Digitalization provides an unparalleled opportunity for firms to better understand customers and their buying journey. Yet despite significant efforts and investment, B2B companies have struggled to harness the power of digital tools in their sales and marketing efforts. At Growth Arc, we have identified five cultural norms in B2B firms that act as barriers to results from digital sales and marketing techniques.
In the first four posts of this series, we discussed barriers to deepening customer understanding, working cross-functionally, learning experimentally, and managing complexity. Today we look at investment mindsets and how they can put digital initiatives on the wrong path.
In order to successfully implement digital sales and marketing techniques, firms must invest in technology, people, and processes. This often takes the form of capital outlays and staffing additions, with the certainty of returns varying for each investment. For example, cost savings on printing and travel are easy to estimate and likely to be realized. The benefit of increased sales revenues, however, is harder to estimate and predict.
As such, it is common for management to justify digital investment by referencing cost savings, which are more certain, rather than growth, which is harder to guarantee. The thinking is that if an investment performs well with the known returns, then it can be expanded to take advantage of the less certain but still desired potential revenue gains.
While this play-it-safe approach to investments will yield more certain returns, it jeopardizes a firm's ability to achieve maximal returns on their investments. Firms that justify investments on a cost savings basis will focus their attention on cost savings activities, which represent only a subset of the activities required for reaching return potential. This behavior runs the risk of not resourcing the initiative well.
The blind spot lies in not recognizing that the activity sets for cost savings and growth are distinct with minimal, if any, overlap. For example, to reduce printing costs, your communications teams must make marketing collateral available digitally to sales personnel. However, improving conversion on a particular step along the customer journey may require new collateral targeted to new buying influences, which would likely require sales and marketing input to design. As cost-savings activities and growth-generating activities are different, they should only be undertaken when in alignment with the intended outcome of your investment.
When firms rationalize a digital investment on a cost reduction basis, attention can be drawn toward cost savings activities - and away from growth activities. Cost-cutting activities are prioritized, and as a result, firms do not experience meaningful revenue returns despite significant investments in digitalization. In addition, basing investments on incremental cost savings may result in under-investment, as top-line returns might justify larger bets.
Breaking this barrier requires firms to align the goal of their investment with its justification. To do so, firms need a clear focus on their desired objectives. As previously discussed, digitalization offers firms the chance to better understand their customers and add tactics to drive conversion. It is on this basis that digital investments should be made. Investment objectives shape the initiative's activities, so firms must ensure they invest in digitalization for the right reasons.
It is understandable that firms want to manage investment related risk. To do so, they can charter pilots to appraise the top line benefit before making larger investments. This is more effective than hastily making larger investments and shifting focus to cost savings. Doing the latter essentially throttles the investment, diverting teams' attention to activities which, although beneficial, are not the primary goal.
Approaching digital investments with the right mindset is critical to achieving the significant revenue returns these investments offer.