Andrew Davis, best-selling author and keynote speaker, sits down with host Mark Jones to examine the top marketing budget trends for 2020.
It may not be possible to predict the future just yet, but with the rise of artificial intelligence and data-driven marketing, the marketing-to-revenue model is becoming easier to forecast.
According to Andrew Davis, best-selling author and marketing keynote speaker, the hot topic with CMOs at the moment is how they should spend their marketing budget.
“To increase your tenure, be more successful and drive real value that’s going to increase your budget, you’ve got to be able to attach content to revenue,” says Andrew.
“I think most CMOs are measuring the wrong stuff. And there’s a huge emphasis on spending on advertising, digital advertising specifically. And it’s a constantly growing area, with every new social platform there’s a new opportunity to spend those dollars and so they’re increasing their budgets to keep up with that.”
As new digital innovations continue to arise, CMOs find themselves looking for ways to leverage new trends to enhance the customer experience. Andrew cautions it’s important to incorporate these new tactics into a marketing plan only when they will help achieve the business goal and not just because they are trending.
“I think as marketers we love new tools. If a new tool can help us be more efficient, automate our marketing better, build better relationships faster and farther, a new tool seems to be a great piece of the puzzle.”
Andrew says that prioritising customer experience pushes marketers to measure the lifetime value of their customers and encourages them to continue to do so in the new decade.
“I think investing in customer experience, and creating better content experiences that align with the customer’s needs along their journey is such an easy investment,” says Andrew.
“Very simple changes in your customer experience can have a huge impact.”
Check out this episode of The CMO Show to find out how marketers can best use their budgets at the start of the new decade.
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The CMO Show production team
Got an idea for an upcoming episode or want to be a guest on The CMO Show? We’d love to hear from you: firstname.lastname@example.org.
Host: Mark Jones
Guest: Andrew Davis
Mark Jones: When CEOs look around the boardroom in these uncertain economic times, one big question can’t be ignored: Who among my leadership team is driving growth?
Mark Jones: In return, CMOs should ask two questions of their own: Does my CEO believe in the long-term value of brand building, or is revenue growth the only thing that matters?
Mark Jones: Hello everyone. Mark Jones here. Welcome to The CMO Show for 2020. So excited to have you back with us, and I’m really excited about our guest today and many, many more exciting guests to come up in the year to come.
Mark Jones: My guest today is Andrew Davis. For those of you playing at home might remember he was with us in 2019, and anytime that we chat is always fun. But more than that, not just your entertainment I’m thinking about, but what he’s got to say. This is a man who is always thinking about the marketing landscape, particularly as it relates to how do we build brands and what’s on the horizon.
Mark Jones: I was actually thinking about last year in October, Gartner issued its annual CMO Spend Survey, and, digging back into that, wanted to understand what are the big trends for marketers this year. Of course, if you want to know the future of marketing, you look at budgets, or as we say in journalism, follow the money. So I invited Andrew on and we had a big chat about the key trends. What are the trends we need to care about this year and what are the ones that you can pretty safely ignore.
Mark Jones: So enjoy the show, and here’s to a great 2020.
Mark Jones: It is 2020. This is the first episode of the CMO Show. And the very first cab off the rank is Andrew Davis, an expert in all things marketing, content, storytelling. A friend of ours, a friend of the show. So, great to have you back with us.
Andrew Davis: So glad to be back. Happy new year! I’m excited about talking about money.
Mark Jones: Well, let’s get stuck into it because back in the day I used to be a journalist and the number one rule is follow the money. In the context of CMOs and CEOs, it’s a really interesting thing to get your head around.
Mark Jones: The CMO spend survey which came out in October 2019, offered some really interesting insight into what’s going on for CMOs this year, because obviously they pitch it forward. And there’s broadly speaking a shift towards more budget being allocated to IT, HR and research. And either flat or declining budgets for CMOs. So, obviously those of us who, like us in the agency game, this is kind of interesting news right?
Mark Jones: I thought it’s probably time for us to kick off and get our heads around what’s happening for budgets for CMOs this year. So, my number one question to get us going, do CEOs trust CMOs to do the number one thing, which is deliver growth?
Andrew Davis: It’s been my experience that there are two types of CEOs. There are CEOs that are brand believing CEOs. They believe in building a brand and they believe very heavily that marketing has a tremendous amount of value to add. The other type of CEO, generally a CEO who came out of finance or operations or HR is the opposite. They really believe in building value and that’s value for the company. Revenue for the company, value for shareholders. And I think there’s a real split down the middle. So, for me, I think the CEOs that come out of that revenue growth, value driven mindset don’t believe CMOs can deliver growth, that they’ve been told it before, they’ve held other C level or VP level positions where they’ve watched CMOs rotate through the door and never deliver on the promises.
Andrew Davis: And so, they shift spending, discredit the belief in the brand and move forward by providing revenue growth opportunities that are really meaningful on the revenue side. Whereas, the brand driven CMOs are like all about it. And there’s some great examples recently, like, do you guys have Casper? The people who sell mattresses in a box. What’s one of the Australian brands now?
Mark Jones: I think it’s called Koala.
Mark Jones: You get this thing in a box, you unwrap it and then you cut open the plastic and the whole thing expands out like a balloon.
Andrew Davis: Yes, exactly.
Mark Jones: Right, yeah.
Andrew Davis: So, Casper is kind of one of the market leaders here and is obviously a brand driven company. Casper is just like Koala I would imagine. Does Koala spend a tonne on advertising?
Mark Jones: Yeah, quite a bit on billboards actually.
Andrew Davis: Yeah. So, Casper’s the same thing. They’re investing heavily on building the brand and beating everybody in the marketplace by outspending everyone. Well, they just filed their IPO, their initial public offering paperwork so that they could actually be traded on the stock market here in the United States. And I counted out, Casper in their IPO documentation, they mentioned brand 201 times in the IPO documentation. They mentioned the word profitable, which they are not, nine times.
Mark Jones: Wow.
Andrew Davis: Nine out of 201, 200 to 201 when it comes to brand. And you can tell that’s a brand driven business that really believes in marketing. For me, I think it depends what kind of CEO you report to, as to whether you’re going to be trusted to drive revenue and build a brand. And how you approach it? I think you need to take the time to figure out what kind of CEO are you dealing with and then, actually build value depending on what they value most. Are they brand driven, or are they revenue and value driven?
Mark Jones: Well, I would also maybe spin that and say the same could apply to CMOs. Many of them are actually either brand driven or value outcomes driven. But I think that interplay too. I wonder whether that, getting back to your point about tenure of CMOs, I think it’s two years now.
Mark Jones: They’re not really doing themselves great credit. But I think this tension is an interesting one. And I wonder, is the question you’ve got to choose the right CEO, choose the right partnership. Find yourself in the right place where you can build long term brand value.
Andrew Davis: I definitely think that’s one of the keys. I love your point about CMOs fitting into the same kind of bucket. You’re either an ROI driven CMO who loves to look at the analysis and figure out where you’re winning and where you’re losing. Or you’re kind of a, “Yeah, let’s just create content and build a brand” kind of CMO. They definitely exist, right? That kind of dichotomy. But I think in either case, I think most CMOs are measuring the wrong stuff. And there’s a huge emphasis on spending on advertising, digital advertising specifically. And it’s a constantly growing area with every new social platform there’s a new opportunity to spend those dollars and so they’re increasing their budgets to keep up with that, but they’re still measuring the wrong stuff.
Andrew Davis: And I think ultimately to increase your tenure, be more successful and drive real value that’s going to increase your budget, I think you’ve got to start being able to attach, specifically in our area, I mean Mark, you’ve got to be able to attach content to revenue. If you can’t do that and have a real line to revenue, you’re going to struggle with those value driven CEOs and you may even struggle with the brand driven CEOs because there are better ways to measure your brand awareness and the value bringing than content marketing.
Mark Jones: Well, you’re pretty plugged into the global trends. What would you say are the ways that CMOs are connecting content to revenue these days? How has it changed?
Andrew Davis: Well, I don’t know if it’s changed much. I think that’s part of the problem. The most interesting models to me are the ones that are doing revenue per subscriber type of analysis.
Andrew Davis: It’s essentially they’re taking revenue contribution, dividing it up over the number of subscribers they have let’s say to an email newsletter, or their video series. And then, they’re basically cross analysing how many of those people actually have bought from us, what’s their revenue contribution, and then, what is it across the entire subscriber base. It’s a great way to measure revenue because every time you get a subscriber, instead of saying we got 1300 subscribers, you can say we got 1300 more subscribers that’s a value of $152 each for a total revenue of X, Y, and Z. And you start measuring, is your revenue per subscriber going up or going down? If it’s going down, you’re generating the wrong audience. You may be doing great, and increasing brand awareness with a bunch of people who actually are never going to buy your product.
Andrew Davis: If it’s going up, that’s perfect. You’re getting the right audience. You’re delivering the right kind of content, you’re building trust, and you’re actually generating revenue as a result of it. I have seen people also do subscriber versus non-subscriber revenue analysis to determine if people pay more, what’s their lifetime value. And it’s pretty clear that the people who subscribe to ongoing content generate more revenue over time than those that don’t. If you’re in a software business that requires a subscription, they’re more likely to stay. There’s all sorts of evidence that if you focus on subscribing and creating content that’s about a subscription, it’s much easier to showcase the path to revenue versus just, “Hey, we have an article that has generated X amount of revenue,” Michael Brenner has a really good book, The Content Formula. He has a formula that lays out the most basic way to determine the revenue generated from any content activity.
Mark Jones: Well, I think that’s actually fascinating. It’s clearly the next step beyond the focus around building a subscriber base, which we tell clients all the time you’ve really got to build that because firstly, at a simplistic level, you know who you’ve got, right? But I also wonder if we kind of connect that up to some of the trends in this report, one of the big issues that’s still circulating around is the MarTech Universe, i.e. complexity, right? So, a subscriber base by definition means you’ve got to have something approaching a decent CRM. So you’ve got to be able to slice and dice your audience, your subscribers, your customers. And then, start attributing all of this revenue. So, a CMO ostensibly has to hack together their own formula, in their own context to try and get a CEO on board with this sort of loose metric.
Andrew Davis: I think one of the biggest problems in the marketplace has always been that there is no tool designed to show you the connection between subscriber and revenue. And I even talked to some of the content marketing brands and CRM brands out there asking them to kind of help with this. It’s a daunting project and it’s a daunting task. But to be honest, I think it’s a lot easier for a CMO with an existing CRM and no subscribers to start today. If you say this is what we’re going to measure over time, and you start with the CRM you have and the customers and clients and prospects you have, and invite them to subscribe to something within a few months, you’ll have a good gauge as to whether the content fits the audience. You’ll know who’s unsubscribing, if they’re your most valuable customers.
Andrew Davis: So, I kind of feel like it’s over engineered and we’ve over thought it. Start with the people you have. Those are your clients and customers that you’ve already got. And if they love your content, then you can use that content to acquire new subscribers that lead to new revenue generators. But you’re not wrong about the MarTech spend. And it’s one of the reasons in that Gartner report that you’re talking about, CIOs are spending more and more of the marketing budget.
Mark Jones: Right.
Andrew Davis: And I think it’s in part because marketers are having to lean on the CIOs to help connect the dots more, which means they need their buy in for new tools. They need them to control the budget and connect all the dots. So, they’ve actually, I think, they had to give up budget to help make their dreams of measuring their success a reality. And I think most of us have fallen short.
Mark Jones: Well, I think to that point, one of the issues has actually been the sheer complexity of bolting together all these systems. The issue is with the CEO and the CIO and CMO kind of dynamic, which is fascinating to me.
Mark Jones: The research was saying that the MarTech spending is flat lining or falling back from 29% of the total budget to 26, which is equal to media buying. So, there’s the same amount of money being spent on paid media as there is on MarTech and we’re seeing sort of a downtick there. We talked about ROI but I actually wonder whether part of it is internal sales, being able to sort of sell the vision for what you’re doing. And actually just education. I wonder whether CMOs have really invested enough time and effort, not just for themselves but their whole team, in really getting their heads around these MarTech stacks. Because the stats also show that it’s like 60% of the functionality in most systems doesn’t get used, right? So you have this incredible dilemma unfolding here. And no wonder CEOs are getting moody, right? Don’t you think?
Andrew Davis: Yeah, I think they’re dead on, right? I think I’ve heard more than one CEO and CMO, even just in the last six months at events around the country and around the world, just kind of preach no new tools, no new tools. I don’t want another piece of technology that we’ve got to train people on, get them up to speed on, get them to buy into and get to work, which is the biggest problem. I think as marketers we love new tools. If a new tool can help us be more efficient, automate our marketing better, build better relationships faster and farther. A new tool seems to be a great piece of the puzzle.
Andrew Davis: But no, I think you’re totally right. Lack of integration is a huge issue and I think the most successful marketers today are choosing fewer tools and participating on fewer platforms, which actually is reflected in the data you shared with the reduction in budget on MarTech. But, here’s the thing, I think advertisers have created great ROI tools and that’s why you’re seeing an investment that’s equal to, if not greater, than the investment in MarTech because they’re finding the value in their Instagram advertising tool. Is it working? I can show you! Let me log in.
Mark Jones: Right, right.
Andrew Davis: And so, I think the MarTech community has this challenge on their hands that they’ve got to demonstrate the ROI for the tool they’re providing in an easy to understand way, just like Facebook or Instagram or even Snapchat can do on a mobile device. They show you, is it working or is it not working? Just log in and then, in two seconds you know.
Mark Jones: Yeah.
Andrew Davis: So, I’ve yet to see a content marketing tool that does that.
Mark Jones: Right, right, right.
Andrew Davis: And so, I think we’ve got to get there.
Mark Jones: Yeah, there’s a real comfort level there, isn’t there? With digital advertising, and the Gartner research says that digital advertising is the only channel and segment of the whole CMO pie that’s actually growing. It’s connected up to these native platforms as you say, Instagram, and Facebook and others, you can actually get really granular, powerful information that shows you whether it’s working or not. I control my spend and I’m done. The dilemma comes if you think about the content marketing universe that you and I’ve tracked with for some years now.
Mark Jones: Is it a decade?
Andrew Davis: It’s more than a decade.
Mark Jones: Yeah, longer. The issues comes with the idea that you’ve still got to keep spending to reach your audience. So, they’re actually happy to make the trade off of results and knowing that I’ve got to keep doing that because I still get the results.
Andrew Davis: Yeah, yeah.
Mark Jones: Yeah, there’s a comfort level there and sort of an acknowledgement that yeah, I probably could do it in more efficient ways but those other more efficient ways or long term ways are slower and possibly harder. So, I wonder how we’re going to unpack that?
Andrew Davis: Well, I think those ways are just more nebulous and I think that’s the problem. I’ve seen so many people be very successful using digital advertising platforms to market their content, and they can tell the success of their marketing campaign, their advertising dollars they spend on advertising the content, but then can’t connect the dots again to the content they advertised and the outcome in dollars and cents for the organisation. So, there’s still this big hole there that needs to be filled. And without a clear goal or objective for the content you’re creating from a revenue standpoint or subscribers standpoint, advertising becomes an easy, quick win. Well, why are we putting the content in the middle? If we could just spend that advertising to get them to buy what we want them to buy and get enough eyeballs with the audience we want to see. That’s why you get someone like Casper or Tesla building these big kind of brand driven organisations that firmly believe the easiest way to get to everybody is just spend money to get to everybody. And as long as they’re aware of you they’ll buy from you eventually.
Mark Jones: Are we talking ourselves out of content marketing here?
Andrew Davis: Here’s the problem, at the end of the day, the people that are unbelievably successful with their content marketing efforts do all of these things. It’s just not as easy today as it should be.
Mark Jones: Well, we get back to my other long term fascination and I think yours is the role of a content brand and treating yourself like a publication, developing an audience from a content perspective, knowing that it’s tightly woven into a product. And we’ve seen this morph and change over the years of course. With budget pressures, we think about this year that’s unfolding. How are people going to maintain a focus on a content brand? I’m really ambitious for documentaries like big set piece, a set piece really well done, emotion driven, video within a content brand that kind of hooks people into a big picture idea and gets that cut through.
Andrew Davis: That’s Fat, Sick and Nearly Dead. The documentary example.
Mark Jones: Right, right, right. Of course.
Andrew Davis: That’s one of my favourite stories in the world, let alone in Australia. That was Breville’s content play essentially with Joe Cross to build a brand that increased demand for a product or service that no one wanted in the marketplace or had consistent demand year over year. And I think that’s the difference. Have you seen Airbnb’s magazine?
Mark Jones: I have actually. I read it when I was in the states at an Airbnb.
Andrew Davis: Yeah, exactly. Pineapple.
Mark Jones: Right.
Andrew Davis: Exactly. But here’s what they’ve realised at Airbnb, is that they can leverage this magazine to increase demand for markets that are currently not at peak performance and have opportunity to grow. Everybody wants an Airbnb in San Francisco. You don’t need to do anything to increase demand for Air BNBs in San Francisco. However, if you’re in the Maldives on a little island wishing somebody would rent your Airbnb and it’s been sitting on Airbnb’s website and they have 20 others just like it, Airbnb wants those places rented. So, what do they do? They put it in Pineapple magazine as one of the top 20 destinations that no one’s going to this year and next thing you know, they’re all booked up. That’s the difference between the power of creating a content brand and just raising awareness and buying ads because nothing can do it the way content can.
Mark Jones: I would also add that are you actively fostering community, you know?
Andrew Davis: Absolutely.
Andrew Davis: I think there’s a big opportunity for content brands within the company as well. Like Uber actually has a magazine jus t for drivers. It’s meant to foster community among drivers so that they feel like they’re learning from their peers. They’re seeing what other peers are doing, they’re seeing opportunities to improve their service or have better experience with Uber. And Uber’s done a really good job of leveraging that in a time where Uber is actually got a huge amount of backlash to help really foster the right kinds of things with their new leadership team. So, I still think between content brands and subscribers, there’s a much easier path to revenue, which is what this is all about.
Mark Jones: Getting back to the survey, despite all of these challenges, 61% of CMOs expect their budgets to increase in 2020 despite all the signs. What kind of levels of denial are we talking about here? What’s going on?
Andrew Davis: This just frustrates me. They’re crazy. I think it kind of proves how deep some CMOs have their heads in the sand. And that’s why I’m not surprised that the CEO tenure keeps dropping again, because I really think that they have no idea. Here’s how I think CMOs work, if the economy is good they think they’re budget is always getting better. And while I think that there’s a huge amount of truth to that because there’s money to spend, as a percentage of company revenue marketing budgets are going down, even though revenue is going up and you can’t argue with that. So those 61% of CMOs are just wrong. It’s not going to increase.
Mark Jones: Well I don’t know about the US, but it’s pretty wobbly everywhere you go. So, I think that’ll be one of the big things to watch for this year. Now, hey, before I let you go because I really appreciate your time today and all of the-
Andrew Davis: It’s fun.
Mark Jones: It’s always awesome. I wanted to do buzzword bingo with you, hot or not.
Andrew Davis: Let’s do it.
Mark Jones: Right? Because this is quick way of getting through all the big trends and setting the stage for the year. So, user generated content. Well, we’ve talked a bit about this, obliquely through content brands, but user generated content, hot or not?
Andrew Davis: Not hot. I think it’s a bad investment. What about you? I want to hear your opinion on that one.
Mark Jones: No one’s asking me for it.
Andrew Davis: Yeah, I think no one’s interested.
Mark Jones: Right. Customer experience?
Andrew Davis: Great investment. That’s hot.
Mark Jones: Hot.
Andrew Davis: I think that’s super hot.
Mark Jones: Right.
Andrew Davis: Yeah. I think if you can measure lifetime value and referrals by creating a better customer experience and especially through content, I think it’s a great investment and I think it should be hot.
Mark Jones: To me this is supposed to be highly emotional. How do you define it? Or what would you say?
Andrew Davis: I define a customer experience as a series of encounters that leave an impression on someone. So, if you have to attach an emoji to every one of the interactions your brand has with a consumer, that’s the sum of those emojis, the average would be their experience. And I think most brands, when you average it out, just have a meh emoji. I think investing in customer experience, creating better content experiences that align with the customer’s needs along their journey is such an easy investment to take their average emoji experience from meh to hell yeah. Like excited clapping, knock it out of the park. And I think it’s a really easy place to invest, especially for content marketers today.
Mark Jones: All right, personalisation?
Andrew Davis: I actually just was diving into personalisation. I think personalisation is a hot buzzword. I read some research recently that what marketers think personalisation is, is very different from what consumers think personalisation is. If you ask consumers, do they want a personalised experience, 91% of them,, say yes. When you say what do you consider to be a personalised experience, 57% of them say, “I just want to feel like I’m running the show.” The other 50 or so, or 60% say, “I want to be remembered.” Another 50% say they want to be delivered relevant information and experiences. So, I think when marketers think about it, we think about all these cool tools we can use to personalise the experience. So, there’s a disconnect there. So, I think personalization is hot, but I believe personalization should be not what we think it is, but what the consumer thinks it is.
Mark Jones: Well, I think it’s a cousin of customer experience. It’s a subset.
Andrew Davis: Totally.
Mark Jones: Right.
Andrew Davis: It’s almost the same thing in my mind.
Mark Jones: Pretty much, yeah. All right, here’s the next one. AI.
Andrew Davis: Oh man.
Mark Jones: Augmented reality. To blend the two.
Andrew Davis: I wish it was not hot. How’s that? I think this is a bad investment. Most of us, most brands in the world are not ready for this. There are very few who can execute it well and are successful with it. I think it’s just a terrible investment for most brands.
Andrew Davis: The potential is there to be phenomenal and I think 10 or 15 years from now, I think we’ll all be able to use it in a way that matters for marketers. I think the problem with marketers is we don’t need AI to uncover some of the most basic things like personalisation. If the customer just wants to be remembered, stop sending me emails selling me the same couch that I already bought like that. That’s just a simple. You don’t need AI to do that. That’s like a very simple solution and every E-commerce software out there can already do that without artificial intelligence. I think there’s tremendous potential actually for a lot of these when done right, all of these work, right?
Mark Jones: And at the risk of going over old ground, content marketing.
Andrew Davis: Content marketing’s always a good investment. I don’t think it’s as hot as it has been in the last decade and so, I think you’re going to see more and more of a pushback to the kind of content marketing trend. And I think it’ll probably morph and have a few new names over the next decade, but here’s the thing, I don’t care what you call it. If you can measure the impact of great content and on its path to revenue, it’s always a good investment.
Mark Jones: So good. Andrew Davis, thank you so much for being number one guests for 2020 on the CMO Show. Great to have you back again for the second time, and all the best with all of your speaking and writing, and all the amusement and happy buzz and optimism you bring to your video platforms. Thank you so much.
Andrew Davis: Thank you guys so much.
Mark Jones: So there it is. Mr. Davis, of course, sharp as always and lots of fun. I went away thinking a lot about this concept of calculating value, ROI of course, and some of these different models that are out there for showing the connection between content and revenue over time. I particularly like the idea of subscribers and how we attribute a value dollar per subscriber. I think that’s something we should work on. Actually, in my conversations with clients and CMOs over the past couple of weeks, it’s been interesting to reflect on just how much time we spend, internally with stakeholders, essentially justifying our spend.
Mark Jones: The challenge for us, and if you feel like the opportunity, this year is how are we going to change the conversation from this defensive, “What am I doing with my budget and how am I creating value?” to actually spending more time demonstrating through case studies or through testimonials, through customers, to be able to get those quick wins, those instant, “Wow. You guys are really doing some great work” and getting that visibility within the organisation. Really, because obviously that helps the whole thing move ahead.
Mark Jones: So, it’s an exciting year. We’ve also got some great guests coming up this year on the show, which I’m really looking forward to. As always, I do invite you to subscribe to us on all the channels, particularly Spotify and Apple Podcasts. You can find us, of course, through your search bar. As always, we look forward to your feedback. Until next time.Mark Jones: Hold the podcast! Hold the podcast. Thank you for joining us for the first episode of a new decade; The CMO show. It’s really exciting to be back. I just wanted to take a quick moment to look back on 2019 because it was a big year for us. On behalf of the entire CMO Show team, we’re absolutely honoured, to have won the 2019 Australian Marketing Institute National Award for Marketing Excellence in Content Marketing. The judges said some really nice things about this show. They called it “well-researched, well structured, with excellent execution.” Part of that, of course, is because of our executive producer, Charlotte Goodwin. Of course, Charlotte herself won the Content Marketer Award at the 2019 Mumbrella NeXt Awards in 2019 for her work on this show. So I, for one, am very thankful for her and the entire CMO Show team, and for you for listening and making our show a success that it is.