Better Ways To Do More With Less

Crawling around inside a few dozen large marketing and finance organizations these past months I’ve seen some evidence of five patterns of “do more with less” which seem to work best.

First, the “best” clearly define what “doing more with less” really means. The most common metric appears to be “marketing contribution efficiency” – an increase in the ratio of net marketing contribution per marketing dollar spent. That’s seems appropriate when budgets are falling (recognizing the need to monitor it over time as it can be manipulated in the near term).

Second, when they cut, they do it strategically. Face it, most of us didn’t take Budget Cutting 101 in B-school. After eliminating travel and consultants and other easy stuff, bad decisions creep in under mounting political pressure. More about this in last week’s post.

Third, they watch the risk factors. CFOs want to cut marketing spend to increase the likelihood of (aka decrease risks against) making short-term profit goals. Yet when marketers try to do more with less, risk exposure rises in ways never imagined – especially if it wasn’t clear which elements of the marketing mix were working before the cuts. It’s the “risk paradox”. If you want to make sure your “less” really has a chance of doing “more”, manage the new risks that have silently crept into the plans.

Fourth, they avoid the ostrich effect. Just because there’s enormous pressure on today, the best don’t ignore the fact that tomorrow is right around the corner in the form of 2010 plan. And when looking ahead, the only thing certain is that historical norms are no longer a reasonable guide. So the best are anticipating the key questions for 2010 plan, and working on getting some answers now. They’re committed to leading the process, not getting dragged behind it.

Finally, the best push their marketing business case competency further, faster. The marketing skeptics and cynics have more political clout now. Un-tested assumptions, like ostriches, will not fly. Better business case discipline is the new currency of credibility.

We all have basically the same tools at our disposal to do more with less. The “best” seem to be able to apply their imagination most effectively in the use of those tools. I’m the world’s biggest proponent of the importance of creative inspiration and instinct, but the lesson here I think is to start the conversation these days with “what do we mean by ‘effective’?”

Taking Full Credit When Harvesting Brands

I’ve spent the past few days at the AMA’s MPlanet conference, listening to every speaker make some form of the following statement:

Now more than ever before, we need to build and nurture our brand assets.

Presumably this is intended to mean that in these times of great economic challenge, we cannot afford to let our brand standards slip, our brand equities become cloudy, or our brand experience decay.

Fair enough. But does that mean that we should be spending money to build these brand assets, even in the face of substantial cutbacks elsewhere? Or just be cautious not to cut things that would cause an undue decline in brand strength?

This had me wondering … under what conditions would we expect to be able to “harvest” some of the investment we’ve been making? How bad would things have to get before we expected the brand to “pay us back”? At what point would a CMO stand up and advocate “harvesting brand value”?

Sure, I understand that you should always be working on building your brand, and that done right, it is always paying you back. The flow is bi-directional and fluid. But it’s also transparent, and that’s the problem.

Assets, in a financial context, are a way of storing cash value for later use. You invest in stocks as assets, with the expectation that they will appreciate and return more cash to you later. Likewise, you invest in assets like manufacturing equipment, software, or other “tools” required to produce goods or services to sell. Brands could be said to play a similar role. Yet property, plant, and equipment are depreciated over time to reflect the decline of their useful life. Stocks and bonds are liquid assets for which there are markets to quickly buy and sell them, thus establishing their value.

Brands, on the other hand, aren’t depreciated. They can become “impaired” (accounting term meaning they are worth less than you paid for them, thereby triggering a write-down), but only if you purchased them from someone else. So if we marketers are going to rationalize some of our cash spending in good times by talking about “investing” in brand “assets”, at some point we are expected by the financial types to demonstrate how that asset value is being realized back into cash. I call it, “harvesting”.

So under what circumstances would you consider harvesting some of that brand equity?

Well, for starters, if you need to raise prices without adding any incremental costs associated with new features, benefits, or other value visible to the customer. In that case, you are relying on your brand asset to carry you past the danger of customer defection. To the degree that you averted attrition related to unilateral price increases (not matched by competitors immediately), you can legitimately claim that your brand “saved” you money. This is measurable.

Likewise, when a competitor announces a new product/feature/benefit that you cannot match, thereby taking an advantage in perceived value, you rely on your customers’ relationship with your brand to carry you through until you can once again restore your value proposition to its rightful state. This too is measurable.

And finally, when some aspect of your customer experience is deficient – a poor interaction with a call center agent, an inaccurate statement, or maybe a data privacy mishap – you rely on the strength of the overall brand relationship to carry you through. The value of this too is measurable.

So in this economy, while your budget is getting cut again and again, be sure to take the necessary steps to earn credit for how you’re now “spending” some of that “asset” value you built up over time. Done correctly, it will underscore what a good steward of company resources you are, and how far-sighted you’ve been all these years.

Just be careful not to overspend that brand asset account along the way (also measurable).