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A Test Driven Model for Marketing Success

There’s a concept, popularized in a 2004 book by Barry Schwatrz, called the Paradox of Choice (WikipediaTED.com video). The argument goes something like this: capitalism is great because its brought consumers a wide range of autonomy and options. However this same array of choice has increased anxiety and, in many situations, produced the inability to make a decision at all.

I believe a similar concept applies to marketing and lead generation. As communicators we can’t deny that there are now nearly an infinite number of ways to educate prospects, engage buyers and capture leads. Sure, if you’re working on a restricted budget or short timeline that may check a few options off the marcom list; but even so you can always take the time to learn SEO, put a pen to paper to write informative content, run a few demographically targeted advertisements or pick up the phone and do cold calls.

The issue isn’t that there aren’t good opportunities to advertise your business. And I don’t believe that the problem is your lack of financial or human resources either. No, the real roadblock to growing your business comes down to one question:

“What’s going to generate the biggest return on investment for my time and money?”

I don’t care how good your advertising agency tells you they are or how much experience your new CMO has – no one can guarantee ROI. However, a talented marketer can help you research and develop a series of educated guesses – what we at Method Savvy, borrowing from Steve Blank’s “Four Steps to the Epiphany”, call hypothesizes – that you can then run experiments to prove or disprove. This type of test-driven marketing allows you to build on the experience of your marketing team, minimize risk and invest the bulk of your marketing budget in what is generating real, measurable results.

A four step model to practical test driven marketing

I know, I know – accountability is a buzz word these days in marketing circles. However iteratively testing your marketing endeavors is about more than just covering your butt – it’s a way to quickly learn what your prospective customers respond to before investing heavily in scale. Testing and optimizing your marketing actions on a continual basis allows you to invest in what works while ruling out what doesn’t. Sounds great, right? But how is this done? Let’s look at a simple four step model:

Step #1 – Pick a small hypothesis
Start with as small of an experiment as possible. Preferably one that allows you to test an isolated variable. For instance, let’s say you’re a company that sells cupcakes for events and special occasions. You’ve done your research and know that your customers (on average) purchase cupcakes from you 2 times per year: once for the birthday of a loved one and once for a work function. Let’s also say that your data shows that one of the most effective ways to gain a repeat customer is through free sampling of your cupcakes. One potential (and scalable) hypothesis to test would be that, “we believe that if we offer a prospect customer a coupon for a free cupcake on their birthday then we can generate a minimum of two additional purchases from that new customer within 12 months.”

Step #2 – Measure the right metrics
Now that we have a reasonable hypothesis you need to figure out all of the practical ways to measure whether or not its true. For a first test I recommend that you keep the metrics to a few that are important rather than all that are possible. The reason being that its easy to drown yourself in data, and as technique to improve ROI its much better to have a few metrics that are practical for you to measure rather than a whole bunch that quickly become overwhelming. Using the cupcake example, a few practical metrics can include:

  • Number of visitors to the cupcake coupon website landing page
  • Number of free cupcake coupon redemptions
  • Number of times customers use the “Share with a friend” feature on the coupon website landing page.
  • Number of times the new customer orders in 12 months
  • Average order size from new customer

Step #3 – Run a limited test
There are many ways that you could test a promotional marketing campaign like the cupcake example. But keep in mind that you want to run the smallest test that you possibly can so that you can first measure results before investing a lot of money in the program. Continuing with this example, one easy way to test the coupon would be to run pay per click advertisements on Facebook that only target prospective customers within 20 miles of your cupcake store on their birthday. You can run the campaign for a short period of time – say one month, or up to a lifetime budget of $500 (which ever comes first) – and collect great outcome data.

Step #4 – Evaluate the results
OK< so by now you’ve run your experiment and have real results to evaluate. At the most basic level the first question to answer is how did your prospects react to the offer? Did they click on your ad, share it with friends and/or register for the coupon? Did they actually redeem the coupon and/or make a follow up purchase? Was the response in line with your expectations or did your prospects do something surprising that can inform your future marketing efforts? Remember, just because a campaign didn’t work doesn’t mean that it wasn’t useful to run. There’s a lot of great learning that happens when something doesn’t work.

Ideate. Test. Adapt. Repeat

The test driven marketing model provides a fairly simple framework built around one rule – don’t spend a lot of money on a marketing program until you can be reasonably sure its going to generate positive results. That doesn’t mean that you shouldn’t come up with big ideas or take chances. But it does mean that in an increasingly return on investment oriented business environment its a lot easier to justify a larger budget when you can show proof of ROI.

So, run any good test campaigns recently?

Posted in Business, Marketing, Sales