“The Customer is King” and Customer Relationship Management Provides Substantial Return on Your Event Investments
I hear exhibitors criticized for wasting trade show and event marketing dollars on existing customers. In my opinion, nothing could be more wrong. In fact, this is one of the most valuable aspects of event marketing.
Retention and growth of the current revenue base is an important part of nearly every business strategy. After all, existing customers (and the revenue they provide) is the most profitable of all. Existing customers are the easiest to sell in the future. That is why Customer Relationship Management (referred to as CRM) is such an important function in virtually every organization. Marketing events present an excellent opportunity to:
• Bring customers up to date
• Gain updates on the state of the customer’s business and needs
• Show what cannot be easily seen in field
• Have customers meet with your executives and experts
• Assure customers their needs will be met
• Introduce new ideas and programs
• Provide exclusive, confidential information such as future direction
• Thank customers for their business
All of these accomplishments have a direct and measurable impact on revenue retention and profitability.
Establishing a value for your CRM activity at events can be challenging, however estimating the scope of your effort is not. The scope can be quite large and therefore of great importance to your executive management. For example, a large consumer packaged goods client assesses the various types of customers and the amount of revenue addressable at events they attend. To establish objectives and measurement for an event, they breakdown the addressable revenue as follows:
A. What is the total market share addressable at the event?
• What is the total revenue of the market represented by the event?
• How many customers and potential customers will be attending?
• What is the average number and value of products or services each customer or prospect might be buying, etc.?
B. How much of that market total is comprised of current customers that represent existing revenue? This number becomes the retention target.
The average annual value or lifetime value of a current customer multiplied by the number of customers addressable at the event defines the scope of the event retention opportunity. If 100 current customers can be reached at the event that each have an average annual revenue value of $100,000 each, your retention target is $10,000,000! This puts an important value on the CRM activity at the event.
C. What is the growth opportunity on the existing revenue base at this event? This is the growth target.
For example, estimating the percentage of current customers that are likely to be cross-sold into an additional product line(s) highlighted at the event, establishes the growth revenue target for the event. If 100 customers are addressable, and 25% are likely to be cross-sold, at an estimated revenue value of $25,000, then the growth target is $625,000.
D. What is the market share conquest opportunity addressable at the event? This is the conquest target.
If 500 companies are represented at an event and 100 of them are current customers, then 400 present an opportunity for increased market share and new revenue. Keep in mind that your competitors are looking at your current 100 customers as conquest targets. If these 400 companies are potentially worth $100,000 per year in revenue (similar to your existing customers), then the conquest opportunity at the event is $40,000,000.
These numbers convey a lot more value associated with participating than simply reporting that 5,000 people will be there, and hopefully many are prospects. Defining the addressable revenue targets in this manner helps to understand and report the potential value of an event as well as add focus to the tactics and activities planned for the event.
If your company places a heavy weight on CRM activity as a trade show marketing goal, then it is important to know how well your CRM initiatives are working. CRM is essentially a process for providing optimum value to customers that supports obtaining maximum revenue value for your company. Therefore, it is wise to use measures of success that relate directly to the customers’ perceptions of value. Trade show CRM assessment should be consistent with any other enterprise-wide measures and metrics applied to other CRM initiatives. Briefing senior management on CRM success measures and applying these metrics on an ongoing basis will help to ensure continued funding of your event activities.
As mentioned, customer feedback should be incorporated into assessments of trade show performance. Customer measures may include:
• Increases in average order size
• Decreases in the number of contacts required to close a sale
• Reductions in the number of calls and time devoted to customer service or support
• Changes in customer satisfaction results
• Marketing measures such as net promoter scores
Many of these measures provide some basis for estimating potential return on investment, such as a cost savings through reduction of reliance on customer service or technical support.
Random intercept surveys with customers who have engaged with you at an event are an excellent way to identify changes in their perceptions, what they learned and what they intend to do as a result of their visit with you. Post event research should be considered as well.
Trade show activities can be tied to improvements in customer acquisition, retention, and customer reactivation. Many companies know their retention rates and changes in the retention rates can be significant measures of success. Your company may track the percentage of re-activations among lost customers for the year. Discuss how improvements in these areas can potentially impact profitability and how trade show tactics may be employed to affect results. Tracking these types of measures over time will help identify the improvement related to events.
Estimating the potential value of CRM efforts is similar to estimating the sales opportunity in a sales funnel. What is the effect upon the retention rate among customers seen at events where a CRM initiative was in effect? And by extension, what is that change worth in profitability? The same concept may be applied to “reactivated accounts.”
Investing in retention of existing customers and their revenue at events makes sense. Take for example any business with some level of customer/ revenue attrition each year. An initiative is developed for events that will result in reaching and retaining 50 customers among the 200 or so lost each year. The average value of a customer addressable at these events is estimated at $100,000.
To determine if event reactivation initiatives are a worthwhile investment, consider the following:
Multiply the number of customers retained or reactivated (50) by the average annual revenue value of a customer addressable at events ($100,000): (50 Customers X $100,000) = $5,000,000 in re-claimed revenue. Multiply that times the profit margin on sales associated with existing customers (it will be higher than for new customers, for example 35%) and you will find $1,750,000 in gross profit attributable to those customers who would otherwise be gone. That level of profit contribution is likely to be a high percentage of the entire event program budget. The other ROI justifications of new revenue development, cost avoidance and promotion value accomplished at the same events are icing on the cake.
If a single event is a key part of managing the customer relationship for the year, such as a premier customer conference or the largest annual conference you attend together, then the investment in that activity would likely be a significant portion of the overall amount a company spends on maintaining the business. If the event you are considering is not a main part of relationship management then it might represent only a small fraction of your company’s effort. Regardless, if you add up the current annual revenue of the customers you will engage, brief or entertain at an event, those numbers are usually impressive, and demonstrate what is at risk if those relationships are not maintained.
Consider making CRM one of your most important event marketing goals. Hold discussions internally to understand the value your company is willing to place on retaining and growing existing customers and revenue through investments in event activity.
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Wednesday, February 29, 2012
Wednesday, February 8, 2012
Measuring Payback and CRM Value for Marketing Events
A great tool for conveying the value of your marketing events is the payback ratio. This is the ratio of the total value of estimated revenue, revenue retention, cost savings and promotion value gained through event activity, divided by the event cost. It is expressed as $XX/1, for example $42/1. The payback ratio serves not only as an indicator of event efficiency, but also as a useful way to compare past, current and future events. The payback ratio is based upon estimates of the four main categories of value derived from marketing events:
1.Revenue (or gross profit margin) from New sales –This element of event value is the most difficult to document as so many people and steps may be required to close a sale and sales cycles can be quite long. It is possible to estimate revenue impact using acceptable internal assumptions such as the “close ratio” associated with well-qualified leads from an event and the “average value of sale” for sales that result from those leads. The best approach is to discuss these assumptions with your sales team and get their agreement. It is also best to have the sales team define the “next step” expected of people who become leads through their interactions at an event. Use “closed loop” systems such as sales automation, warranties, registrations and other types of tracking aids where available.
2.Retention and Growth of Current Revenue Base- Customer Relationship Management (referred to as CRM) is a very important function in companies today. Existing customers and the revenue they provide are the most profitable for most companies. I have heard criticism about companies that devote their event marketing resources to interaction with existing customers, yet I would suggest this is one of the most valuable aspects of event marketing. Keeping customers up to date, reassuring them that their needs will be met, and thanking them for their business has a direct and measurable impact on retention and profitability.
One of our large consumer package goods clients assesses the revenue addressable at an event, broken down like this:
A.How much total market share (expressed in terms of revenue, number of customers and potential customers, average number of products per customer or target, etc.) is addressable at this particular event? (Addressable Revenue)
B.How much of that total is comprised of our current customers, representing existing revenue? (Retention target)
What is the growth opportunity on the existing revenue base at this event (Growth target)? For example, the percentage of current customers that are likely to be cross-sold into an additional product line(s) may help establish a growth revenue target for an upcoming event. The average annual value and lifetime value of a customer are important measures in defining the scope of the opportunity.
C.How much does that leave as additional market share addressable at the event? (Conquest target)
Defining the addressable revenue targets in this manner helps to understand and report the potential value of an event as well as add focus to the tactics and activities planned for the event.
If a company places a heavy weight on CRM as a trade show marketing goal, then it is important to know how well their CRM initiatives are working. CRM is essentially a process for providing optimum value to customers to support obtaining maximum revenue value for the company. Therefore, it is wise to use measures of success that relate directly to customers. Trade show CRM assessment should be consistent with any other enterprise-wide measures and metrics applied to other CRM initiatives. Briefing senior management CRM success measures and applying these metrics on an ongoing basis will help to ensure continued funding of your CRM activities.
As mentioned, customer feedback should be incorporated into assessments of trade show performance. Customer measures may include increases in average order size, the number of contacts required to close a sale, number of calls and time devoted to customer service or support, changes in customer satisfaction results, and marketing measures such as net promoter scores. Many of these measures provide some basis for estimating potential return on investment, such as a cost savings through reduction of reliance on customer service or technical support.
Trade show activities can be tied to improvements in customer acquisition, retention, and perhaps reactivation. Many companies know their retention rates and changes in the retention rates can be significant measures of success. They also must then agree how improvements in these areas will potentially impact profitability. Measurements may exist regarding the percentage of reactivations among lost customers for the year. Tracking these types of measures over time can assist in identifying trends of improvement related to events.
Estimating the potential value of CRM efforts is similar to estimating sales opportunity in a sales funnel. What is the effect upon the retention rate among customers seen at events where a CRM initiative was in effect? And by extension, what is that change worth in profitability? The same could be applied to “reactivated accounts.”
Investing in retention of existing customers and their revenue base at events can make really good sense. Take for example a business with any level of attrition each year. Let’s say an initiative is developed for events that will result in reaching and retaining 10 customers among the 50 or so that are lost each year. The average value of a customer addressable at these events is estimated at $750,000. It is a simple process to determine if event initiatives are a worthwhile investment:
Multiply the number of customers retained or reactivated (10) by the average annual revenue value of a customer addressable at events ($750,000): (10 Customers X $750,000) = $7,500,000 in reclaimed revenue. Multiply that times the profit margin on sales associated with existing customers (it will be higher than for new customers, say 35%) and you will find $2,625,000 in profitability attributable to those customers who would otherwise be gone. That level of contribution is likely to provide a fairly high percentage of justification for the entire event program budget in addition to the other monetary values of new revenue development, cost avoidance and promotion value accomplished at those same events.
If an event is a key element in managing the relationship with an account for the year, such as your premier customer conference or the largest annual conference you attend together, then the value of that activity would likely be a significant portion of the overall amount a company spends on maintaining the business. If the event you are considering is not a main part of relationship management then it might represent only a small fraction of your company’s effort. Regardless, if you add up the current annual revenue of the customers you will entertain or brief at an event, those numbers are usually impressive, and demonstrate what is at risk if those relationships are not maintained.
3.Cost Savings – Cost savings and expense avoidance achieved through trade show activity can be quite substantial. Events present “one on many” and “many on many” opportunities. This value element is a real, traceable source of ROI on an event.
Everyone in your market universe may be gathered in one place, thinking about the same concentrated range of topics. Prospects, customers, suppliers, allies, analysts, press, executives, sales, product management and marketing are all at a single event, usually at their own expense. The number of potential interactions is huge. Consider special approaches to maximize the time, place and focus available through the event.
Be sure your activities at your next event are aimed not only at the income side of the profit equation, but the cost side as well. Realizing these benefits requires dialogue with those managers who can take advantage of the opportunity your event provides. They may also help you estimate the value of doing multiple things at an event instead of doing them one at a time in the future at additional expense.
Reporting these results in your event measurement report will add credibility and financial justification for your investment beyond the primary goal of increasing sales.
4.Promotion Value – This is often the least reported source of ROI, but promotion value at a marketing event provides real, identifiable value. Promotion value may be calculated using “ad equivalency” values, which are derived from what an equivalent advertising cost to accomplish a similar promotional impact would be.
“Ad Equivalency” is a less popular metric today than it was even a few years ago. It is still useful to report promotion value in terms of total impressions made at marketing events as this provides an idea of “reach”. “Gross Impressions” are those that fall on the eyes and ears of anyone. “Targeted Impressions” are those that fall on the eyes and ears of those who fit your target profile. The total impressions are the sum of all gross and targeted impressions made as a result of show budgeted activity. These activities often include promotion activities in direct marketing, media (including digital and social media) show exposure and exhibit exposure.
The payback ratio is a simple measure of success for your event marketing program. By adding the monetary value of all the tracked and estimated revenue and cost avoidance represented in the categories above, we can compare apparent value of an event to its cost. Using the payback ratio as an index is a great way to convey the value of your marketing events. The payback ratio provides qualitative and quantitative analysis of events and often greatly facilitates the discussion with executives over event strategy and funding.
1.Revenue (or gross profit margin) from New sales –This element of event value is the most difficult to document as so many people and steps may be required to close a sale and sales cycles can be quite long. It is possible to estimate revenue impact using acceptable internal assumptions such as the “close ratio” associated with well-qualified leads from an event and the “average value of sale” for sales that result from those leads. The best approach is to discuss these assumptions with your sales team and get their agreement. It is also best to have the sales team define the “next step” expected of people who become leads through their interactions at an event. Use “closed loop” systems such as sales automation, warranties, registrations and other types of tracking aids where available.
2.Retention and Growth of Current Revenue Base- Customer Relationship Management (referred to as CRM) is a very important function in companies today. Existing customers and the revenue they provide are the most profitable for most companies. I have heard criticism about companies that devote their event marketing resources to interaction with existing customers, yet I would suggest this is one of the most valuable aspects of event marketing. Keeping customers up to date, reassuring them that their needs will be met, and thanking them for their business has a direct and measurable impact on retention and profitability.
One of our large consumer package goods clients assesses the revenue addressable at an event, broken down like this:
A.How much total market share (expressed in terms of revenue, number of customers and potential customers, average number of products per customer or target, etc.) is addressable at this particular event? (Addressable Revenue)
B.How much of that total is comprised of our current customers, representing existing revenue? (Retention target)
What is the growth opportunity on the existing revenue base at this event (Growth target)? For example, the percentage of current customers that are likely to be cross-sold into an additional product line(s) may help establish a growth revenue target for an upcoming event. The average annual value and lifetime value of a customer are important measures in defining the scope of the opportunity.
C.How much does that leave as additional market share addressable at the event? (Conquest target)
Defining the addressable revenue targets in this manner helps to understand and report the potential value of an event as well as add focus to the tactics and activities planned for the event.
If a company places a heavy weight on CRM as a trade show marketing goal, then it is important to know how well their CRM initiatives are working. CRM is essentially a process for providing optimum value to customers to support obtaining maximum revenue value for the company. Therefore, it is wise to use measures of success that relate directly to customers. Trade show CRM assessment should be consistent with any other enterprise-wide measures and metrics applied to other CRM initiatives. Briefing senior management CRM success measures and applying these metrics on an ongoing basis will help to ensure continued funding of your CRM activities.
As mentioned, customer feedback should be incorporated into assessments of trade show performance. Customer measures may include increases in average order size, the number of contacts required to close a sale, number of calls and time devoted to customer service or support, changes in customer satisfaction results, and marketing measures such as net promoter scores. Many of these measures provide some basis for estimating potential return on investment, such as a cost savings through reduction of reliance on customer service or technical support.
Trade show activities can be tied to improvements in customer acquisition, retention, and perhaps reactivation. Many companies know their retention rates and changes in the retention rates can be significant measures of success. They also must then agree how improvements in these areas will potentially impact profitability. Measurements may exist regarding the percentage of reactivations among lost customers for the year. Tracking these types of measures over time can assist in identifying trends of improvement related to events.
Estimating the potential value of CRM efforts is similar to estimating sales opportunity in a sales funnel. What is the effect upon the retention rate among customers seen at events where a CRM initiative was in effect? And by extension, what is that change worth in profitability? The same could be applied to “reactivated accounts.”
Investing in retention of existing customers and their revenue base at events can make really good sense. Take for example a business with any level of attrition each year. Let’s say an initiative is developed for events that will result in reaching and retaining 10 customers among the 50 or so that are lost each year. The average value of a customer addressable at these events is estimated at $750,000. It is a simple process to determine if event initiatives are a worthwhile investment:
Multiply the number of customers retained or reactivated (10) by the average annual revenue value of a customer addressable at events ($750,000): (10 Customers X $750,000) = $7,500,000 in reclaimed revenue. Multiply that times the profit margin on sales associated with existing customers (it will be higher than for new customers, say 35%) and you will find $2,625,000 in profitability attributable to those customers who would otherwise be gone. That level of contribution is likely to provide a fairly high percentage of justification for the entire event program budget in addition to the other monetary values of new revenue development, cost avoidance and promotion value accomplished at those same events.
If an event is a key element in managing the relationship with an account for the year, such as your premier customer conference or the largest annual conference you attend together, then the value of that activity would likely be a significant portion of the overall amount a company spends on maintaining the business. If the event you are considering is not a main part of relationship management then it might represent only a small fraction of your company’s effort. Regardless, if you add up the current annual revenue of the customers you will entertain or brief at an event, those numbers are usually impressive, and demonstrate what is at risk if those relationships are not maintained.
3.Cost Savings – Cost savings and expense avoidance achieved through trade show activity can be quite substantial. Events present “one on many” and “many on many” opportunities. This value element is a real, traceable source of ROI on an event.
Everyone in your market universe may be gathered in one place, thinking about the same concentrated range of topics. Prospects, customers, suppliers, allies, analysts, press, executives, sales, product management and marketing are all at a single event, usually at their own expense. The number of potential interactions is huge. Consider special approaches to maximize the time, place and focus available through the event.
Be sure your activities at your next event are aimed not only at the income side of the profit equation, but the cost side as well. Realizing these benefits requires dialogue with those managers who can take advantage of the opportunity your event provides. They may also help you estimate the value of doing multiple things at an event instead of doing them one at a time in the future at additional expense.
Reporting these results in your event measurement report will add credibility and financial justification for your investment beyond the primary goal of increasing sales.
4.Promotion Value – This is often the least reported source of ROI, but promotion value at a marketing event provides real, identifiable value. Promotion value may be calculated using “ad equivalency” values, which are derived from what an equivalent advertising cost to accomplish a similar promotional impact would be.
“Ad Equivalency” is a less popular metric today than it was even a few years ago. It is still useful to report promotion value in terms of total impressions made at marketing events as this provides an idea of “reach”. “Gross Impressions” are those that fall on the eyes and ears of anyone. “Targeted Impressions” are those that fall on the eyes and ears of those who fit your target profile. The total impressions are the sum of all gross and targeted impressions made as a result of show budgeted activity. These activities often include promotion activities in direct marketing, media (including digital and social media) show exposure and exhibit exposure.
The payback ratio is a simple measure of success for your event marketing program. By adding the monetary value of all the tracked and estimated revenue and cost avoidance represented in the categories above, we can compare apparent value of an event to its cost. Using the payback ratio as an index is a great way to convey the value of your marketing events. The payback ratio provides qualitative and quantitative analysis of events and often greatly facilitates the discussion with executives over event strategy and funding.
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