It’s not as simple as evaluating your advertising; in fact, the quality of advertising usually has very little to do with the overall quality of a company’s marketing efforts.
For years I have been getting asked, by senior executives and senior marketing professionals, for my opinions on their company’s marketing efforts. In this article, I will share six questions I explore when I evaluate a company’s marketing programs:
- Are your marketing efforts focused on the right results?
- Are you clear about what you want customers to do?
- Are you clear about the rich story you want customers to understand?
- Are your marketing efforts integrated over the entire lifecycle of a customer’s relationship with your company?
- Are you focused on internal marketing within the company?
- Does management allow its marketing professionals to succeed?
Only by answering these questions can I assess the quality of the company’s marketing efforts.
In this issue, I will explore questions 1 & 2. Stay tuned for the next two issues when I address questions 3, 4, 5 & 6.
1. Are your marketing efforts focused on the right results?
I’ve peered into the marketing efforts of hundreds of companies.One of the most common problems I see is a disconnect between the results the marketing efforts try to create and the results the business needs. Here’s a litmus test: Is your marketing team discussing the same metrics as your board of directors?
Brochures, ads and web pages are not results. They are means. Yes, a marketing department needs tangible objectives and deliverables. But it is easy to fall into the trap that looks at these deliverables as ends in themselves. A PR story in an industry trade magazine or a really beautiful direct mail package mean nothing if they don’t, in some way, contribute to improving the state of your business. Similarly, brand awareness isn’t a result. It is also a means. Building brand awareness may be a reasonable objective but only if your marketing team can articulate how it drives results.
This is not to say that everything must be directly measurable. As I wrote in this post on tompeters.com, The Follies of Marketing Measurement, “‘If you can’t measure it, you shouldn’t do it,’ is one of the stupidest concepts in business.” The effects of some things just can’t be directly measured.
That’s all the more reason that your marketing efforts need to be focused on the right results. Because it is difficult to measure directly the effects of many marketing tactics, it is important to design those tactics with appropriate end results in mind. Otherwise, it’s too easy to do things just because you’ve always done them.
A strong marketing team is directly focused on your business’s economic engines. This is a lesson I learned very early in my career, as a freshly-minted MBA working at MTI Vacations in Oak Brook, IL. With razor-thin margins on the package vacations we sold, the gross profit on each vacation sold had a major impact on our results. If we could squeeze another 2% gross profit out of our product line, by raising prices just a bit or steering business to hotels where we had better rates, we could leave a very nice mark on the bottom line. We realized that we couldn’t deal with low margins by “making it up in volume” as easily as we could by shifting the mix of business to more profitable products. This awareness influenced everything we did.
Conversely, I was speaking with the owner of a Caribbean-based company today who works on very high margins. In his case, it is clear that focusing on volume makes a lot of sense, even if he sacrifices a bit of margin. Each additional sale contributes a lot to the bottom line, so he can “make it up in volume.” The key is to know your particular economic engines, and focus your marketing efforts on them.
What are your most influential economic engines, and are your marketing efforts focused on them? Do you make significantly more profit on a small number of loyal customers than you do on a large number of transactional customers? If so, do your marketing efforts focus appropriate energy on building customer loyalty, or is the lion’s share of your efforts focused on finding new customers? Do service contracts add significantly to the profitability of product sales? If so, are your marketing efforts encouraging service contracts, or is that just not something your marketing department worries about? Is yours a sales-driven business? If so, does your marketing team focus adequate resources on supporting sales, or is sales support a minor priority for them? If the CEO gets excited about social media and demands more attention on it, can he draw a connection between Twitter and the bottom line?
2. Are you clear about what you want customers to do?
Customer action is the direct driver of your business results. You make money when your customers do things, not when you do things.
Buying is only one of many things you want customers to do. When I ask clients or workshop audiences to list the actions that customers take (or don’t take) that impact results, they are usually able to fill pages. There are many steps before and after a purchase that a customer can take to impact your results.
For example, a health-care client and I were discussing all of the actions a patient must take in order to make an appointment, show up for the appointment, sit through the appointment and do home follow-up care. Pulling out an insurance card or a Visa card is only the start of the list. By understanding the key actions that lead to a strong patient relationship, we were able to identify some very interesting new marketing ideas.
Can your marketing team describe, lucidly and with detail, what they want customers to do? I don’t just mean “buy” and “refer.” I like to hear something more specific. I’m very impressed when marketing professionals tell me things like, “Our restaurants have very high margins on wine, and we learned that 79% of people who taste a sample of a wine will purchase either the wine they tasted or another wine. So, check out this really cool program we created to encourage people to take a sample taste of our wines.” Or, here’s something else I heard: “Customers who join our frequent buyer’s club are three times as likely to refer a friend to us. We’ve made club sign-ups a major marketing priority for this year.”
Here’s another example from my days at MTI Vacations that shows the connection between a single customer action and results. My colleagues Frank Silzer and Bob Pancoast wanted to find a way to reduce our 50% cancellation rate when people booked vacations to Las Vegas or Hawaii. Traditionally, we hadn’t required people to pay for their vacations until 45 days before they traveled. Frank and Bob put in place a program to encourage customers to put down a $50 refundable deposit when they first booked their vacations, even if they were booking six or eight months in advance. The cancellation rate on these customers dropped from 50% to less than 15%, even though the deposit was refundable– apparently a small commitment was enough to keep the customer from canceling their trip with us and going with a competitor. This one simple customer action– giving us a $50 refundable deposit– had a major impact on our results.
Here are a few things you can do now to assess your marketing efforts. You can do this if you are in the marketing department, running the marketing department, or someone interested in how well your marketing department performs.
- Make a list of the most important performance metrics that drive your business, i.e., the economic engines that drive results. Sales per customer? Dollar value of each transaction? Proportion of revenue from add-on sales? Percent of revenue that is recurring?
- Then, go through all of your company’s marketing efforts, and see how closely you can connect each of these efforts to your economic engines.
- Remember, you don’t have to show direct results from a marketing effort to connect it to an economic engine. For example, let’s say you run an executive recruiting firm, and you know that there is considerable profit for you to be made placing high-level IT executives. You can rest assured that a feature on Ars Technica about your firm is on-strategy, even if you can’t directly measure how many clients you acquired because of the story.
- Look once again at your list of economic engines. Now, list out the actions your customers could take to influence these economic engines. Remember, customer action drives results, so you should be able to connect every result with one or more customer actions. (Yes, this even holds true for driving results through cost reductions. It all depends how you define the word customer. I define customer as anyone whose actions affects your results)
- Next, return to your list of your company’s marketing efforts. Can you find marketing efforts that influence your most important, results-driving customer actions?
Stay tuned for my December 15th issue in which I’ll explore the next two questions: Are you clear about the rich story you want customers to understand? and Are your marketing efforts integrated over the entire lifecycle of a customer’s relationship with your company? Then, on December 29th, I’ll turn to questions 5 & 6: Are you focused on internal marketing within your company? And does management allow its marketing professionals to succeed? After reading this series, I trust you will be able to go into 2010 with a clearer picture about what it will take to create winning marketing efforts for the upcoming year.