Spur Digital: Overcoming Barriers to Online Investment

Overcoming Barriers to Online Investment

By Steve Latham, CEO of Spur Digital
July 2008

Despite the importance and advantages of the Web as a marketing medium, barriers to online investment exist. In this article, (part 2 of a series) Steve Latham provides a 5-step process for overcoming them. To read “Barriers to Online Investment” visit www.spurdigital.com/resources/barriers.

The Promise of the Web
As most are aware, media consumption has changed dramatically and the Web is now a close second behind TV in daily media time. For marketers, the Web offers numerous advantages including:

Ability to segment and target audiences
Ability for users to take action
Ability to measure reach, engagement and conversions
Relative low cost to produce and place ads

Online programs generally outperform other media. For our clients, the cost of Web leads is 30-60% LESS than that of traditional media. Online efforts should yield $10-$15 (or more) in directly attributable revenue for every $1 invested.

Barriers To Investment
Despite its benefits, online accounts for only 7% of media spend, which pales in comparison to the 30% of media time spent online. McKinsey recently reported that the primary barriers to online investment were:

59% Insufficient capabilities (in-house and at their agency)
52% insufficient metrics to measure impact
33% Difficulty of convincing upper management
24% Limited reach of digital tools

In addition, other factors including status quo mentality, misperceptions and business process may also prohibit investment. To learn more, read Barriers To Online Investment.

Overcoming the Barriers: a 5 Step Process
Barriers to online investment are formidable, but not insurmountable. Below is a 5-step process for obtaining budget and building a foundation for online success.

Step 1. Educate your executives
At the 2008 IAB Conference, a key takeaway was the need to educate c-level executives on the importance of the Web. They need to understand the trends in media consumption and the advantages of digital marketing. They need to realize that your customers are online and competitors are only a few clicks away. You have to be competitive in this arena.

Step 2. Develop an online strategy
Many start with one-off projects that have little chance of succeeding on their own, and little synergy between them. Poorly designed, user-unfriendly web sites, and mixed bags of standalone Web initiatives are not atypical. As with any venture, success starts with a plan. An online marketing strategy should define the audiences, objectives, tactics, requirements and expected results with a clear link between online engagement and revenue.

Step 3. Define metrics for success
The #2 barrier cited by McKinsey was insufficient metrics. While most understand the concept of “hits” or visits, few are able to connect visits, page views, actions, etc. to revenue. The best metrics for measuring engagement depend on the campaign objectives, audiences, creative, media and desired results.

Let’s assume you are a provider of B2B services and that customers use the Web to learn more about you and how you compare to your competitors. Your Web objectives are to reach, educate and engage prospects. To measure success against these objectives, you might track the following:

Visits: number of visitors and visits to your site
New vs. returning visitors: shows interest in your company and the content on your site
Page views and time spent on site: indicates level of engagement
Actions as % of visitors: measures actions that can lead to revenue (e.g. requests for information) as a percentage of visitors

Step 4. Build a Business Case
Once you have goals and metrics, you can create a business case and an expected ROI. Here’s how to do it using the same B2B service example:

Let’s assume you typically close 1 out of every 10 qualified leads (50% of leads become prospects, 60% of prospects request a proposal, 33% of proposals are won) and that each customer is worth $50,000. In this case, every online lead is worth $5,000 ($50,000 x 10%).
If you generate 10 leads per month, you should land 1 new customer worth $50,000. If it requires $5,000 per month in marketing expense, your direct ROI is 1000% ($10 in revenue for every $1 invested).
If you account for the incremental awareness, visibility and user engagement (your site often plays an “assist” role in engaging known prospects who want to learn more about you), the ROI is even greater. Studies show that 70% of online searchers purchase offline. So for every sale traced to the Web, 2-3 offline sales were influenced by the Web. If you assume this engagement value is equal to the direct revenue, the ROI is now 2000%.

If you present a business case that 1) is based on conservative assumptions, 2) can be easily understood by a CFO, and 3) produces a compelling ROI, you have a good shot at securing the budget you need to get started. If all else fails, show your CMO how well your competitors fare (and how poorly you do) on a Google search for your products or services.

5. Get Some Quick Wins
Once you get the budget, you now have to show results. As with any new initiative, it’s important to get some quick wins to validate your plan and provide needed credibility. It’s best to start with the lowest-hanging fruit, or with what we call a “foundational approach” that includes:

Optimizing your Web site to convert visitors to customers. This requires good usability (easy to navigate) and marketing effectiveness: good messaging, relevant content and compelling calls to action.
Paid search engine marketing or “SEM”. SEM should be used to test and validate search before you undergo a long term effort to optimize for natural search rankings. Paid search generally offers the fastest path to new customers.
Email marketing: the most cost-effective, efficient and measurable way to communicate with and cross-sell existing customers and prospects.

While search engine optimization (for natural search rankings), creating a blog or launching a display campaign may be important, they often take longer to produce results (i.e. revenue). If you want the opportunity to implement “strategic” programs, you first need to show some quick wins.

While barriers do exist, they can be scaled and overcome. You can find success by following the 5-step program above. If you have questions or comments please contact us.

Steve Latham is the founder and CEO of Spur Digital, a strategic interactive marketing agency. Steve is the President of the Houston Interactive Marketing Association and a Director of the American Advertising Federation – Houston. For more articles visit www.SpurDigital.com