Speaker 1: Welcome to the SBI podcast, offering CEOs, sales and marketing leaders ideas to make he number.
Greg Alexander: Good morning, good afternoon, good evening everybody. This is Greg Alexander, CEO and co-founder of SBI, as sales and marketing consultancy dedicated to helping you make your number. You are listening to the weekly podcast series. Today, I have an outstanding guest, Chris [Majara 00:00:35], who is the Chief Marketing Officer of McGraw-Hill Education, which employs 5,000 people in 44 countries in pursuit of better learning outcomes for students, educators, and administrators, via e-learning solutions. Prior to his current role as CMO at McGraw-Hill Education, Chris spent 20 plus years leading marketing teams at some great companies, such as BEA Systems and Kronos. Chris resides in the United Kingdom and he received his education at Middlesex University. He’s also a Fellow of the U.K. Charted Institute of Marketing. Now that we have established Chris’s rather extensive qualifications, let’s have some fun with him. Chris speaks fluent German. So, Chris, say “Good luck making your number” in German to our mostly American audience.
Chris: [Foreign Language 00:01:29].
Greg Alexander: Fantastic. I saw that in your LinkedIn profile and had to work that in here.
Chris: No worries. That was a bit of an outfield question. I had to dig deep into the memories of my days back in good old Germany.
Greg Alexander: Well, you did good. I was really excited to see that you agreed to be on the show because I think what it is you are trying to do right now is a fascinating use case. Let me set this up for the audience a little bit. As I understand it, you are trying to help McGraw-Hill Education go from a traditional textbook publisher to a digital solutions company. Is that correct?
Chris: That’s correct.
Greg Alexander: Many of our listeners run marketing teams for companies trying to reinvent themselves to stay relevant in the digital age. Before I just into my questions, Chris, can you frame up for the audience in maybe a few sentences or so, maybe what you were hired to do and how it is going so far.
Chris: Sure, not a problem, Greg. The real challenge here at McGraw-Hill, as you outlined there is to go … it’s really changing business models from an old textbook, print book publishing model to a e-learning digital solution technology provider and that is a huge transformation in anyone’s world. You know, McGraw-Hill Education has a 125 year history out there and in the last couple of years, we’re really seeing the digital transformation of education taking its pace, still picking up pace all the way around the world, not only in North America, but in the U.K. and in Australia, even Latin America, and increasingly in lots of part of Asia. That is a dramatic change in education. That is them improving student outcomes for all levels of students, be they pupils in K-12, K-20, to even post-graduate students of professional development, as well. Very exciting time.
Greg Alexander: Yeah, no doubt. I don’t there’s an industry in the world right now that’s not getting disrupted by technology, so when I think about textbook publishing in a 125-year-old company in the middle of this transformation and I think about it from a marketing perspective, I was really intrigued to have you on the show. Let’s jump into it a little bit and let’s discuss the elephant in the room: budget.
Chris: Let’s go straight in there. No, I mean, coming from a software and I.T. marketing background, that was probably one of the biggest challenges that I faced, was really to get my hands around the marketing organization and budget was a key part of it. Traditional publishers do not spend a significant part of their revenues on marketing. As you move to become more of a technology and solutions provider, that game changes and increasingly we’re devoting more of our efforts around investing in the right talent, the right people, as well the new customer-centric processes that you need, as well as the marketing and sales automation technology that can really help us scale at a global level. Pretty dramatic transformation. We’re having to make some pretty tough choices. What do we stop doing from the traditional channels of book publishing and what do we need to start changing and spending more money into the reaching our customers and prospective customers directly, creating a direct channels to market, as well as completely repositioning the brand from a book publisher to a learning science company.
Greg Alexander: With regard to budget, I have a very specific question. In the work that I do with my clients, my experience has been that companies trying to reinvent themselves, they need a big marketing budget to do so, but long-tenured executives married to the old business model are reluctant to invest. Have you experienced this and, if so, have you overcome it? What advice would you give to our listeners if they’re dealing with that?
Chris: Yeah, I mean, absolutely. It’s not an easy journey to go, but I think you’ve got to paint the vision of where you’re going and how you’re going to get there. Particularly for the CFOs, it’s about demonstrating real value at the end of the day. The new sales and marketing systems processes that we’re putting in place, will really provide the foundation for a global scalable model. What we inherited here when I arrived was very much a federated model of the [stitcheries 00:06:14] pretty much doing their own thing in the regions, very decentralized, and very tough to get a global view of sales and marketing and how you prove the efficiency and effectiveness of those dollars that are being spent globally. It’s a hard, uphill task.
It’s never easy to go to the CFO/CEO to demand that we need to be spending more in these areas. You’ve got to prove your worth and prove the value every step of the way. We are a private XPOed company since the last couple of years. Again, they’re very much used to seeing business cases put together that really … that you can believe in and with the right record of the individuals that are in place to transform and make those changes. That’s how we’re signing up for this.
Greg Alexander: Okay. What was the stimulus? When I think about this company, Mc-Graw-Hill Education, and I think about them going out and hiring a CMO from the software industry like yourself, I mean that’s a pretty bold move. What happened in the business that gave them the confidence to go hire somebody from outside of the industry to come in and transform their company?
Chris: Yeah, that’s a significant change that we’ve seen throughout all of the other function [inaudible 00:07:30], lucky enough to come in for pretty much after the first 12 months of being private equity owned and new CEO onboard, new President of the international division as well. They’re really looking at where we want to end up and what’s the end of the journey for us. That dimension is increasingly becoming a platforms technology provider for the education industry. Guess what. You need to hire people with those types of backgrounds and skills. There’s latent talent within the organization but with such a dramatic business model change, I think everyone recognized that you needed to get proven experience of that software technology world.
It’s not just on the marketing side, but on the sales side, and even more importantly and crucially, on the product development side. We have a Chief Digital Officer that’s really transforming our new product development process and how we develop the right types of digital solutions. There is a very interesting parallel there between the marketing world and where the education software world is heading and that is one-to-one personalized tailored education experiences, or learning experiences, that really … there’s a very good correlation between the journey that marketing has gone through towards that one-to-one personalized tailored right concept at the right place at the right time. I really do work on that analogy to what we’re trying to do in the learning space now.
Greg Alexander: Okay. We’re going to take a quick break. I want to make the audience aware of the new SBI Magazine. There’s an article in that magazine written by Jack Whalen, who’s a VP in Marketing at Philip 66. He discusses how he’s using digital marketing to transform the oil and gas industry, which is similar to what Chris is talking about here today in trying to transform the textbook industry. Here’s how you can learn more about the magazine and get the copy.
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Greg Alexander: Okay. Welcome back everybody. This is Greg Alexander, CEO and co-founder of SBI. Today I am talking to Chris Majara, who is the Chief Marketing Officer of Mc-Graw-Hill Education. Right before the break, we were having a conversation around how to justify budget, especially inside of a company that’s going through a transformation. Chris, right around the time that this episode is going to air, it will be mid-air and many CMOs will have to prove the marketing budget was spent wisely in the first half of the year before they can spend it for the second half. How does a CMO know if the first-half budget worked, it generated a return, and therefore, make the recommendation to continue with the conviction and spend in the second half?
Chris: You got to look at those forward-looking indicators. Revenue in this particular industry is very seasonal. When you are looking at the university entrance point throughout the year and they do defer around the world, as well. It’s not the traditional say September intake that we’re used to in the Western world, but it does change. In terms of justifying to continue or increasing the spend, you’ve got to look at your pipeline. You’ve got to be able to demonstrate and look at your lead demand waterfall and the conversion rates that you’re getting there, so all of those forward-looking indicators that can give you confidence along the way that you ultimately get to your revenue goal at the end of the season or the end of the year. That’s how I’m pretty much setting up the system to give us not only that marketing force revenue and pipeline information, but prior to that, the key metric as far as our campaign analysis is going and our demand generation activities and whether we’re reaching the required set of leads and how we’re converting them to pipeline.
Greg Alexander: These forward-looking indicators, I’m assuming that they weren’t in place before your arrival. Is that correct?
Chris: That’s correct. Coming from a print publishing world, it was pretty much a channel and B to C type model and increasing years we’re selling software solutions, it is becoming far more of a traditional B to B play. There, we’re really transforming the self-marketing system to become an implement, what I would be best in class is buyer-driven sales processes, that align to how the customer is buying and also looking at that complete customer experience or the complete life-cycle of the customer from [inaudible 00:12:35] that buying cycle to the post-sales, to customer usage and adoption because a lot of the solutions we’re putting out there are now sadly cloud-based solutions. You need to insure you’re getting usage. Once you’ve got the usage, then you want to try to get advocacy and really get some key ambassadors and the advocate base that will recommend the solutions. I’m a big believer that advocacy is going to be a key driver of demand generation. Back in the day, getting your customers to do the selling for you. That is absolute the case now even more so in the digital, social media world that we’re [spacing 00:13:15] ourselves in.
Greg Alexander: I had a customer tell me the other day, this is old wine in a new bottle.
Chris: I couldn’t agree more, couldn’t agree more.
Greg Alexander: I mean, getting your customers to sell for you, advocacy. That’s been a best practice forever. It’s just done digitally now where before, it was done word of mouth. Right?
Chris: Yeah, word of mouth marketing and we just got a new tool set, a new tool kit to go in and exploit that online and probably more scaled around the world. Obviously, the ream that I have is very much on the international side, so it’s how do we do this at scale, in the different markets, with the different culture that we’re seeing, in the different parts of the world.
Greg Alexander: In our practice, staying on the topic of budget, we typically see 4 budget-setting methodologies. I want to run each of those 4 by you and get your reaction to each, maybe share with me some pros and cons of each. It’s highly situational, of course. I just want to get these out there and just get your perspective on them. The one that we most commonly see as a budget-setting method is simply a percentage of revenue, which is some fixed amount expressed as a percentage. If you’re a 100 million company, you spend 10 million on marketing, then you have 10% spent. What are you thoughts on that, Chris? Your pros and cons on that approach?
Chris: That’s a traditional method of calculating marketing spend, but it all depends on the context of the marketplace. If you’re a brand new technology looking to make a new entrance into a new area, clearly you’re going to be spending a significant amount more to acquire customers in the new education phases, as it were. In a mature market, with established competition, established product, then it’s how do you take share away from your competition and their more established model. It does depend on the type of demand, type in the marketplace and the market dynamics. That is a proven rule out there and it’s one that you typically have to look at because a lot of the ratios around sales and marketing spend is a proportion of revenue. Our allowance are aligned to certain industries and certain stages of maturation of those industries.
Greg Alexander: I agree with you. I think it is useful to look at but I think it has to be placed in the proper context. That was some good advice as to how to do that. Okay, let’s go to another common one that I see, which is competitive benchmarking. This is establishing a peer group of companies, that are reasonable to compare yourself to. Then understanding how much the peer group is spending in marketing and kind of seeing what your spend is. Is it greater than, less than, etc. Chris, what are your thoughts on that? Pros and cons?
Chris: I think that’s an equally valid one but you’ve got to take into account that it’s all about the context. While context is all about the competitive market shares, that has that peer group. What type, again industry are we talking about? Is it a mature industry? Is it one that is on the verge of brand new innovation and technology and disruption? You can look at first mover advantage in coming in there and outspending your competition to get that first mover advantage. It’s all about the context, but traditionally more mature markets, even the software industry where I came from, that was, again, another key ratio that I looked at to be able to, again, build a business case to either increase or how do you drive more efficiency from our current market to spend if were spending more or less than the competition.
Greg Alexander: I think this one as well. However, I advocate benchmarking at the program level. Somebody can always outspend you. It’s a question of do you have the budget allocated correctly across the programs and intelligently spending can give somebody an advantage. I think that’s the benefit of competitive benchmarking.
We’re going to take a quick break. When we come back from the break, I’m going to ask Chris to comment on the 2 remaining types of budget setting methods: the affordability method and the objective method. However, we recently just recorded a podcast with Tim Huffmyer, who is the CFO of Black Box, which is a billion dollar technology company. He discusses how the CFO and the CMO should be working together to create this marketing budget. If you’re new to the podcast or if you the Tim Huffmyer podcast, I think you’ll get a lot out of it. We’ll be right back.
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Greg Alexander: Welcome back everybody. This is Greg Alexander, CEO of SBI. Today I’m joined with Chris Majara, who is the CMO of Mc-Graw-Hill Education. Right before the break, we were talking about the 4 forms of setting marketing budgets. Up to this point, we spoke about the percentage of revenue method. We just concluded our conversation on competitive benchmarking. We’re now going to move to the affordability method. This is typically used by companies in trouble. It is as it sounds. What can we afford? I’d like to spend x, y, z, but is it affordable based on the P&L, etc.? Chris, you have any thoughts or comments on the affordability method?
Chris: Yeah, it is a case of making consumption choices. You got to have a business strategy in place and a plan that the whole organization, sales marketing, product [inaudible 00:19:24] are executing against. You’ve got to be able to set yourselves up for success. If that means that through the analysis, you need to be spending more to achieve your goals and objectives, then you’ve got to stop doing some other stuff. When you’re in survival mode, it’s extremely tough. That’s what it comes down to in my experience, is very much making very tough consumption choices around every single dollar that’s being spent. There’s no easy way out. You’ve got to be able to prioritize correctly to drive ultimately an increase in sales and market share.
Greg Alexander: What’s makes this one particularly hard is early in the conversation you talked about how important it was to analyze forward-looking metrics. If you’re going to embrace the affordability budgeting method, that’s even more important because you have to have conviction to continue to spend. Answering the question “Can we afford this?, can only happen by looking at data. When it comes to very important things like brand building, you mentioned that you were re-branding Mc-Graw-Hill Education to be a digital provider. Sometimes it’s difficult, especially for finance people, to measure the impact that a brand may have on an income statement. How do you handle that one?
Chris: Yeah, where we’re now absolutely in the middle of a complete brand transformation, reworking our whole value proposition, company positioning, narrative, messaging. We’re having to do the groundwork, foundational work, and investing and getting all of that content together and then rolling that out to the staff internally and then ultimately externally to our customers. The brand building has got to be tied together with demand generation, as well. It’s that linkage there that I think, when you don’t have the large million dollar budget, every dollar that you’re spending on demand generation, there’s got to be some brand building elements in there, as well. At some stage, you’ve got to go and get a way to make the case to get that upfront investment to do that heavy lifting work. Then on an ongoing basis, you need to tie that very closely to demand generation activity.
Greg Alexander: Okay. That takes up to our fourth and final type of budgeting that I see, which is my personal favorite. It’s called ‘objective based budgeting’. Sometimes it’s referred to as ‘zero based budgeting’. It says here that here’s a list of objectives that we’re trying to get done and here’s what it’s going to cost to do that. We don’t start with any preconceived notions. We should invest this month, this much or that much. It’s what are we trying to do? How is the marketing strategy reflective of the corporate strategy? Are these mission critical objectives? If so, they need to be properly funded. I think this is an excellent way of doing budgets. Unfortunately, it’s not common. Chris, what’s your opinion on zero based budget or objective based budgeting?
Chris: I’m a big fan of it and a big believer of it. I think the opportunity to drive that type of new thinking with a blank piece of paper every year or every couple of years. It happens when you are going through these transformations where you need to look at doing things very differently than you’ve done in the past. New capabilities. New ways of communicating with your end users. It’s what I hinted at before. We’re having to make within Mc-Graw-Hill Education very tough consumption choices. What are we going to stop doing. For example, complimentary copies of books. You know, a large proportion of the promotional spend was spent on conducting that type of activity. Now, we’re converting that to e-sampling and sparing up a lot of those funds to be actually able to do more effective demand generation activities, brand-building activities and measuring the hell out of all of those programs.
Greg Alexander: That’s a very interesting example. Free copies of books versus e-sampling in books. My first uneducated thought is e-sampling’s a lot more cost-effective than free copies of books. But then I started thinking to myself, well, jeez, maybe not. Maybe there’s some stand up cost to get to the ability to provide somebody an e-sample. Is e-sample more cost effective and is that why you did it? Or is it more effective and is that why you did?
Chris: It’s definitely more cost effective. We’re looking very closely at the trials in terms of effectiveness. We have still a very conservative audience who typically still want to touch and feel or see the books and the chapters in the books. It isn’t a flick of the switch will just turn it off. It’s a gradual evolution and weaning our audience off of a very traditional model that it has seen in the past. It is a case of dialing it down and dialing up the different types of communication. Other key channels we are looking to now develop through additional marketing activities, but it all comes back to measuring the effectiveness of everything that we’re doing. That will then tell us whether it’s working or not.
Greg Alexander: You said something there that’s really interesting. I want to ask a follow-up question, which is: You’re in a very traditional industry. You come from the software industry and were progressive in your previous stops. You probably have a bag of tricks, so to speak, that you want to implement. However, you have to be careful that the industry that you’re now in. What will be receptivity of these new forms of digital marketing be? How do you assess that ahead of time?
Chris: Testing and then proving it out and learning. One of the key things that I’ve learned with this particular industry is that best practices. We’ve seen some great studies, references of uses of our new technology of our new technology and the impact that this has on student outcome. Teaching is a very individual, personal experience. There are no set standards, even though lots of governments want to put in core standards, teaching methods and methodology’s up to the teachers ultimately. How they want to organize their lessons, what materials they want to use, it’s a very one-to-one environment. It’s a very private environment.
No one has really opened up and shared those experiences widely. Now that we’ve got technology and big data even, coming into play where the use of technology is helping profess those instructions, teachers assess the programs of their classrooms. The good teachers did this, of course, extensively or through regular quizzes, regular tests and knew which students were performing well, which weren’t. Now, you can, with the use of the software and the data and the dashboard, get that in real time. That’s the big advantage. It’s a huge transformation. It’s going to be a journey. It’s not something that everyone is buying. It’s an example, but yet at the moment, we’ve seen great pockets of adoption. What I’m learning is that it’s going to take a lot more than just best practices and case studies to get all of the different players in place, up to the stay level of appreciation of the impact that we’re going to have.
Greg Alexander: We’re going to take a quick break. When we come back to the break, I’m going to ask Chris to wrap up all of his advice today into an action plan on something that you can implement after listening to this. I wanted to draw your attention to a recent blog post that seems to be doing very well. It has a provocative title, “Is your CMO the Real Deal?” If you’re not already subscribed to the blog, here’s how to subscribe.
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Greg Alexander: Welcome back everybody. This is Greg Alexander, CEO and co-founder of SBI. We’re talking with Chris Majara, who is the Chief Marketing Officer of Mc-Graw-Hill Education. We just had a detailed conversation around transforming a company that has been around for 125 years into an organization that’s trying to stay relevant for the next 125 years through digital technologies. We spend a lot of our time on the issue of budget. Getting it, reallocating it, spending it correctly. We tried to apply some science to the setting of a budget. We reviewed the 4 common ways to do that. What I want to do know is wrap up with some type of action plan. If you just spent the last 30 minutes listening to Chris and myself on this podcast, you might be wondering: What do I do right now? I have some thoughts on that, which I’ll lead with here and then I’ll give Chris some time to collect his thoughts and maybe suggest a few tactical things that somebody can go do.
If you are a CMO working for a company trying to execute a pivot, as Chris is, and you need to modernize the marketing team to do so, to be honest with my recommendation is just do what Chris does, which is invest your marketing budget wisely, for there is only so much money available. If you need help bringing science to the budgeting process, one resource is many, but one is our site, which is salesbenchmarkindex.com. If you click on the ‘About Us’ section, you’ll click on ‘Our Services’, you’ll see a service offering titled, ‘Budget Planning’. If you click on that, we present to your our methodology. We provide some definitions around these 4 budget setting methodologies and some tool. That might be helpful to you.
Chris, let me turn my attention to you. Outside of that, I’m sure you are constantly educating yourself on these things. If you were somebody listening to this podcast and dealing with what you’re dealing with maybe a year ago, first entering this challenge. What advice would you give them?
Chris: It’s really working closely with the leadership team to spell out that vision of where the organization is going. Effectively, the marketing team has to be the change agent within the organization and make sure that that transformation, the repositioning of the organization, people understand because the brand is made up of all of it. Everything an employee is the key brand ambassador. You need to really have that clear vision articulated, formulated, and rolled out through your employees. Then, ultimately, to the marketplace. That’s the starting team. Bring the rest of your leadership team with you to execute against that vision. Of course, you’ve got to go through and assess the talent within the organization. Where do you need to bring in new blood, new people, new capabilities to really look at the new digital marketing systems infrastructure and processes that can ultimately turn you into a data driven organization that is truly geared up to deliver a superior customer experience.
Greg Alexander: I really want to thank you. Based on your track record, you could be a CMO in any company that you wanted to be. You’ve demonstrated great courage here by taking your skills and going into an industry that needs to be transformed. A lot of people would run away from that and they would stick to what they’ve done in their lifetime because it’s easier and it’s less work. We’re all benefiting from that by being able to watch from a distance what it is that you’re doing. I’ll speak on behalf myself and the SBI team and all the members who are listening to you right now. We’re all rooting for you and we wish much continued success.
Chris: Thank you very much, Greg. I very much appreciate it.
Greg Alexander: Okay. Take care.
Chris: Take care. Bye-bye.
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