Digital Strategy

Introduction

Digital marketing consists of a variety of channels for communicating with and transacting with both potential customers and existing customers. Companies that utilize these channels effectively are likely to see good results (i.e., earn a positive ROI) from their digital marketing efforts. But companies do not have unlimited resources, so most companies cannot and should not execute every digital marketing channel available to them. And even very large companies that engage in all digital marketing tactics still have to allocate budgets across the various digital marketing channels. Companies need to be strategic in these decisions to maximize long-term profits and ensure a strong market position in a marketplace that is constantly changing. The purpose of this chapter is to provide a framework for thinking about and evaluating digital marketing decisions.

What is Digital Marketing Strategy?

The selection of digital marketing tactics and the allocation of marketing budget across those digital tactics is what composes digital marketing strategy. In the hierarchy of company strategy, digital marketing resides below the marketing strategy (CMO-level decisions) but above individual tactical decisions (e.g., Director of Paid Search-level decisions). Thus, the purpose of this chapter is to provide a framework for making purposeful decisions about which digital marketing tactics to employ and the relative budget allocations that should be given to these tactics to produce long-term, sustainable profits for a company. Because the digital marketing strategy is situated beneath the company’s marketing strategy, higher-level strategic decisions (e.g., brand positioning, the product assortment, customer segmentation) are made elsewhere. Lower-level implementation decisions such as ad copy and email segmentation are also not central components of the digital strategy.

Because digital marketing strategy functions both above and below other crucial business functions, a good digital strategy is only likely to produce the desired results of long-term profits if the following two conditions are met:

(1) The digital marketing tactics are being executed and will continue to be executed competently.

(2) The company’s marketing strategy (positioning, targeting, competitive landscape, etc.) has been decided and the individual tactics are being executed in accordance with this strategy.

The importance of the first point is straightforward. Even the best digital strategy cannot perform well if the individual tactics are being executed poorly. Good execution of a randomly-selected set of digital marketing tactics is likely to produce better results than poor execution of a great digital strategy. The second point is critical for producing long-term profits. Competent execution of digital marketing tactics is likely to produce short-term profits regardless of the

governing marketing strategy, but long-term profits are likely to be elusive for companies that cannot maintain a strong market position.

The Digital Strategy Framework

As Peter Drucker famously stated, “The purpose of a company is to create and keep a customer,” so we take as a foundation the process of creating a first-time customer followed by efforts to turn that customer into a loyal, repeat-purchasing customer. The process of creating a first-time customer is further subdivided into demand generation and demand harvesting. Demand generation consists of marketing activities that increase a potential customer’s desire for the product or service. Demand generation can be product-centric (“I really want to own a car”) or brand-centric (“I really want a Ford Fiesta”). Product-centric demand generation would focus on increasing a consumer’s desire for the benefits of the product category (“I want the freedom and flexibility of automobile ownership”), while brand-centric demand generation would focus on increasing a consumer’s desire for product features unique to the brand (“I want the new Ford Mustang with its powerful-looking body”). Demand harvesting consists of any activity that increases the likelihood of securing a purchase from a potential customer who already desires the product.

Turning a first-time customer into a loyal customer is most critically influenced by the customer’s experience during and after the first purchase. If the product meets or exceeds expectations and/or the customer service is good, the customer’s affinity toward the company will increase, which typically produces increased loyalty. But marketing communications can

often enhance product-focused or customer service-focused efforts to building customer loyalty. Therefore, digital marketing strategy includes the employment of digital marketing channels for enhancing loyalty-building efforts.

The fundamental decisions that make up digital marketing strategy are represented by the arrows emanating from Digital Marketing Channels to the three customer influence efforts of demand generation, demand harvesting, and loyalty building. A digital marketing director must determine resource allocation across the various digital marketing tactics in the service of these three efforts, with the recognition that resources allocated to many tactics may be 0.

Finally, all of these strategic decisions must be made with the recognition that not everyone is a potential customer. Potential customers and non-potential customers are mixed together in the marketplace, so it is impossible to ensure that all marketing expenditures go only to those who may eventually make a purchase (or many). However, digital marketing channels provide ever-more-sophisticated methods of ensuring that marketing communications reach a high concentration of potential customers.

Applying the Framework – Choosing Marketing Efforts

The core of digital marketing strategy focuses on resource allocation across the various digital marketing channels in service of the three customer influence efforts (of demand generation, demand harvesting, and loyalty building). But prior to that resource allocation, a company must determine the resource allocation across the three marketing efforts. The optimal allocation of marketing expenses depends primarily on the company’s current state.

Consider a company that has only just finished its retail website and has yet to make its first sale. Clearly, since it has no customers, it cannot put any effort into loyalty building. As long as the product(s) the company sells are known to the market (i.e., are not radically-new products), there is likely existing demand that can be harvested. Demand generation may yield dividends later, but the company should prioritize immediate profits over later profits. Therefore, the company should focus entirely on demand harvesting. As the company gains expertise and skill in demand harvesting, its future demand generation efforts will yield greater rewards.

In contrast, consider instead an online retailer that for the last few years has been focused almost exclusively on demand harvesting efforts. This company should almost certainly shift its focus to loyalty building (though it should continue its profitable harvesting efforts). From its multi-year history generating new sales, it has likely accumulated an impressive list of customers with demonstrated desire for its products, so marketing to this group will almost certainly yield high returns.

Only rarely will increased efforts in demand generation yield a higher return than will increases in demand harvesting or CRM. Potential customers who are higher in the conversion funnel are more difficult to distinguish from non-potential customers, so demand generation efforts typically involve more wasted marketing spend. However, increases in spending on demand generation may be wise when (1) demand harvesting efforts have saturated the market

and/or (2) demand generation efforts are sufficiently effective that harvesting of that newly-created demand occurs immediately.

Applying the Framework – Allocating Resources across Channels

Once strategic decisions about resources across the three customer influence efforts have been made, decisions about resources across digital marketing channels must be made. Marketing budgets should be set with an eye toward earning the highest possible return on investment. This maximization in turn requires knowledge of (or inference about) the returns likely to be earned from investment in each tactic. Digital marketing returns are determined by three factors: (1) cost per exposure; (2) customer concentration; and (3) the effectiveness of each exposure. The return on investment roughly follows this mathematic relationship:

Cost per exposure

The cost per exposure of most online advertising channels (paid search, display advertising, social media ads, and so forth) is straightforward and is reported by the platform. The cost per exposure of other digital marketing channels (search engine optimization, social media posting, etc.) is more difficult to account for. An investment in search engine optimization requires payment to employees or to a digital agency to engage in those efforts, and the revenue generated by such efforts may not materialize for many weeks or months. Despite these difficulties, smart digital marketers take great efforts to measure both the costs and returns of all digital marketing efforts, including SEO.

Customer concentration

Every digital marketing channel contains a mix of potential customers and non-potential customers. Potential customers are people who, under the right circumstances, will make a purchase or sign a contract. Non-potential customers are those who would never under any circumstance be likely to purchase the product or service. A company like Toyota may have a relatively large concentration of potential customers within virtually any group of people, because most people own a car and a Toyota would be a reasonable purchase for most of them. A company like Ferrari would, in most digital channels, have a much smaller concentration of potential customers, because very few people have sufficient monetary resources to purchase such an expensive car. Generally, paid ad exposures to non-potential customers are wasted money, because they represent a cost that produces no revenue. Therefore, the cost-effectiveness of a digital channel is also determined by the concentration of potential customers that can be found on the channel.

The dramatic advantage that digital channels have over most traditional marketing channels is the ability to select ad targets that increase the concentration of potential customers. One of the primary reasons that Google and Facebook have become so dominant in the digital advertising world is the superiority of the targeting options on these platforms. (See Figure 2.) On top of this effective targeting, machine learning-based automated targeting can produce even higher concentrations. Thus, even when these channels have a higher cost per exposure, they are often more cost-effective than lower-cost channels because less money is wasted advertising to non-potential customers.

Figure 2. Effective ad targeting on Facebook (and other digital channels) produces a high concentration of potential customers.

Exposure effectiveness

In order for an advertisement or customer communication to be effective, it must accomplish a very difficult task—it must ultimately change the behavior of the person who views the ad or communication. A person must click on the ad and purchase (or take an action to move them along the purchase path) when he/she would not have made the purchase in the absence of the ad. To have such a dramatic effect on behavior, an ad or communication must command sufficient attention and thought from the potential customer. A display ad on the sidebar of an online newspaper article is easily ignored by most people, and so such ads typically have a small effect per exposure. Facebook ads are typically more effective than other display ads because they show up within the News Feed and command users’ attention for enough time to force users to decide whether to skip the ad or investigate it more.

= non-potential customer

= potential customer

All Facebook Users

Ad Target

The effectiveness of an ad exposure also depends on the proportion of potential customers who are harvest-ready. If Toyota purchases 10,000 ad exposures on a display network, perhaps 5,000 of those may be to potential customers. But of those 5,000 potential customers, perhaps only 100 of those are currently in the market for a new car. The other 4,900 potential customers may be locked into a lease, currently living in a city without the need for a car, satisfied with their current car, etc. Those 4,900 exposures may not be a complete waste—it is possible that those ad exposures increase the likelihood of a Toyota purchase several months or years in the future, but the 100 ad exposures to the people who are currently in the market for a car, and thus are harvest-ready, were the most effective. Search ads tend to be highly effective because a search for four-door sedan prices is a strong indication that the searcher is harvest-ready.

Channel Evaluation

The cost effectiveness of each digital marketing channel differs across companies, and thus the optimal budget allocation across the channels also differs. However, the relative advantages of each channel often extend across a wide variety of companies.

Email. If a company has established an effective method to collect email addresses from potential customers (along with their consent to send them marketing emails), email is often an extremely profitable tactic. Cost per exposure is extremely low; the customer concentration tends to be high (recipients likely consented to emails because they had an underlying interest in the product or service); and the exposure effectiveness is typically high because the customer gives the email dedicated attention.

Search engine optimization. SEO, when successful, can produce extremely high rewards. Once a good organic search ranking has been achieved across a variety of relevant search terms, a proverbial gold mine appears—high customer concentration with high exposure effectiveness, at zero cost per exposure. But the “zero cost per exposure” is an illusion. The amount of employee time and effort required to achieve good search rankings is typically quite high, with a delayed and uncertain result. And even when good rankings have been achieved, constant effort is required to maintain those rankings. Well-executed SEO is typically a worthwhile activity for most companies, but it has a number of difficulties: (1) the results are delayed; (2) the results are uncertain; (3) the cost per exposure is difficult to measure. These difficulties make it difficult not only to measure the return on SEO investment, but even more so to determine the optimal amount of SEO investment.

Paid search advertising. Both the customer concentration and exposure effectiveness of paid search advertising is extremely high. The cost per exposure (derived from the cost per click, the most typical method of paying for paid search ads) is determined via an auction, which means that more valuable keywords tend also to cost more. Advertisers who can generate a high conversion rate (a high percentage of website visitors making a purchase) can often count on a steady stream of profitable website visitors from paid search ads. Other advertisers who have not refined their purchase funnel have difficulty earning a positive return on even the best keyword

targets. An important advantage of the paid search channel is that the returns are often immediate, because a search on a particular keyword indicates purchase readiness.

Social media advertising. The variety of targeting methods available on most social media platforms enables smart advertisers to achieve an impressive level of customer concentration. This advantage combines with high impression effectiveness, because most social media ads command the user’s direct attention. Cost per exposure has steadily increased over time, but many advertisers across a wide variety of industries and customer types earn positive returns on social media ads.

Social media posting. In the early days of social media, companies anticipated it would be a valuable new “free” advertising channel. The thinking went that by earning followers to their social media accounts, they would have highly effective ads appearing to a concentrated group of customers at zero cost. But these efforts have yielded poor returns for most companies. Those returns have only decreased over time as social media platforms increasingly limit the exposure of content from corporate pages. While a select number of companies have earned huge returns with viral social media content, these runaway hits are exceptions, not the rule. Unpaid social media content tends to be more productive for loyalty building efforts than for demand generation or demand harvesting.

Display advertising. Banner ads running along the top or side of a media website are literally and figuratively a sideshow. Most internet users try explicitly to avoid looking at them. As a result, exposure effectiveness is typically low. However, these ads also have low cost per exposure, and display ad networks offer a number of targeting options that can produce a high customer concentration. Retargeting, a technique whereby advertisers show ads to previous website visitors, produces an especially high level of customer concentration and a high level of harvest-readiness, and thus often produces positive returns.

Table 1 summarizes the above discussion.

Channel Cost per Exposure Customer Concentration

Exposure Effectiveness

Email Low Medium to High Medium to High Search engine optimization

Varies Medium to High Medium to High

Paid search advertising

Medium to High High High

Social media advertising

Medium to High High High

Social media posting Varies Medium Low to Medium Display advertising Low Medium to High Low

Other Digital Marketing Tactics

Choice of digital marketing channels and the level of investment in each channel are key considerations of a digital marketing strategy. But a number of other important tactics can be employed by digital marketers, so a digital marketing strategy may also wish to consider the resource-intensity merited by these tactics.

Conversion rate optimization. The prototypical digital marketing transaction proceeds as follows: a consumer sees an ad, clicks on the ad, visits the website, and makes a purchase from the website. The best advertising in the world will not produce profitable results if the website does not convert—that is, if the website design or purchase flow is not conducive to purchase. Conversion rate optimization (CRO) is a process by which website copy is tested to determine whether different content, a different layout, and/or the addition or subtraction of features produces a higher conversion rate. CRO is virtually always a worthwhile tactic.

Mobile Application. The mobile application market is one of the most skewed in the entire business world—a small number of apps are wildly successful, while most apps never achieve a sizeable install base. And among apps that do achieve a decent install base, many of those installs result in only one immediate use and are eventually deleted before ever being used again. Building a mobile application is highly resource intensive, so before a company undertakes the effort, it must ask whether (1) it can achieve a requisite number of installs; whether (2) customers and potential customers will establish a pattern of continued usage of the app; and whether (3) use of the mobile application use will have a sizeable impact on demand generation, demand harvesting, or loyalty. A retail company like Best Buy might be better served optimizing their mobile website rather than developing an app. But a booking site like Expedia is likely to generate additional bookings from users who install and use their app.

Affiliate Marketing. Affiliate marketers promote products on their website, provide a link to purchase the products on a different site, and then receive a commission on purchases generated from those links. The key strategic questions around affiliate marketing are (1) whether to engage with affiliate marketers, (2) what commission sizes to provide affiliates, and (3) how intensely to focus on affiliate relationships. Affiliate relationships are typically beneficial, as they drive low-risk, profitable traffic. One possible downside of affiliate engagements is that affiliates could potentially steal traffic and thereby require commission from sales that might have occurred without the affiliate’s efforts. But the fact that Amazon uses affiliates extensively demonstrates that this downside does not outweigh the benefits for Amazon.

Influencer Campaigns. Many people have managed to amass enormous social media followings. Companies can hire these influencers to peddle products to their followers. Some industries (e.g., fashion, make-up, workout supplements) seem to thrive on influencer campaigns. The impact of these campaigns can be difficult to verify, because an influencer’s post is typically only seen by a fraction of those followers. In addition, fake follower accounts abound on social media platforms. Despite these pitfalls, influencer endorsements can be profitable. Many companies are also finding success working with micro-influencers, people who have amassed much smaller, but often more loyal, social media followings.

Direct Messaging. Facebook Messenger, WhatsApp, and WeChat allow companies to communicate directly with consumers. Chatbots, software programs that engage in unsupervised conversations with potential customers, can produce personalized (and therefore highly effective) promotional content. But this channel remains quite small, and despite consistent growth, it is unclear whether it is likely to become a mainstream channel.

Allocating Resources Across Channels

The apportionment of budget across channels should be done to maximize long-term profits. Due to the inherent complexity of long-term profit-maximizing budget allocation, we begin with a stylized example that assumes market stability (i.e. that maximizing immediate profits also maximizes long-term profits) and full knowledge of each digital marketing channel’s returns at various levels of investment.

Figure 2 shows the marginal level of return expected from an additional dollar invested in each channel. For all of the channels except SEO, marginal returns uniformly decrease as investment increases. (It is typical that return on investment in any channel decreases as the level of investment increases. Competent digital marketers conducting a paid search campaign will advertise on the most profitable keywords first. If the budget increases, they will begin advertising on the next-best keywords, but the return on these keywords will be lower.) In this hypothetical example, SEO requires a higher level of investment before it begins producing profit-earning rankings on high-volume keywords. Finding the optimal allocation of digital resources across the six channels would be an easy exercise with a basic optimization software (even as basic as Solver in Excel could find the optimal allocation). But to provide better intuition about it, we will discuss a more manual process for determining budget allocations.

Figure 2. For most channels managed by a competent digital marketer, returns decrease as investment in the channel increases.

If a company had an extremely limited digital marketing budget, say $100 per month, how would those $100 be best spent? Based on Figure 2, all $100 should go toward email marketing, because it earns the highest returns. As the budget increases, this company should continue to allocate the additional funds toward email until the marginal return drops below the returns exhibited by paid search at the top of the paid search curve. At this point, some of the additional funding should go toward paid search. The share of funding between the two channels should be allocated so that the marginal return is equal between the two channels. As the budget increases for both channels, the company would soon begin running social media ads, then eventually undertake social media posting and display advertising. Throughout this allocation process, the company would be maximizing profits if it maintained equal marginal returns across the channels it was participating in.

The most significant difficulty in this process is the allocation of budget to SEO. Returns to SEO are 0 for the first dollar spent on it and continue to earn very low returns at low levels of investment. But when the company’s total marketing budget increases beyond this small amount, it should invest heavily in SEO. Here, a basic optimization program would easily find the profit-maximizing budget allocation at any given level of overall budget.

This optimization process provides a useful model for thinking about digital marketing strategy, and good marketers frame their thinking in this way. But marketers cannot apply this

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Investment Level

Channel Returns by Channel Investment

SEO

Email

Paid Search

Social Media Ads

Social Media Posting

Display Advertising

process literally, because marketers typically do not know the marginal advertising returns from every digital channel at all levels of investment. Nevertheless, a good digital marketing strategy should center on maximizing return on marketing investments across channels in the service of the three customer influence efforts, even if the maximization process is done with incomplete knowledge. We now illustrate the application of the digital marketing strategic framework to three very different hypothetical companies.

Company #1 – Online retailer

Custom Tees sells custom T-shirts on its new website. It just launched its website, which enables customers to submit a graphic design of any variety and create T-shirts with that design printed on it.

Customer Influence Efforts. Custom Tees has no existing customers, and existing demand for custom T-shirts is strong, so Custom Tees will at first invest all its resources in demand harvesting. As Custom Tees begins to earn sales from its demand harvesting efforts, it will engage in loyalty building efforts to induce repeat purchases from those customers. It will likely never invest heavily in demand generation efforts, as it will likely always be more cost effective to earn business from people wanting a custom T-shirt than it will be to convince new people to design a custom T-shirt.

Channels and Tactics. With its singular focus on demand harvesting, Custom Tees will invest heavily in paid search, social media advertising, and display advertising. As the ads across all these channels generate traffic, Custom Tees also invests in retargeting. Because their profits are generated entirely by online conversions, Custom Tees will engage in conversion rate optimization from the outset.

Competition for organic rankings in the custom T-shirt market is fierce, so Custom Tees does not believe it will be able to earn first-page rankings for any high-volume keywords for a long while, so it invests very little in SEO. However, it contracts with a digital marketing agency to do some basic SEO, with the hopes of earning first-page rankings on some specialized keywords. Such efforts will also provide option value for the future, because if in two years the company determines that heavier investment in SEO will be beneficial, results will materialize faster with its two-year history of SEO, even at a low investment level.

Other than creating the obligatory Facebook page, Custom Tees does not invest in organic social media. Email efforts will grow in proportion to the size of its customer database.

Ongoing Implementation. As Custom Tees grows, it continually monitors its advertising returns on paid search, social media advertising, and display advertising. It finds paid search to be so competitive that the returns are low on all but a few selective keywords, so its paid search spending decreases in favor of increased spending on paid social media campaigns, which shows steady returns. Display advertising shows somewhat low returns, but the display retargeting campaigns are highly profitable, so budget gradually shifts from generic display

campaigns to retargeting campaigns, though it keeps some budget in the generic display campaigns to continue feeding the supply of its retargeting pool.

After a few years, Custom Tees begins ranking on the first page on a greater number of low-volume searches, and metrics indicate that it has built credibility as high as many of its competitors who are ranking for larger-volume searches. It therefore increases its SEO spending after forecasts indicate the likely return will exceed the returns from the paid advertising channels.

Custom Tees consistently earns strong returns from its email marketing, so it expands its investment by purchasing sophisticated software to enable greater customization of email content and by hiring additional employees to create more personalized content.

Custom Tees also notices that many fashion companies of similar ilk have established solid Instagram followings. This fact, combined with the fact that Instagram advertising has earned high returns, convinces Custom Tees to begin posting on Instagram. Custom Tees especially likes the fact that Instagram followers will likely be a different audience than their current email list, which means that Instagram efforts will not be redundant.

Company # 2 – Furniture Seller Expanding Online

Barrett Furniture has several large furniture stores throughout Texas and Oklahoma. They have done very little digital marketing to this point, because their traditional marketing efforts have been very successful. They have a website and a Facebook page, but the website is out of date and is purely informational (i.e., consumers cannot make purchases on the site). The owners have finally decided to invest heavily in digital marketing.

Customer Influence Efforts. Because of Barrett’s long history in the furniture business, it has an extensive list of past customers. Loyalty building will be a top priority in its digital efforts. However, most people make furniture purchases very infrequently, so Barrett will also focus on demand harvesting from consumers who are “in-market”. Because furniture purchases are large purchases for most people, brand perceptions are highly influential in consumers’ decisions about where to shop, which implies that demand generation efforts should be beneficial. However, Barrett’s chain of stores and traditional marketing efforts likely accomplish this effort more effectively than any digital channel, so Barrett will not put extensive efforts into demand generation through digital channels.

But before Barrett begins directing customers to its website, it will invest heavily in updating the website, getting its full inventory uploaded and searchable on the site, and enabling web purchases and in-store pick-up.

Channels and Tactics. Because of the priority it places on loyalty building, Barrett will invest heavily in email. It has been collecting email addresses from purchasers and will begin sending regular emails to this list. These email efforts will be more cost effective than the catalogs it has been sending.

Barrett’s chain of stores gives it an advantage on the SEO front. Many furniture searches turn up local results on the search engine results page, so Barrett only has to compete with other local furniture stores to rank well on those pages. Barrett will likely see the positive impact of SEO efforts almost immediately. In addition to organic search, Barrett will invest heavily in paid search as a central pillar of its demand harvesting efforts.

Only a small fraction of the general population is actively looking for furniture, so display advertising may at first blush seem to be a waste of money. But Google provides “in-market audience” targeting, allowing Barrett to show ads only to those who show evidence of actively looking to make a furniture purchase. In addition, retargeting would likely be highly effective for Barrett Furniture.

Barrett will likely not invest heavily in social media, either posting or paid advertising. But it may allocate some investment into experimental marketing efforts in these channels. With the right targeting mix, Barrett may be able to find consumers who are actively looking for furniture, so experiments in social media advertising are worthwhile. Barrett may also find that loyalty building efforts through paid advertising are cost effective. Barrett can upload its email list to Facebook and then advertise directly to these customers to induce additional purchases.

Ongoing Implementation. While Barrett’s website enables online purchase, consumers more commonly come in to the store to make a purchase, even when their purchase is instigated by digital marketing communications. As a result, measurement of advertising effectiveness is difficult. While sophisticated experimentation and analytics methods may enable measurement of advertising returns, Barrett does not have the capability or desire to implement these difficult methods. Instead, Barrett does its best to infer marketing effectiveness from the measures that are available to it. For example, it can measure click-throughs from its display advertising and infer that some percentage of these visits will lead to an in-store visit (and purchase). And though only a small percentage of website visitors make a purchase on the website, it can use this conversion rate to infer the overall purchase rate from the various digital marketing channels.

Based on this imperfect method of gauging marketing success, Barrett infers that its SEO efforts and paid search are yielding highly profitable returns, so both channels quickly reach a steady state of high investment. Its email efforts also produce a high level of digital activity (and presumably a high level of purchase), so it continues to expand efforts both in email collection and email content creation and segmentation. Its email efforts have an interesting ancillary benefit in that its experimental social media advertising turns out to be profitable because of look-alike audiences based on its email lists. As a result, Barrett gradually increases its social media advertising.

Barrett’s display advertising is mildly successful, but the other channels prove more cost effective than display, so Barrett gradually decreases investment in this channel. What’s more, Barrett also believes that much of its display advertising audience overlaps with its social media targets, so any purchases generated from display advertising might be double-counted.

Company # 3 – B2B Software Provider

K7 Analytics provides an integrated dashboard for integrating, storing, and reporting company data from multiple sources. For example, a company can combine operations data, sales data, and digital marketing data and run reports on this combined data. It sells its software to large organizations through a long buying cycle. Implementation of its software requires a multi-month, labor-intensive effort.

Customer Influence Efforts. A purchase of K7 software typically proceeds as follows. An employee of a potential customer company fills out a lead form on the website. If the lead is a high-value lead (i.e. K7 determines that the company is in its target market and that the employee has decision making authority), it will be forwarded to the sales team, which will contact the lead to try to set up a sales call. If the lead is of lesser value, the lead will be put in the lead nurturing pool, in which the lead will receive periodic email content that will educate the lead about K7’s software offerings and benefits. K7 will monitor the lead’s activities (in addition to activity from other employees of the same company) and will attempt to schedule a sales call when the activity indicates the company may be serious about a software purchase.

Demand generation and demand harvesting take a different meaning in this context. Demand harvesting typically refers to securing a sale, but K7’s digital efforts will be focused on gathering leads, so has K7 “harvested demand” when it collects a lead? The short answer is no, because K7 has not satisfied any demand; it has only secured the right to market to the lead. But leads are nonetheless very valuable to K7, so it needs to track its success on this front. Instead of determining company priorities across demand generation, demand harvesting, and loyalty building, K7 will prioritize lead harvesting, demand generation, and loyalty building.

Lead harvesting will be K7’s top priority. Generating demand for its products is much more cost-effective via email than via any other channel, so the more qualified leads it can secure, the more effective its marketing efforts will be. Demand generation will be K7’s second priority, because if its digital marketing efforts can improve the sales team’s close rates, it will directly impact the bottom line.

Once a company has signed a contract to implement K7’s software, the customer relationship will mainly be managed by the customer support division or the customer success team. However, some digital marketing channels could possibly be used to communicate with customers and either increase the likelihood of contract renewal or promote possible add-on software offerings through cross-selling or up-selling.

Channels and Tactics. In its lead harvesting efforts, K7 may first look to paid search to find people actively looking for a corporate data management platform. But K7 may also find that most search terms around “analytics” have such diverse meanings that very few of the searches have a high customer concentration. If only very few keywords are specific enough to screen out non-potential customers, paid search may only merit a small investment.

K7 knows that email will form the majority of its demand generation efforts. This reality increases the likely benefits of SEO. With an entire team constantly producing content for an

extensive email effort, the SEO team will have plenty of content to use to build backlinks. Producing sufficient content at high quality is typically the largest impediment to SEO efforts, so with that bottleneck removed, SEO efforts should produce results quickly.

Both display advertising and social media advertising are likely merit extensive investment. Most critically, K7’s advertisements need to be targeted to people who work in the right positions within the right companies. Both display advertising and social media advertising provide targeting methods that will enable good screening on this dimension.

For its demand generation efforts, K7 will primarily utilize email. The rich content capabilities combined with personalization possibilities and low cost of email make it an obvious choice. But K7 needs to be seen as a thought leader and authority on the subject of business analytics, so becoming a regular contributor to LinkedIn Groups or other social media content providers may also prove fruitful.

Ongoing Implementation. As K7 monitors the results of its marketing efforts to measure its returns, these measures are complicated by the long sales cycle. Most of its digital marketing expenditures go toward lead harvesting, so it measures returns by assigning a fixed value to every lead. But it may be that leads from some channels are more likely to close than leads from other channels, making them more valuable. Because of the long sales cycle, a year may pass before K7 realizes that the leads from its social media content are twice as valuable as the leads from display advertising. Worse yet, K7 may never realize this, because the software system it uses to track lead progress and sales efforts is accessed by multiple people from multiple departments, which means the data are highly likely to become corrupted at some point. If K7 is able to maintain its data integrity and is able to determine the value of leads from various channels, it still faces the reality that the leads produced one year prior are not the same as the leads produced today, so the analysis of last year’s leads may not provide an accurate representation of the value of today’s leads.

Even with these complications and limitations, K7 does its best to measure returns to its marketing expenditures. As it collects more and more leads, its display advertising and social media advertising become increasingly effective through use of look-alike audiences on both channels. Because of the importance of email in demand generation, K7 continues to build out increasingly complex email personalization through marketing automation software. As anticipated, paid search yields poor results except on very specialized search keywords, so investment in paid search remains low.

K7 finds that its social media posting and participation in LinkedIn Groups does not produce a large number of leads. But it hears repeatedly from its sales team that customers who close deals mention the content produced by K7 as an important source of validation of K7’s superiority. Though it is difficult to empirically verify the effectiveness of these efforts, K7 decides to expand on these efforts, because it is at least plausible that these efforts are effective.