I’m a bit of a data nerd, so nonlinear relationships fascinate me. And they’re everywhere – from GDP growth over time to wealth distribution in societies. Understanding nonlinear relationships helps you realize why artificial intelligence is suddenly a hot topic. Unfortunately, most people have difficulties understanding nonlinearity. A quick test: if you could fold a piece of paper 42 times, how high would the pile be?
The answer: you would reach the moon. Thought experiments like this are interesting, but there’s one nonlinearity that beats all others: the Pareto principle, also known as the 80/20 rule. I first learned about it while studying economics at university. I ended up working for a CRM consultancy, which then led to analysing and segmenting the customer bases of more than ten industrial companies. The result was always the same – customer revenue obeys the 80/20 rule.
Generally speaking, sales managers have understood this nonlinearity for a long time. Most companies use customer classification models where key accounts make up roughly that 20%. These accounts have dedicated sales teams, while the smallest customers are typically left for telesales or occasional sales visits. Sales processes are defined according to account types, with gates, qualification criteria and dedicated sales roles.
In marketing, however, everything is upside-down. Marketing organisation and activities are usually based on products and channels, not on accounts and their potential. Marketers have to come up with fancy plans to push new products to the market. At best, they can show the added value they create through incremental increases in brand awareness and site visits. Even worse, the marketing budget is spread over different channels and activities, which still means a heavy focus on trade fairs and printed brochures.
Can marketers do any of this differently?
First, marketers should understand the nonlinear nature of the customer (and prospect) base. This alone helps to align sales and marketing objectives. Account planning should be an integral part of planning marketing activities.
Second, marketers need to understand the possibilities modern technology allows. For the first time in history, marketers have the tools to identify target audiences in detail, tailor the message for each stakeholder, and engage with them via the right channel, at the right time.
Third, the marketing strategy should be based on this nonlinearity and enabled by technology. There are two main approaches that arise from these considerations: account-based marketing (ABM) for large accounts and digital relationship management (DRM) for smaller ones.
The goal of account-based marketing is to influence stakeholders, including a wide variety of key stakeholders that are outside the reach of sales. Account-based marketing should be about delivering the right message to each stakeholder via the right channel. Technology allows marketers to simultaneously gain valuable stakeholder insight at different touch points. In turn, this insight will be critical for sales – reps will be better informed about interesting topics for their target accounts, and they will have better visibility in the customer decision-making process. To see a practical example of ABM, download our Wärtsilä case study here.
Digital relationship management is about improving the customer experience. It is much more than inbound marketing – it’s about automating customer processes and digitising touch points across the customer lifecycle. Of course, lead generation will be a big part of it, but marketers should be looking at on-boarding programs, up-selling opportunities and predictive churn prevention. By doing this at scale, the sales team can focus on the accounts with the greatest potential. To see examples of DRM, download our B2B engagement tactics gallery here.
Understanding the difference between ABM and DRM is the key to success in digitised B2B marketing. It also means a much more customer-focused marketing organisation – we may soon even see the rise of key account marketers!