Here’s a fairly simple formula that Sierra uses to help connect the dots and deliver an ROI calculation that bench tests a campaign before the first dollar is spent and delivers the financial metrics that executives are looking for:

(C x D x E)+ B

The formula may be easy, but filling it in is a different exercise entirely. To begin with, you’ll need to challenge your team or client to fill in the following variables, using profit dollars, not revenue dollars. All we care about as marketers is generating profitable growth, not just growth.

a. _____________ Sales team’s average conversion rate – if given 100 prospects, how many do they historically convert to customers?

b. _____________ Average profit for month #1 of net new customer – Due to installation or start-up fees, inception fees, etc. a new customer may pay more in the first month than following months. If there are no one-time expenses, take whatever you figure you have in item C and write it here.

c. _____________ Average net new profit per month per unit of measure – this could be seat licenses, facilities, contracts, or products.

d. _____________ Average number of units per customer – How many of these units do you sell on average for each net new customer?

e. _____________ Average customer lifetime value in months – Some customer relationships past months, others may last decades. If this average isn’t known, use 36 months which is the standard value for Customer Lifetime Value calculations.

Let’s plug in some hypothetical numbers to show how this works:

“ISV” is a software developer producing project management software for small to mid-sized businesses on a per-seat basis. Their average customer is a 12 seat license holder that nets about $25 per seat per month for ISV. This product is fairly new, so long-term lifetime value isn’t known. We’ll assume it’s 36 months. Lately, ISV estimates it has has been closing about 25 out of every hundred demos they provide within 30 days of the demo date.

Here’s how the numbers fall into place:
A. Sales team’s average conversion rate = 25%
B. Average profit for month #1 of net new customer = no start up costs, same as month two and beyond
C. Average net new profit per month per unit of measure = $25
D. Average number of units per customer = 12
E. Average customer lifetime value in months = 36

The formula would then be as follows:

($25 x 12 x 36) + $300 = $11,100

Every new customer for ISV means $11,100 of profit for the company, on average. Not bad in a volume play like ISV’s.

So what about the value for A? That comes into play when it’s time to develop the business case and ROI models for any new marketing initiative. We know that 25% of any prospects that request an online demo convert to customers. That’s one conversion for every four qualifies leads.

By applying the formula above, ISV’s marketing leaders can remove much of the guesswork from the go/no go decision: any marketing support activity that costs less than $11,000 to deliver every four qualified leads should cross the 100% ROI threshold and net positive return in the end.

If ISV embarks on a $60,000 marketing support campaign, it would need to generate 24 demo requests (and thus six new customers expected to generate a total value of $66,600 to the company) to deliver 100%+ ROI.

The question then becomes which tactics should be executed within that $60K budget to deliver the most leads, and what can be done to increase the conversion rate? In our opinion, the question should never be IF a campaign can break the 100% threshold, but by how many times that magic number can be bested using the dollars allotted.

Have a different way to determine ROI or see a flaw in our formula?  Post your thoughts below!

This theory was disproven once again for me recently, and from a place I least expected it. I’ve always been fascinated with human behavior in real life-or-death situations (think plane crashes in the rainforest, not missed deadlines). So I finally had time to read Laurence Gonzalez’s Deep Survival: Who Lives, Who Dies & Why. Along with the gripping stories of survival I expected came some surprisingly deep neurology lessons that rivaled anything in the behavioral sciences textbooks I studied in college.

It turns out the same reason that compels Navy pilots to ignore obvious danger signs from the cockpit when landing on a carrier is the same one that causes us to head for the refrigerator when we’re hungry: emotional shortcuts that are more powerful than the world around us allow us to sift through the barrage of sensory information to get us what we need, quickly. In panic situations like carrier landings in heaving seas these shortcuts can get us into trouble sometimes. But for most of us, we rely on emotional shortcuts to help us navigate the world safely and effectively.

Gonzalez illustrates how much we rely on these emotional pathways and how truly irrational we are with a simple illustration. Assume you are working at your desk and you develop those familiar hunger pangs around lunchtime. A completely rational being, Gonzalez argues, would try to fulfill that need for energy by expelling as little energy as possible in the process. That person would begin by systematically putting anything in easy reach in his or her mouth to see if it’s palatable enough to eat. Mouse? No. Stapler? No. Post-it notes? Don’t think so. And so on. Why? Because none of us have ever tried to eat those items before, and we’d just be responding to the stimuli immediately around us just the same way a newborn baby does; try and find out.

On the other hand, every human being driven by emotion – meaning all of us – addresses the situation by ignoring the immediate stimuli in front of us to call up some strong imagery: fridge. Pantry. Break room. Vending machine. We do it without thinking, knowing in a Pavlovian way that those actions will lead to satisfaction based on strong emotional associations we’ve made in the past.

It’s really no different in a group setting. We’ve all been a part of meetings that carry over into the lunch hour. But do those groups of intelligent, rational individuals begin gnawing on their notebooks and pens in an effort to satiate their hunger? No, though they may think about it if it gets bad enough. They behave the way we do as individuals, relying on well-worn emotional shortcuts to get us what we need.

So should we as B2B marketers give in to the temptation to focus solely on the rational sides of our target audiences? Heck no. Don’t be afraid to hit them with emotional appeals of status, prestige, risk avoidance, career advancement, unique knowledge, and any other emotional tricks that B2C marketers use to get you to buy that thing you never realized you needed until a moment ago.

Because the marketer that manages to hack through the forest of competing stimuli to find that well-worn emotional shortcut is usually the only one that survives in the end.

Create unique Meta Titles. Try to make your website page titles unique to the content for THAT PAGE ONLY. Your most important keywords should be the first word in the title tag. In most cases, this is what will show up the most in search results.

Develop descriptive Meta Tags. This should be just one sentence or two describing your website page and its content. In Google, the page description is what shows in the search responses – so be sure to make it encourage “clickthroughs”.

Only use SEO-Friendly URL’s. Avoid using long URL’s where at all possible, and always try to use your keywords in URL’s. As your website grows, be sure to establish a naming convention for URL’s and adhere to it. Many popular platforms, such as WordPress and Joomla, have plug-ins to assist you with this.

Write good Effective Content. In today’s very competitive SEO environment, CONTENT plays a huge role in the success of your SEO strategies. Consistently develop and deploy fresh, new content to your website to maximize your search results.

Optimize your Website Images. Write ALT text that exactly describes your images on their respective pages. ALT text is the words that pop-up in a bubble when you mouse over an image on a web page. Always keep the text very short, and never put the same keywords on every image on your website.

What did publishing in? Three things: Rising materials and postage and complex distribution channels increased expenses. The rise of search engine marketing (SEM)/pay-per-click and the advent of social media led to a steep decline in display ad revenue. And readers everywhere flocked to the free, immediate content available on the Web.

But help might be on the way from a most unlikely source: Apple. The same company that revolutionized the music distribution business is looks ready to do the same with the way we gather and interact with published information. There’s a good chance this revolution will begin before school lets out for the summer.

The heart of the revolution is the rumored iTablet or iSlate device that the Wall Street Journal announced will launch in January 2010 and ship by March. Although nobody has said anything official about the device, it has been mentioned by The New York Times in passing, and Sports Illustrated has actually posted an impressive demonstration of what their magazine *might* look like — on a device that has yet to be officially announced.

Why will the equivalent of a giant-sized iPhone be the salvation for the print industry? A few reasons:

• It’ll do for publishing’s distribution model what iTunes did for music. The old model of write/layout/print/deliver/consume will be replaced by write/layout/consume. Much faster and cheaper.
• It’ll bring back display advertising dollars. Today, print content is posted and reflowed to the Web, and a full-page display ad is replaced by a bunch of banner and tile ads. Not remotely the same user experience. By keeping print content in its native format as the iTablet allegedly will, the display ad again becomes a valuable piece of the marketer’s arsenal.
• It drops the barrier between offline and online content. If you looked at a magazine today and wanted to follow the call to action, you’d have to set aside the magazine or paper, open a browser, type in an arcane URL and hope you got it right. The iTablet experience removes the wall between print and online with the click of a mouse, engaging social media, online video, Flash animations, and more.
• It allows the user to keep content – and search it easily – forever. The beauty of the Web is that all content is linked together and searchable, making it unnecessary to hang onto old media. The same will now apply with content on the iTablet.

But Apple isn’t the only one looking to lead the revolution. Microsoft is preparing a device of its own called Courier, along with another impressive-yet-unofficial tech demo. Courier’s hinged cover actually mimics the act of holding a magazine better than a flat surface can. Whether the software is elegant and intuitive enough to meet the promises of the demo will probably mean the difference between a true revolutionary device and an evolution of the tablet PCs on the market today.

Most corporate communicators have already migrated their in-house magazines to either enewsletter or imagazine platforms in the last few years in an effort to save costs. But corporate marketers and communicators who haven’t built the iTablet or Courier into their plans for this year will be missing out on one of the biggest revolutions – and product launches – since the rise of the Internet. Bernstein Research is projecting that 3-5 million tablets will be sold in 2010 alone… will your communications plan be ready?

Every day, it seems that researchers and engineers take another big step forward in the ongoing pursuit of placing more and more capacity into our computers. For a technology-based marketing agency such as Sierra, these are exciting times for developing the right branding strategy for each customer by tapping into a rapidly expanding array of web-based tools. However, while the capacity of our hardware is growing by leaps and bounds, the hardware itself appears to be shrinking, or even disappearing

Not long ago, a single transistor (i.e., one of those little metal black bugs that fell out of dad’s radio that day you dropped it on the sidewalk) was large enough for you to easily hold between your fingers. Today, we have transistors that are literally one one-thousandth the width of a human hair. One of the biggest challenges now facing developers lies in finding ways to squeeze light through these gadgets. Can you believe it? We’re almost at the point where light won’t be able to “fit” into the transistors we’re building. It’s fascinating, but also hugely problematic.

Additionally, with the advent of virtualization, software and other data are no longer tied to any single piece of hardware. In fact, today’s virtualization solutions enable data managers to easily move ‘virtual machines’ (which might be running a company’s email system, or ERP solution, or high availability program, or whatever) from one server to another without ever interrupting the flow of information throughout the company. Better still, since virtualization enables the operator to run several solutions on a single piece of hardware, companies are actually reducing the physical “footprint” of their server farms by more than 75%.</p>

<p>At the same time, the convergence of cell phones, PDAs, cameras, GPS devices, social networking and so much more onto devices that become smaller every week means that the solutions driving our ongoing communications, social networking, web surfing, etc. are becoming less tangible and more virtual.

So, what do you think – Will communications in general, and marketing in particular, soon become a hardware-free enterprise where a webinar, a whitepaper, and a podcast can be delivered in the blink of an eye with no hardware component? If so, will that make our interactions more efficient and productive, or will we soon be “crushed” by a virtual mountain of “Tweets,” “tags,” instant messages, email, and good old-fashioned phone calls? Comments?