Tuesday, March 24, 2009

It's All Relative

Brilliant strategy? Check.

Sophisticated analytics? Check.

Compelling business case? Check.

Closing that one big hole that could torpedo your career? Uhhhhhhh....... Most new marketing initiatives fail to achieve anything close to their business-case potential. Why? Unilateral analysis, or looking at the world only through your own company's eyes, as if there was no competition.

It sounds stupid, I know, yet most of us perform our analysis of the expected payback on marketing investments without even imagining how competitors might respond and what that response would likely do to our forecast results. Obviously, if we do something that gets traction in the market, they will respond to prevent a loss of share in volume or margin. But how do you factor that into a business case?

Scenario planning helps. Always "flex" your business case under at least three possible scenarios: A) competitors don't react; B) competitors react, but not immediately; C) competitors react immediately. Then work with a group of informed people from your sales, marketing, and finance groups to assess the probability of each of the three possibilities, and weight your business case outcomes accordingly.

If you want to be even more thorough, try adding other dimensions of "magnitude" of competitive response (low/proportionate/high) and "effectiveness" of the response (low/parity/high) relative to your own efforts. You then evaluate eight to 12 possible scenarios and see more clearly the exact circumstances under which your proposed program or initiative has the best and worst probable paybacks. Then if you decide to proceed, you can set in place listening posts to get early warnings of your competitor's reactions and hopefully stay one step ahead.

In the meantime, your CFO will be highly impressed with your comprehensive business case acumen. Check

Thursday, March 12, 2009

Adam & Eve Beware: Another Apple in the Garden of Accountability

I saw an article in Ad Age today headline: Banks That Spend the Most on TV Ads Performed the Best. It referred to "A new report from financial-services research firm Aite Group, which examined ad-spending trends and return on advertising performance of 32 of the largest 50 U.S. retail banks from 2006 through 2008, found that top 25% highest-performing banks are those with TV-heavy buys.". The data was provided by TNS.

Great news for TV sales reps. Likewise for TV production companies. But a sucker's bet for bank marketing executives who would rip out that page of Ad Age and run into their CFO's office to defend a recommendation to spend more on TV.

First, this "study" didn't isolate the non-media marketing variables which may have affected the outcome. Little things like customer service quality, direct marketing spending programs, message effectiveness, word-of-mouth, etc. Bet they didn't count the number of toasters given away either.

Nor does it appear to have accounted for other characteristics of the banks themselves which may have driven performance higher. Price perhaps. Or interest rates charged/paid. Or branch location demographics. Or in-branch cross-sell incentives. Or other things which would never show up in syndicated spend data.

So what can a bank marketing executive take away from this study? Nothing. They just measured what was easy to measure and didn't answer ANY of the open questions surrounding the payback on marketing investments beyond a reasonable doubt. Worse, it is the apple and marketers are Eve. It beckons with faint promises to fulfill the desire to believe that it may offer "evidence" of the beneficial impact of marketing.

If you value your credibility, don't circulate stuff like this within your marketing organization, and don't EVER use it in discussions with a savvy financial executive. When you see a headline like this, just pass it along to your trustworthy, naturally-skeptical research professional and ask them to find the flaws.

Stuff like this isn't research. It's PR. One bite of this apple will cost you your reputation - perhaps permanently.

We'll keep working on raising the standards in the media on what passes for good content.

Wednesday, March 11, 2009

DMA Jumps the Shark

In true Hollywood fashion, the DMA announced their headliners for this year's DMA Days conference. The keynote speaker will be... drumroll please.... Ivanka Trump - that skilled expert in direct marketing and ROI.

Is it possible that the DMA is losing sight of its role and mission? In this current environment where attracting paying registrants to conferences is so difficult, they seem to have err'd on the side of flash and glitz rather than meaningful substance and advancement of the trade.

It's hard to deny that Ivanka will put more butts in seats than the most compelling direct response case study. And perhaps more butts in seats for Ivanka actually will lead to more exposure of members to substantive content. But it's a sad day when such a long-valued industry organization can't find enough compelling content that they resort to the equivalent of Fonzie jumping the shark to draw "spectators". Maybe next year they can get Chris Angel to come make their relevance re-appear.

Tuesday, March 10, 2009

How do You Know if it's Time to Spend MORE?

In times like these, budgeting and resource allocation decisions tend to get made fast and furious, with little time for clear thinking. Unfortunately, it’s exactly these times when some real discipline is required to both make smart decisions and build credibility with the rest of the senior management team. So if you’re thinking about recommending that your firm should be spending MORE on marketing right now, STOP.

If you’re thinking “let’s spend more now to gain share”…

Good luck. Headline-grabbing stories of marketing heroes who have taken this approach tend to emphasize the few who have succeeded and gloss over the vast majority who have simply squandered more by throwing money into an economic hurricane. The fact is that there’s not much empirical data to prove the merits of this strategy beyond a reasonable doubt. Many “studies” have been done, but none have derived their conclusions from projectable samples which account for the primary risk factors, nor have any led to any high-probability “formula” for succeeding with this strategy. The margin of error between success and failure tends to be very narrow. It’s a roll of the dice against pretty long odds.

If you’re thinking “we’ve got to keep up our spend to maintain our share of voice”…

Be careful. Matching competitive levels of spend (or making decisions on the basis of “share of voice”) is most often seen by CEOs and CFOs as foolish logic. How do you know the competitor isn’t making an irrational decision? What do you know about the effectiveness of your spending versus theirs? How much ground would you lose if they outspent you by a substantial amount? If you don’t have specific answers to these questions, relying on anecdotal evidence won’t help. It may get you the spend levels you’re requesting in the near term, but if it doesn’t work out, the memory of your recommendations will undermine your credibility for years to come.

When times get tough, buyers re-evaluate the value propositions of what they buy. They make tradeoffs on the basis of what is or isn’t “necessary” any more. Shouting louder (or in more places) is unlikely to break through newly-erected austerity walls.

To make a sound case for spending more, tune into what the CEO is looking for… leverage. They want to find places to squeeze more profitability out of the business. To help, focus your thinking around:

  • the relative strength of your value proposition, channel power, and response efficiencies versus your competitors.
  • your assumptions about customer profitability and prospect switchability as buyers cut back.
  • your price elasticity to find out where the traditional patterns may collapse or where opportunities may emerge.
  • the relevance, clarity, and distinctiveness of your message strategy, and your ability to defend it from copycat claims.

And make sure to check with finance to see if the company’s balance sheet is strong enough to handle higher levels of risk exposure during revenue-stressed periods. If it’s not, the whole question of spending more is moot.

If your comparative strengths seem to offer an opportunity, then increasing spend may just be a smart idea. But even so you have to anticipate that competitors aren’t just going to let you walk away with their customers or their revenues. And that may just leave you both with higher costs in times of lower sales. In technical parlance, this is known as a “career-limiting outcome”.

Friday, March 06, 2009

Another VP Marketing lost his job today...

... for the wrong reasons.

He was (is) strategically brilliant and a fountain of ideas. His insight into his customers was formidable. His managerial capabilities were strong. His relationships with sales management were excellent. And the CEO really liked him. In fact, the CEO really supported the launch of the new ad campaign a few months back that substantially increased the company's spend.

But now, several months past the campaign's initial wave, there is no credible evidence or consensus that it had any positive effect on sales, profits, customer value, or any other meaningful dimension. And the fact that unaided brand awareness was up X% was little comfort.

So this particular VP of Marketing was let go, and marketing is now reporting to the EVP of Sales.

I spoke to the CEO who told me "I relied on (the VP Marketing) to make smart decisions about where and how we spent our marketing resources. In the end, it wasn't the lack of positive results that bothered me about that campaign as much as it was our inability to really learn anything important about why it didn't work and what we should do next. So I felt I needed to place my bets somewhere I get better transparency and feedback... sales. It may be short-sighted, but we need to demonstrate learning and improvement every day, or we're just spinning our wheels."

In better times, the VP may have gotten another chance to iterate to the magic marketing formula. But in the current environment, you only get one chance. To learn, that is, and to build confidence and credibility even when your efforts fail to achieve the desired outcome. Which, in marketing, happens quite often.