Tuesday, May 30, 2006

Making Six Sigma Work FOR Marketing: 2 Good Places to Start

Few people are opposed to implementing Six Sigma processes, if the right areas can be found within the Company. The challenge is even greater within marketing departments with their ad hoc processes and short timelines. There are, however, a couple of Six Sigma "tools" that can be immediately implement in marketing with almost guaranteed success. Better yet, no statistics are required!

Process Mapping

Want to get 25% to 33% more accomplished with the same resources? That is a typical outcome from a Six Sigma process-mapping exercises.

For most marketers, the very word “process” conjures up images of deathly boring navel analysis and lint extraction by committee. So don’t use it. Think of it as “experience mapping,” “value graphing,” “frustration charts,” or some other creative moniker. But whatever you call it, recognize that most of the people on your staff may never have taken the time to step back from their day-to-day execution to really draw out on a whiteboard exactly how things get done from start-to-finish. How are local market campaigns executed? How are events planned and implemented? How are promotions moved from concept to market to assessment? Invariably, when they do they gain a whole new perspective on why some tasks are so frustrating, time-consuming, or unreliable.

Mapping the work process helps people see that there are, in fact, patterns buried in the seemingly random nature of the things they undertake each week. This pattern identification helps break down the emotionally filtered perceptions of where time, money, and energy are misspent and forces a re-examination of just how they are adding value (or not) at each stage.

In the end, process mapping shines a bright light on the value-destroying steps which slow down execution, add cost, or obscure the real opportunities. It illuminates the path to greater profitability or efficiency and draws your attention to things you can do NOW to have a big impact.

Voice of the Customer

At the very heart of Six Sigma lies an emphasis on ensuring that customer requirements are satisfied to the optimally profitable level. To do so, the company must know the customer's requirements, how well they are being met, and what opportunities for improvement exist.

While there are many passive ways to gather this information (i.e. complaints, returns, credits, warranty claims, etc.), gaining a full perspective requires a proactive apprioach, involving market research, customer/prospect interviews, and the like.

By leading the dialogue on how the voice of the customer is heard and measured throughout the organization, marketing can ensure that customer-centric business decisions become the norm and inspire the organization to higher levels of challenge in producing better products and services. This in turn creates more opportunities for differentiation in brand marketing and better coordination through all owned and third-party sales channels.

Marketers who embrace what Six Sigma really stands for (growth, efficiency, and customer-centricity) see ways to use the tools and training to inspire new levels of creativity and innovation, while helping the rest of the company build and maintain more profitable customer relationships. CMOs who’ve gone through that initial “oh no, not in my department” phase will tell you that if you plan the implementation carefully, choose the right tools, and get off to a strong start, Six Sigma jumstart marketing effectiveness and efficiency improvements that you’ve only been able to dream about up till now.

Tuesday, May 23, 2006

Setting Priorities to Succeed

The surest way to realize the role of marketing you seek is to begin with the right vision. That means dissecting the customer value chain and finding all the places where marketing can and should play a role in improving it. But before you launch headlong into such an initiative, here are some thoughts on common pitfalls that await...

4 Ways to Lose Your Way

  1. Losing track of your base. Before you seek to expand into new areas of influence, make sure you have strong process and people managing the current scope of marketing responsibilities. You’ll also need strong measurement abilities to get early warnings of problems within the marketing department. Identify the biggest risks to your present activities, and develop mitigation strategies for each. You can’t open new frontiers while fighting wars on the homefront.

  2. Sticking your nose where it isn’t welcome. Before you leap to conclusions about how something outside your traditional scope can be better, ask the people managing that part of the company. Find out what worries and frustrates them. Ask them how they measure success, and see if there are more customer-centric ways of doing so that engage them. Use your credibility and capacity in customer research to help them achieve their goals. If they perceive that your interest is motivated by self-aggrandizement, you can forget about cooperation. The door will close hard, and your swollen nose will be on display for the rest of the company to see. Ground your interest in achieving measurably better results for everyone. It’s a difficult entreaty to resist.

  3. Stretching your skill supply lines too far. Apart from the two gaffes listed already, the biggest mistake in seeking to expand influence is to get enthusiastic support from other functional heads and deliver well-meaning under-execution a few months later. The skill set of your staff must align with the value-added tasks for which you volunteer or your weaknesses will show themselves quickly. If you’ve taken the time to diagram where in the company you would like to get involved, take a few extra weeks to think through the skills necessary to succeed and your ability to get them into your arsenal either through hiring of staff or consultants or development of existing employees. Many times the reason the value-added activity isn’t being done (or done well) is because the current manager doesn’t have the requisite skill set on his or her team. Jumping in before sizing the challenge properly can make for a particularly unpleasant experience for everyone involved.

  4. Dying by scope-creep. There’s only one real downside to success: popularity. Once you’re successful at creating value across many areas of the organization, the risk changes to one of having such a great reputation for results that everyone wants your help. Before you know it, your marketing team is being pulled in so many directions that it’s spending too much time on trivial requests from newfound friends around the company and not enough on high-leverage initiatives that really drive results. Protect your focus diligently, and work with sales, operations, R&D, etc., to develop some clear rules of engagement marketing.

Setting Priorities to Succeed

Once you’ve mapped out a path that avoid the pitfalls, prioritize your opportunities on the basis of the likely impact on business results and the anticipated receptivity from the current functional owners. Your two-by-two matrix of opportunities will highlight those areas in which your approach will be received warmly. From this list build your marketing scope one step at a time, ensuring that you have the permission and capacity to succeed.

Tuesday, May 16, 2006

3 Ways to Structure Marketing Measurement Resources

A common question CMOs ask each other when discussing marketing measurement is "Where did you put your measurement group?" The question underscores conflicting desires to have measurement people close, but not too close. Our research suggests that there are three primary models in broad use today relative to the organizational structure of marketing measurement resources.

Model 1 — The Internal Resource

Many marketing organizations today have at least one dedicated measurement analyst on staff. These people are sometimes academically trained statisticians and other times financial analysts. In a few rare cases both disciplines are represented for a balanced perspective.

These internal resources most often report indirectly to the CMO through a vice president of advertising, vice president of database marketing, or vice president of strategic planning. In a few instances, CMOs have created dedicated VP-level jobs for marketing performance planning and given that person responsibility for coordinating back-end effectiveness measurement with strategic planning, developing HR performance, and managing business-case requests for resources.

Model 2 — The Shared Resource

Another, less frequently found model is a stand-alone analytical group shared between any two or more functional groups like marketing, finance, sales, and operations. These stand-alone groups most often report into finance but have dedicated resources supporting the partnering functions. Sometimes, they report into a COO or president, primarily to support corporate planning and development, and are staffed to provide centralized support for the other functions as well.

The skills in these shared resource groups tend to be a blend of those with advanced degrees in statistics and those with strong backgrounds in finance or accounting. By their nature, these groups tend to be larger and have better software tools. For capacity and expertise reasons, they work directly with marketing personnel on front-end planning and back-end measurement and with some of the more marketing-specific analytics outsourced to vendors.

Model 3 — Informal Marketing/Finance Collaboration

The most common organizational approach to marketing measurement — informal collaboration — is characterized by no one person or group having responsibility for marketing measurement. Marketing staff work with finance staff whenever they see the need for a business case to be developed or a program ROI to be determined. Finance, on the other hand, asks randomly-timed questions about assumptions, returns, and resource allocation plans.

Some of these informal collaborations work on the strength of the friendships between individuals. Others survive in an environment where corporate expectations for marketing accountability are still low enough that measurement is an afterthought more than a decision process.

Each one of these models has merits and downsides. Informal models and shared resources are lower cost, but also lower on specific expertise. Internal resources are potentially most useful to marketing, but often resource constrained. No matter which model your company may have or be considering, understanding the tradeoffs and evolution path with help you manage the function for optimal benefit.

Tuesday, May 09, 2006

The Business Case for Loyalty

The key to loyalty measurement is having a very clear picture of the economic value you are trying to create. If there is no expectation of superior economic value in either the short or long term, then initiatives intended to inspire customer loyalty can't possibly pass the basic business-case test that returns must exceed investment.

For most businesses, the promise of customer loyalty implies potential economic value creation with some combination of the following five dimensions:

  • First, many companies invest disproportionately in customer acquisition at the beginning of the relationship, placing themselves in a negative economic position. The hope (a.k.a. "the plan") is to pay off the initial investment many times over through retaining customers and capturing the lion's share of their spending in the category year after year.

  • Second, loyal customers may be inclined to buy more types and more volume of products and services from you (cross-selling and up-selling), thereby generating an enhanced return over the life of the relationship.

  • Third, loyalty can be a strategy for reducing ongoing expense. A company that is retaining customers is one that can, in theory, reduce its investment in customer replacement. By closing the proverbial hole in the bottom of the bucket through which customers leak out, the company can improve profitability substantially. If you hear a lot of companies talking about the importance of customer retention, it's because they have good reason. Competition in most industries is brutal. Customers are promiscuous. Couple these trends with the old-but-true saw that it costs more to acquire a customer than it does to retain one, and focusing your marketing efforts on existing customers makes sound business sense. This was amply demonstrated by Frederick Reichheld in his breakthrough 1996 study, The Loyalty Effect. It analyzed the bottom-line value of an additional five percentage points in retention rate, across a variety of industries.

  • Fourth, customer loyalty can be associated with lower price elasticity. By trusting and engaging with your company and its offerings, customers may be willing to pay more for the privilege of doing business with you. And, higher margins almost always drop to the bottom line.

  • And finally, loyalty can be equated with the mother of all profitability engines — referrals. If loyal customers are happy customers, then it's likely they are unpaid ambassadors for your company, spreading the word on how wonderful it is to do business with you. That saves you real money in reduced customer acquisition costs.

To arrive at the financial benefit, you must be clear on which of the dimensions above your investments are designed to affect. Once you've made the investment decision, you should do the modeling and analysis required to measure how well the investments performed. Investing without goals and measurement leaves you vulnerable to questions that you cannot answer, undermining your credibility even if the results are ultimately positive.

Tuesday, May 02, 2006

CMOs: Get a Contract

We've all read that CMO job longevity is presently, on average, something less than two years. The 22 months or so CMOs last on the job hardly gives one tenure enough to see initiatives through. The implication seems to be that either CEOs feel CMOs fail to achieve what they were brought in to do or CMOs depart frustrated that they couldn't do what they thought they were brought in to do.

A recent study by the Association of National Advertisers and Booz Allen Hamilton suggests that CMO success is highly correlated to five key components.

1. Knowing What Role You're Signing Up for

The study identified three basic types of roles for marketing.

Knowing which of the three the CEO has in mind will clearly outline what lies ahead.

2. Getting It in Writing

Although it's best to do this before you even accept the job offer, a marketing contract between CMO and CEO is a good idea any time there isn't perfect alignment between the two on what's getting done and how. Too many times, both assume that they're on the same track when in fact they have very different perspectives.

A good marketing contract details how you plan and execute your charter. Without a contract, it is difficult to impossible for either you or the CEO to measure performance and unlikely that either of you will be satisfied.

3. Developing Organizational Linkages

Unique in the organization, CMOs influence not only their direct reports, but many others throughout the organization, including such traditionally unaligned groups as sales, manufacturing, R&D, even marketers within other divisional profit centers. That exposes the marketing group to lots of entropy from the rest of the organization. Set boundaries on clear responsibilities and decision-making autonomy with functional peers on the executive committee to avoid letting the pressure of "urgent" issues drive out collaboration on the important ones.

4. Driving a Marketing Capability Agenda

Because CEOs (and CFOs) are asking more of marketing these days, marketing definitely needs a team capable of meeting high and escalating expectations of financial returns, measurement, and accountability. Blending data collection, analysis, and planning adaptability takes on paramount importance. Without a rigorous assessment of the team's ability to succeed on these dimensions, you're metaphorically walking into a gunfight with a pocket knife.

5. Taking More, Smarter Risks

Marketing, almost paradoxically, also needs to take some bigger risks. Driving topline growth is job No. 1 for most CEOs these days, and CMOs just can't get there from within the protective cocoon of the current marketing processes. Marketing has to let the glow of innovation and creativity in, and develop feedback and measurement systems that temper the risk and forecast the profit potential of bigger initiatives.

Of course it's not always practical to get all of these understandings written out in the form of a contract. Our advice is just to make sure you get them committed to writing and shared in one form or another. Take notes during discussions and send e-mail summaries after the meeting. Casual. Informal. Then over time aggregate the understandings to build on one another until you have a more comprehensive document that you can share as a "summary of understanding."