consultant because SEO is really important, search engines send a lot of traffic, and search traffic is something we're not competing in well right now," to, "CAC is high. CAC is too high. Our cost to acquire a new customer right now is too high, and our CLTV is too low for customers that we buy via paid search. So we're spending a lot of money on paid ads right now, and the customers we get via that have this high customer acquisition cost, because we have to spend money to get them, and the CLTV isn't as high because customers who come through paid, on average, usually tend to underperform compared to those who come through organic. It's just a fact of who clicks on ads versus who clicks on organic results. But, if we ranked organically for more of these keywords, and we could get more SEO traffic compared to our PPC traffic, we could stop (a) losing those searches to our competitors, who are outranking us now, and (b) we would bump up the CLTV and we'd be lowering cost of customer acquisition."
Boom. You have changed the conversation to something that this group of folks really gets, and you've made it much more likely that they are going to say yes to your proposal.
Same thing here. Let's say you say, "Hey, we're going to do something crazy. We want to actually spend more on trade shows, on events, on speaking, on going places physically in-person. It's expensive. We don't reach as many people as we do over web channels or over traditional ad channels, but we've been getting good customers via events."
That's a real tough sell unless you do this. "Dear Board, here's a comparison of customers acquired via our five major marketing channels. Here's SEO, here's PPC, here's our Facebook ads, here's organic social, and this is events. You can see cost to acquire, you can see lifetime value, you can see the ratio, and you can see the numbers of folks that we've gotten via each of those channels and the revenue they bring in."
Awesome. Now, repeat buyers and referrals are so much stronger from events, from this group over here, that even though it costs much more, the math works out that it is the best investment we can make over the next couple of quarters. We want to bring this up by two or threefold, and if we keep seeing continued investment or continued metrics in the same way we have the last few months, we're going to have the highest positive ROI from that investment versus any of these other channels.
Awesome. Change the conversation, made it something these folks understand. Speak their language, and you get the buy-in you want.
All right, everyone, look forward to your comments and thoughts, and we'll see you again next week for another edition of Whiteboard Friday. Take care.
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