Tuesday, February 16, 2010

Lose the Marketing Love Handles Without Lifting a Finger

I got an email the other day from a marketing technology company trumpeting their software’s ability to help me “improve marketing ROI without lifting a finger.” Wow. Incredible. Can’t be true, can it?

I asked for a demonstration copy to see if I could realize the incredible benefit, but no luck. They wouldn’t send me one. So to test the validity of the claim, I went to the center of all things factual – the internet - to see what else I could do without lifting a finger. The options are amazing. I can:
  • Lose 20 pounds
  • Find a high-paying new job
  • Earn a college degree
  • Write a book (someone else will do it for me)
  • Drive more traffic to my website
  • Be healthier
  • Look better
  • Attract more members of the opposite sex
  • And, my personal favorite, grow more hair.
I feel stupid. I’ve been spending so much time at the gym, writing my own books, taking my own college exams, choosing my own food carefully, and fretting over my hair. I could have spent all that time goofing off and gotten better results.

And I’m really pissed off about the effort I’ve wasted on measuring and improving marketing ROI. For seven years now, I’ve been working on improving marketing ROI all day every day; working with hundreds of marketing, finance, and sales managers in dozens of companies; overcoming obstacles of technical, structural, cultural, and political dimensions; making slow and steady progress.

NOW I discover that, had I just purchased the right software, I could have achieved much more with virtually NO effort. If my clients ever find out, I’m screwed.

On the whole, I think this magic ROI elixir software is really a good thing. It will:
  • Reinforce CMOs’ desire to believe that they can and should delegate ROI efforts even further down the org chart. Afterall, they have many more important things to worry about.
  • Give marketing managers something more tangible to point to when asked “what are you doing to improve the return on our marketing investment?” Of course, we’ve bought some software to fix that.
  • Postpone the question another year while the software winds its way through the procurement process and then gets passed around the IT department – all the while allowing the marketers to keep doing things the way they have been doing them.
  • Befuddle the finance department and get them off marketing’s back. You know how those finance guys love data. They’ll gladly wait awhile if they think there’s some data coming.
So forget all that phooey about aligning on metrics, implementing smart experiments, and methodically improving analytics. Don’t waste time on smarter marketing research. Just cut that shrink wrap on the software box, hit “install”, and off you go.

Then wait for the Easter Bunny to deliver your bonus check.

Hyperbole is a dangerous tool in the hands of marketers – particularly when it comes to measuring marketing ROI. It undermines our credibility with the more serious financial types who often are key influencers on how much we get in the way of resources and what we can do with it. It reinforces their perceptions of marketers as wild-eyed optimists willing to try anything new to deflect the gravity of the questions being asked. Besides, if there WERE a magic marketing ROI software, do you really think your progressively-minded organization would be amongst the very first to find it?

Bad news. There is still no substitute for diligent, disciplined work when it comes to measuring the payback on marketing. Technology enables, but vision and persistence win every time. Show me a company with the will to work at it, and I’ll show you the company that will get clear insights into their ROI long before the software buyers ever realize they’ve been misled.

Measuring and improving ROI is much more like going to the gym every day; watching what you eat; taking classes to earn a degree; and (take it from one who’s done it) writing a book yourself. Persistent, methodical effort is rewarded with great benefits.

So let’s get after those spending love handles and the marketing muffin top.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on marketing metrics, ROI, and resource allocation, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, February 02, 2010

My friend and business partner, Dave Reibstein of Wharton, writes an advice column called Ask Dave where former students write in with questions on marketing metrics and he offers some sage advice. This recent correspondence caught my attention for its relevance and timeliness for all of you with new fiscal years beginning soon…

Dear Dave –

I’m a finance manager at a large industrial manufacturer. I often sit in the meetings where marketing comes in and shows us how low our marketing spend is compared to our competitors, and then asks for more money.

Maybe I’m wrong, but I don’t see that matching competitor spend is a path to success, is it? How should I coach our marketing team about what a better analysis would look like and what information they should bring to the table?

Sincerely –
Geoff D. in Chicago

Dear Geoff —

The right amount of spend is indeed a relative thing. Our product appeal, our pricing, our packaging, and just about every aspect of our value proposition are only important RELATIVE to the alternatives the customer has. Likewise, our spending is also, in part, only effective RELATIVE to what others are spending. But there are huge risks tied to making that relative spend the center of any strategy, as we are often following moves that deserved no response.

For example:
  • A while back there was a “holey war” between laundry iron manufacturers. One first put holes on the bottom of their iron allowing for steaming of the linens as they were being ironed. The competitor responded by adding more holes to their own model. Then the race was on to see who could add more and more holes until the number of holes was well beyond what the customer cared about.
  • Pepsi chased Coke into the low carb soft drink market (half the calories and half the carbs of normal colas). Hundreds of millions were spent before anyone realized that consumers that cared about their carb intake wanted ZERO carbs and calories, not half.
  • P&G chased after Kimberly Clark in the introduction of moistened toilet tissue. Both were greeted with failure in this market.
In each case, it was easier to approve the budgets for these programs once it was learned that competition was going to be moving there too. Fear of falling behind is a powerful motivator. The aversion to loss is much greater than the attraction of gain (see Prospect Theory). Marketing managers who use competitive spending as a primary justification for their own spending are (most often unknowingly) playing to this loss-aversion instinct.

But when we measure success on a relative basis (e.g. “share of voice” or “market share”), our behavior is only intended to keep up with competition. Also, the notion that we shouldn’t spend on something until we witness competition doing so implies that competition knows more about the right action than we do, which is very often not true. So, it results in the unwise being led by the same. Even worse it results in never taking the steps to actually get ahead of the competition.

The proven path to success is careful analysis of what makes a difference. Rigorous testing of historical data, or experimentation with spending levels to see what really does work will allow for taking progressive acts without having to wait for competition to move ahead. Smarter companies seem to gauge success on the absolutely impact marketing has on the financial goals of the firm.

It all comes down to what your mother always told you… “have a mind of your own”.


Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.