We walked into our client’s conference room and laid it out: “We aren’t sure exactly how much money you are leaving on the table, but our hypothesis is that it’s a lot.” Our data indicated a massive disconnect. Customers saw the brand as a place to buy gear, but few had knowledge of the breadth of services, resources, and expertise available to them after the transaction.
Most marketing teams spend their days in a cycle of low impact marketing campaign optimization. They chase a half percent increase in conversion while the broader strategy stagnates. The first question we usually hear from a CFO is "Why should we spend time and money on something unproven when the current plan is technically working?"
Look, we get it. Your board wants certainty. They want to know what every dollar does before you spend it. But if you only fund what you can already prove, you are effectively betting that your market will never change.
The Case for More Experimentation
We saw this reality firsthand with the national outdoor retailer mentioned above. Their old experience relied on a simple post-purchase thank you and generic product recommendations in a single marketing channel. It served its purpose, but by playing it safe, the retailer was missing a huge opportunity.
The strategy team pitched a radical shift for the mountain bike category where the average purchase is over two thousand dollars. There were at least 15 other categories where the same could be said; customers were buying the product but taking their maintenance and accessory business elsewhere. The finance team almost shut down our pitch three times because they saw it as a distraction from immediate sales.
The hypothesis was that someone who drops $2k or more on a mountain bike is buying a hobby, not just a frame and tires. Instead of rebuilding our entire post-purchase experience across all 15 categories, we focused on one using a high-fidelity MVP approach to establish a durable blueprint. We choreographed a profoundly personalized, robust multi-channel journey targeting customers who'd just bought bikes. This streamlined approach allowed us to move at speed while remaining responsible stewards of the budget.
We educated these customers on expert maintenance services and provided a detailed schedule for their specific model, whether it was a mountain bike, road bike, or cruiser. We used email, mobile, targeted paid social content, and personalized web experiences to showcase relevant training and resources. This kept the customer connected to the brand and built genuine brand affinity.
To the client’s finance team, our experiment looked like an expense. But the numbers told a different story. We saw a 28% increase in lifetime value from the customers in that test group.
Your Marketing R&D Fund
If your company invests in R&D for products but 0% in R&D for marketing, you are managing a decline. At CRMOne we recommend allocating between 5 and 15% of your marketing budget for experimentation. We arrived at this range through years of planning sessions with national brands. The size of your overall budget should drive where you land in that range.
It might sound counterintuitive but the smaller your budget is the more you actually need to experiment to find what works. If you have a billion-dollar marketing budget, 5% is a substantial and impactful amount for testing. But if you have a fifty thousand dollar budget, you will likely need closer to 15% to get a clear answer.
This requires leadership backing. You must give your teams the freedom and the room to try things that may seem off the wall at first. By using a surgical MVP or a Minimum Viable Product you ensure you are not over-investing in unproven concepts. But you have to give the team the authority to be curious and experiment.
Building Your Growth Lab
Incremental testing is a necessary part of the job, but relying only on low-impact incremental optimizations is a recipe for stagnation. If you are ready to keep those small wins while also testing the big, bold things that lead to breakthroughs, follow this framework:
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- Secure the Sandbox: Formally carve out a 5 to 15% line item for experimentation in your next planning session.
- Institutionalize the MVP: Stop building complex solutions for unproven ideas. Use a Minimum Viable Product to get to a decision in weeks by testing only the core hypothesis.
- Democratize the Pitch: Allow anyone on the team to pitch a hypothesis. Great ideas for growth often come from the people closest to the customer data.
If you think your CFO would never go for it, you are probably right. Start by showing her this case study. Then, commit to tracking the impact from your experiments in this 5 to 15% bucket regularly. Show the math on what staying safe actually costs the business. Because in a market that never stops changing, the only thing more expensive than a failed experiment is a perfect plan for a world that no longer exists.
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